Medicare Advantage plans get proposed 4.3% pay hike
AMA says it's unbelievable that insurance companies are getting a pay increase while physician practices are struggling to survive.
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Medicare Advantage plans get a 4.3% pay hike in a proposal released by the Centers for Medicare and Medicaid Services on Friday.
If finalized, the proposed 2026 Advance Notice would result in a net increase of over $21 billion to MA plans in 2026.
The 2024 Trustees Report projects total federal payments to MA plans in 2026 will be $590.9 billion.
Over the next decade, the federal government expects to spend $9.2 trillion on MA payments to plans, CMS said. Of this amount, $1.3 trillion is in MA rebate dollars used for supplemental benefits and premium buy-downs.
The payment rate in the 2026 Advance Notice is based on a 5.93% growth rate, a -69% change in star ratings, a -3.01% in the risk model revision and fee-for-service normalization, and an MA risk score trend of 2.1%.
The negative change in Medicare Advantage star ratings reflects Quality Bonus Payments for the upcoming year.
The growth payment rate is largely driven by the growth in Medicare fee-for-service per capita costs, CMS said. It includes indirect and direct medical education costs associated with services for MA enrollees.
If finalized, CMS said it anticipates stable premiums and benefits for MA consumers in 2026, as was the case in 2024 and 2025.
CMS is accepting comments by February 10 before the rate is finalized by Monday, April 7.
WHY THIS MATTERS
The Medicare Advantage increase compares to a 2.8% pay decrease in Medicare payments to physicians.
"CMS has announced that Medicare Advantage (MA) plans are expected to receive an average payment increase of 4.33% from 2025 to 2026. Meanwhile, physicians treating Medicare patients are facing their fifth consecutive year of payment cuts – this time by 2.8% – despite practice costs rising by 3.5% according to the Medicare Economic Index," said Dr. Bruce A. Scott, president of the American Medical Association.
Scott is calling on the new Congress to find a new approach to physician payment reform or risk the closure of physicians' practices.
"So, while MA plans receive an increase beyond the expected healthcare inflation rate, Congress not only failed to provide a physician payment update but allowed a new round of cuts at the end of the lame duck," Scott said. "It's unbelievable they're giving insurance companies that had record profits an increase while at the same time cutting payment to physician practices that are struggling to survive. This contrast highlights the urgent need for Congress to prioritize linking payment to physician practices to the cost of providing care."
THE LARGER TREND
Other policies released in the Centers for Medicare and Medicaid Services Calendar Year 2026 Advance Notice for the Medicare Advantage and the Medicare Part D Prescription Drug Programs include implementation of a three-year phase-in of improvements to the MA risk adjustment model and growth rate calculation, as well as other technical improvements. The phase-in began in 2023.
In 2026, CMS is proposing to complete the three-year phase-in of the technical adjustment and apply 100% of that in 2026. Pausing this adjustment would have resulted in an additional $7 billion to MA plans in 2026, funds not necessary to support stability in the program, CMS said.
Pausing the risk adjustment model phase-in would have resulted in $3.4 billion in additional payments to MA plans, according to CMS.
CMS said the new 2024 CMS-HCC risk adjustment model is more accurate than the 2020 model, because it reflects more recent FFS diagnosis and cost data and includes clinically meaningful conditions that predict costs developed from experience with ICD-10 and with clinician input.
CMS is concurrently releasing the Draft CY 2026 Part D Redesign Program Instructions that continue to implement the redesign of the Medicare Part D program. The Inflation Reduction Act redesigned Medicare Part D to reduce prescription drug costs and improve benefits for Medicare enrollees.
In Part D for 2026, the annual out-of-pocket threshold is $2,100, which is the original 2025 out-of-pocket cap of $2,000, adjusted based on the annual percentage increase in average expenditures.
MA rebates have stayed stable at more than $2,400 annually per person on average, which indicates that MA payment has remained adequate during the phase-in of these updates, CMS said.
ON THE RECORD
"CMS has worked to ensure that people with Medicare Advantage and Medicare Part D have access to stable and affordable offerings," said CMS Administrator Chiquita Brooks-LaSure. "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. We are also continuing implementation of the Inflation Reduction Act, ensuring people with Medicare Part D have more affordable coverage for their medications."
Email the writer: SMorse@himss.org
