On January 10, 2025, the Centers for Medicare & Medicaid Services (CMS) issued the “Calendar Year (CY) 2026 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (the CY 2026 Advance Notice)” – see Fact Sheet and Press Release. Among other things, the Advance Notice proposes updates to Medicare Advantage (MA) payment rates, which will be finalized in a Rate Announcement by April 7, 2025.
CMS announced a proposed net 4.3% payment increase for MA plans in 2026 – “this is over a $21 billion increase in expected MA payments to MA plans for next year.” This projected payment rate includes a number of factors, including growth rates of underlying costs, continued phase-in of risk adjustment model updates, and increases to risk scores “because of MA risk score trend.”
In part, due to manipulation of the risk adjusted payment system and the quality bonus payment program, the Medicare Payment Advisory Commission (MedPAC) estimated that in 2024 CMS paid MA plans an estimated 22% more than traditional Medicare, a total of at least $83 billion. In its press release announcing the Advance Notice, CMS notes that the Medicare Trustees project “that federal payments to MA plans in 2026 will be $590.9 billion” and “the federal government is expected to spend $9.2 trillion over the next decade on MA payments to plans.” Not surprisingly, the insurance industry is characterizing the proposed payment rate as a cut, and is asking the new Trump Administration for even more. Comments to the Advance Notice were due February 10, 2025.
The Center for Medicare Advocacy submitted comments to the Advance Notice separately and as part of a sign-on letter submitted by several organizations and a former CMS Administrator. Both sets of comments urge CMS to do more within its discretion to rein in wasteful MA overpayments.
February 13, 2025 – D. Lipschutz