CMS approves average increase of 5.06 percent for MA plans while deferring major policy changes in MA and Part D programs
The Centers for Medicare & Medicaid Services (CMS) released the 2026 Medicare Advantage (MA) and Part D Rate Announcement on April 7, 2025, finalizing payment updates for calendar year (CY) 2026. This announcement came shortly after the release of the Contract Year 2026 MA, Part D, and PACE Policy and Technical Changes Final Rule, on April 4, 2025. Together, these updates mark the conclusion of CMS’s annual rulemaking cycle for Medicare Advantage, ahead of the June 2, 2025, deadline for 2026 MA plan bids.
Notably, because of the timing of the draft notices and proposed rule, Trump Administration officials ultimately had more input into policies omitted from the rate notice and final policy rule than on policies that were finalized. For example, the final rule is exclusive of proposals to expand coverage for anti-obesity medications, guardrails for artificial intelligence (AI), and new requirements related to utilization management and prior authorization procedures.
In his confirmation hearing, CMS Administrator Mehmet Oz, MD, cited Medicare Advantage prior authorization practices and health risk assessments that lead to upcoding as areas that deserve further consideration and scrutiny, raising the potential for future regulatory shifts and even legislative reform. With the possibility of Medicare, including MA, facing cuts as part of broader budget negotiations in Congress, the rate notice and policy rule offer program stability counterbalancing the political and fiscal pressures that may emerge this year.
CMS has sought to stabilize MA and Part D programs into 2026, and stakeholders can benefit from understanding the impact in markets for 2026 and the signals of potential regulatory changes to come. For more in-depth analysis and insights on the rate notice, look for our policy and actuarial experts’ brief due out next week.
The remainder of this In Focus article reviews CMS’s decisions on major payment and policy proposals in the Rate Announcement and Final Rule and examines key considerations for healthcare stakeholders.
Payment Impact on Medicare Advantage Organizations
In the CY 2026 Rate Announcement, CMS projects that federal payments to MA plans will increase by 5.06 percent from 2025 to 2026, which represents a $25 billion increase in expected payments to MA plans next year. According to CMS, this represents an increase of 2.83 percentage points compared with the CY 2026 Advance Notice that is largely attributable to an increase in the effective growth rate. The increase in the effective growth rate—increasing to 9.04 percent in the Rate Announcement from 5.93 percent in the Advance Notice—is primarily the result of the inclusion of additional data on Medicare fee-for-service (FFS) expenditures, including payment data through the fourth quarter of 2024.
The Rate Announcement estimates represent the average increase in payments to MA plans and actual payments will vary from plan to plan. Below, Table 1 provides CMS estimates of the impact of finalized payment changes on net MA plan payments.
MA Risk Adjustment Changes
As expected, CMS finalized the last year of the three-year phase-in of the MA risk adjustment model, which requires calculating 100 percent of the risk scores using only the 2024 CMS-HCC (Hierarchical Condition Category) model in 2026. CMS also addressed stakeholder concerns with the planned transition toward a risk adjustment model based on MA encounter data, as previewed in the CMS CY 2026 Advance Notice. CMS pledged to engage stakeholders in this model development process while continuing to evaluate the feasibility, transparency, and timing of a future transition to an encounter-based risk adjustment model.
CMS also finalized the MA coding pattern adjustment factor of 5.9 percent for CY 2026, which is the statutory minimum adjustment factor to account for differences in coding patterns between MA plans and providers under Medicare FFS Parts A and B.
Part D Risk Adjustment
For CY 2026, CMS finalized the revised 2026 RxHCC model with adjustments for maximum fair price drugs. Importantly, CMS also finalized using separate FFS normalization factors for MA-Prescription Drug (MA-PD) plans and Prescription Drug Plans (PDPs), making 2026 the second year CMS will vary normalization for these two markets. The calculation of the factors for CY 2026 is different, however, and will have substantially greater impact than the method used previously. It also will reduce Part D risk scores significantly for MA-PD plans while increasing scores for PDPs.
MA Star Ratings
CMS continues to solicit feedback from stakeholders on ways to simplify and refocus MA Star Ratings measures to focus more on clinical care, outcomes, and patient experience of care measures. Also included in the CY 2026 Rate Announcement are non-substantive measure specification updates and a list of measures included in the Part C and Part D improvement measures and categorical adjustment index for the 2026 Star Ratings.
Separately, in the policy and technical changes rule, CMS finalized new regulatory requirements designed to enhance MA beneficiary protections in an inpatient setting, provisions related to allowable special supplemental benefits for the chronically ill (SSBCI), and the care experience for dually eligible beneficiaries enrolled in MA special needs plans.
Enhancing MA Beneficiary Appeal Rights and Notification Requirements
CMS is finalizing provisions that limit the ability of MA plans to reopen and modify a previously approved inpatient hospital decision on the basis of information gathered after the approval. Under the final rule, MA plans will be able to reopen an approved hospital admission only due to error or fraud. In addition, CMS finalized several provisions to enhance beneficiary appeal rights and new reporting and notice requirements, including:
- Ensuring that MA appeals rules apply to adverse plan decisions, regardless of whether the decision was made before, during, or after the receipt of such services
- Codifying existing guidance that requires plans to give a provider notice of a coverage decision
- Ensuring enrollees have a right to appeal MA plan coverage denials that affect their ongoing source of treatment
Non-Allowable Special Supplemental Benefits for the Chronically Ill
The final rule establishes guardrails for SSBCI benefits by codifying a list of non-allowable examples (e.g., unhealthy food, alcohol, tobacco, life insurance). CMS did not finalize proposals that were designed to improve administration of supplemental benefits and enhance transparency of the availability of such benefits.
Improving Care Experience for Dual Eligibles
CMS finalized new requirements for dual eligible special needs plans (D-SNPS) that are applicable integrated plans (AIPs) as follows:
- D-SNPs will be required to have integrated member ID cards for their Medicare and Medicaid plans
- D-SNPs will be required to conduct an integrated health risk assessment for Medicare and Medicaid, rather than separate ones for each program.
These provisions affecting certain D-SNPS plans will be effective for the 2027 plan year.
Provisions Pertaining to the Medicare Part D Inflation Reduction Act
CMS is finalizing proposals to codify existing requirements related to key provisions of the Inflation Reduction Act, including no cost sharing for adult vaccines and capping monthly copayments for insulin at $35. In addition, CMS is codifying existing guidance related to the implementation of the Medicare Prescription Payment Plan, which is also part of the Inflation Reduction Act.
Key Proposals CMS Has Yet to Finalize
As noted earlier, CMS finalized a streamlined rule that excluded several regulatory changes identified in the November 2024 proposed rule. In addition to provisions related to coverage of anti-obesity medications, guardrails for AI, and mandatory analysis of the health equity impact of MA plans utilization management practices, the following proposals were not finalized. CMS notes that these proposals might be finalized in future rulemaking.
- Expanding Medicare Part D Medication Therapy Management (MTM) eligibility criteria
- Ensuring equitable access to behavioral health services by applying MA cost-sharing limits
- Enhancing the Medicare Plan Finder to include information on plan provider directories
- Promoting informed choice by enhancing CMS review of MA marketing and communication materials
- Enhancing rules on MA plans’ use of internal coverage criteria
Key Considerations
The policies finalized in the CY 2026 Rate Announcement are projected to increase average Part C payments to MA plans by 5.06 percent in CY 2026—a significant uptick from the payment updates originally proposed in the CY 2026 Advance Notice. Nonetheless, the final rate increase will have varying effects across MA plans, with some experiencing larger or smaller impacts in CY 2026. MA plans should assess these outcomes as they prepare their bid submissions for 2026.
According to the CY 2026 Rate Announcement, CMS expects that the 5.06 percent increase will provide continued stability for the MA program and its beneficiaries while ensuring accurate and appropriate payments to Medicare Advantage organizations.
In the CY 2026 MA and Part D Final Rule, CMS adopted a significantly scaled-back final rule, which omitted some of the more far-reaching proposals for MA and Part D that were originally proposed in November 2024. CMS, however, could potentially revisit and finalize some of these proposals in future rulemaking. Moreover, new regulatory requirements that enhance enrollee protections in inpatient care settings and improving the care experience for dual eligibles signal CMS’s continued interest in improving program oversight and enhancing consumer protections for MA beneficiaries.
Connect With Us
MA stakeholders need to undertake scenario planning and be prepared to adapt to a rapidly evolving federal policy environment. From modeling and impact assessments of specific policy changes to strategy development and implementation, HMA is home to experts with diverse skill sets. Our team can help stakeholders assess and prepare for potential changes to prior authorization, looking holistically at their organization’s operations, patient care models, and reimbursement strategies. Our team also provides detailed modeling and assessments to ensure health plans are prepared for changes in risk adjustment and coding policies, supplemental benefits, and other key issues affecting capitation payment, bids, and care delivery models.
For details about the finalized payment and policy rules contact our featured experts below.
