CMS Proposes 2.3 Percent Payment Increase for Medicare Advantage Plans

The increase would equate to an additional $21 billion in payments to Medicare Advantage plans during 2026.

A pharmacy sits in a chain store in New York City on July 23, 2024. Spencer Platt/Getty Images

Health insurance companies selling private Medicare Advantage (MA) plans will pay a higher rate in 2026 if the incoming Trump administration adopts the Biden administration’s latest proposal.

The Centers for Medicare and Medicaid Services (CMS) on Jan. 10 proposed to increase the average benchmark payment to private MA plans by 4.33 percent for 2026, compared to a modest cut by 0.16 percent for 2025.

The hike would equate to an additional $21 billion in payments to MA plans over the year. It would bolster revenue for companies such as UnitedHealthcare and Humana, which together account for almost half of all MA enrollment in 2024, serving 15.4 million people.

“CMS has worked to ensure that people with Medicare Advantage and Medicare Part D have access to stable and affordable offerings,” CMS Administrator Chiquita Brooks-LaSure said in a statement. “Today’s advance notice continues CMS' efforts to provide access to affordable, high-quality care in Medicare Advantage while being a good steward of taxpayer dollars.”

CMS projects $9.2 trillion in payments to MA plans over the next decade, with $1.3 trillion allocated for supplemental benefits and premium buy-downs. The agency said it opted not to pause growth rates related to medical education costs or the three-year phase-in of the updated risk adjustment model, changes that would have added $10.4 billion to MA payments in 2026.

Those changes were unnecessary, according to CMS, since MA offerings for people with Medicare remained stable, with premiums, supplemental benefits, and coverage options largely unchanged since last year.

Insurance companies have complained that recent payment rates have failed to keep pace with rising medical costs, driving down their stock prices. Shares of major MA players, including UnitedHealthcare, Humana, CVS, and Centene, fell last April after the Biden administration moved forward with the 0.16 percent base rate cut.

CMS is accepting public comments on the proposal until Feb. 10.

The MA program, also known as Medicare Part C, is an alternative to traditional Medicare. MA plans are sold by private insurers under contracts with the federal government, often bundling Medicare Part D prescription drug coverage and additional benefits such as dental, vision, and hearing care.

According to CMS, the number of MA enrollees in 2025 is projected to be 35.7 million, representing more than half of all people enrolled in Medicare. The agency expects that the average monthly plan premium for all MA plans to drop in 2025, with 60 percent of MA enrollees in their current plan having a zero-dollar premium.

The average monthly plan premium for all MA plans is expected to decrease from $18.23 in 2024 to $17 in 2025.