BREAKING: Medicare Advantage Plans to See Major Rate Increase Under CMS
Just four days after Mehmet Oz, M.D. was confirmed as the new Administrator for the Centers for Medicare & Medicaid Services (CMS), the agency announced a major victory for Medicare Advantage plans, boosting their benchmark payment rate from the 2.23 percent annual increase announced by the Biden administration in January, to 5.06 percent, an increase of 2.83 percentage points.
CMS made the announcement on April 7. The announcement, posted in the form of a press release on the agency’s website, began thus: “Today, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2026 Rate Announcement for the Medicare Advantage (MA) and Medicare Part D Prescription Drug Programs that finalizes the payment policies for these programs. This release — combined with the CY 2026 MA and Part D final rule that was released on April 4 — makes annual routine and technical updates to the MA and Part D programs.”
The agency went on, “The actions taken by CMS help protect beneficiaries and taxpayers from waste, fraud, and abuse, while also driving access to high-quality, affordable healthcare through Medicare Advantage. By finalizing these payment policies, CMS is ensuring that Medicare Advantage continues to offer access to critical services in an efficient, accountable manner, further strengthening the program’s ability to serve beneficiaries.”
And it added that “Payments from the government to MA plans are expected to increase on average by 5.06 percent from 2025 to 2026. This is an increase of 2.83 percentage points since the CY 2026 Advance Notice, which is largely attributable to an increase in the effective growth rate. The method for setting the effective growth rate is set in statute and represents the average expected change in the benchmarks, used to determine payment for MA plans, based on the growth in Medicare per capita costs. The effective growth rate is 9.04 percent, which is higher than the estimate of 5.93 percent in the CY 2026 Advance Notice. This change is primarily due to the inclusion of additional data on fee-for-service (FFS) expenditures, including payment data through the fourth quarter of 2024, which was not included on account of the early Advance Notice publication.
Dr. Oz, the CMS Administrator, has been a strong proponent of Medicare Advantage.
Mariam E. Sunny of Reuters noted in a report on Monday evening that “Higher rates will benefit large U.S. health insurers, including UnitedHealth Group (UNH.N), opens new tab and Humana (HUM.N), opens new tab, which have been grappling with steep medical costs related to government-backed Medicare and Medicaid plans.
Shares of UnitedHealth and Elevance Health (ELV.N), opens new tab rose about 6% in afterhours trading, and those of CVS Health (CVS.N), opens new tab added 6.7%. Humana shares jumped 11.5% and Cigna (CI.N), opens new tab rose 1% in extended trading The final rate indicates ‘visible evidence of Trump administration's support for MA program,’ said Bernstein analyst Lance Wilkes.”
Also late on Monday, the Wall Street Journal’s Anna Wilde Mathews reported that “The Centers for Medicare and Medicaid Services announced the increase for 2026 payment rates on Monday. The Wall Street Journal first reported the news. Investors likely viewed the bump as a sign of the Trump administration’s support for Medicare Advantage, the program under which private insurers administer the benefits of the federal program for older and disabled Americans. The Medicare agency said the increase in the planned payment rate reflected rising medical costs, and that more recent data had led to the steeper final rise compared with the January proposal,” Wilde Mathews wrote, adding that “The agency said it is ‘ensuring that Medicare Advantage continues to offer access to critical services in an efficient, accountable manner, further strengthening the program’s ability to serve beneficiaries.’”
Wilde Mathews noted that “The Trump administration did stick with a Biden administration policy change that limits certain billing practices that have boosted payments to Medicare Advantage insurers. The change was being phased in over three years, to be completed in 2026, and the agency rejected suggestions from some insurers to pause the process. The rate increase, combined with a rule issued last week that withdrew a Biden administration proposal to cover drugs for obesity, provides a turnaround for big insurers after a difficult year when the long-profitable Medicare business became a drag on margins and share prices.”
As a result of the rate change, Investor’s Business Daily’s Ed Carson reported on Tuesday morning that “Humana (HUM), UnitedHealth Group (UNH) and Aetna parent CVS Health (CVS) and other health insurers rallied Tuesday after the Centers for Medicare & Medicaid Services (CMS) raised Medicare Advantage payments significantly late Monday. Humana stock spiked 11.7 percent to 284.56, above its 50-day line but still below its long-sliding 200-day. Humana is the health insurer most exposed to Medicare Advantage. UnitedHealth stock gained 7.2, pushing above its 200-day line. The Dow giant will report first-quarter results next week. CVS Health stock jumped 9.85% to o 70.14, back above a 67.34 buy point.”
