CMS Suggests 2.3% Increase in Payments for Medicare Advantage Plans

January 11, 2025 TruthUSA

The proposed increase would result in an extra $21 billion in payments to Medicare Advantage plans in 2026.

Health insurance providers offering private Medicare Advantage (MA) plans will see a rise in payment rates for 2026 if the incoming Trump administration endorses the Biden administration’s recent proposal.

On Friday, the Centers for Medicare and Medicaid Services (CMS) announced a proposed increase of 2.23 percent in the average benchmark payment to private MA plans for 2026, in contrast to a minor reduction of 0.16 percent for 2025.

After excluding a 2.1 percent risk score trend adjustment—used to gauge how plans code for patient illnesses—payments are projected to rise by 2.23 percent.

This increase translates to an additional $21 billion being allocated to MA plans over the span of the year. It will enhance revenue for companies like UnitedHealthcare and Humana, which collectively represent nearly half of all MA enrollment in 2024, catering to 15.4 million individuals.

“CMS is committed to ensuring that individuals with Medicare Advantage and Medicare Part D have access to stable and affordable options,” stated CMS Administrator Chiquita Brooks-LaSure in a news release. “Today’s advance notice furthers CMS’ mission to facilitate access to affordable, high-quality care in Medicare Advantage while responsibly managing taxpayer funds.”

CMS forecasts $9.2 trillion in payments to MA plans over the next decade, with $1.3 trillion earmarked for supplemental benefits and premium reductions. The agency noted it chose not to halt growth rates associated with medical education costs or the gradual implementation of the revised risk adjustment model—modifications that could have increased MA payments by $10.4 billion in 2026.

According to CMS, recent payment rates were deemed sufficient as MA options for Medicare recipients have remained stable, with premiums, supplemental benefits, and available coverage options mostly unchanged since last year.

Insurance companies have expressed concerns that recent payment adjustments have not matched the rising medical costs, adversely affecting their stock market performance. The shares of major MA firms such as UnitedHealthcare, Humana, CVS, and Centene dropped last April following the Biden administration’s 0.16 percent base rate cut.

CMS is open to public comments on this proposal until February 10.

The MA program, often referred to as Medicare Part C, serves as an alternative to traditional Medicare. MA plans are offered by private insurance companies under contracts with the federal government, frequently bundling Medicare Part D prescription drug coverage along with additional benefits like dental, vision, and hearing care.

CMS estimates that the number of MA enrollees in 2025 will reach 35.7 million, accounting for over half of all individuals enrolled in Medicare. The agency anticipates that the average monthly plan premium for all MA plans will decrease to $17 in 2025, with 60 percent of MA enrollees remaining in their current plan at no cost.

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

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