Proposed MA rate notice for 2026 looks promising for health plans, which soon could reap more gains

The Biden administration’s final action with respect to Medicare Advantage (MA) provided a boost to health plans, which could fare better yet under the Trump administration.

For 2026, MA plans would receive a 2.23% increase in their payment benchmarks, according to an advance rate notice posted Jan. 10. That would represent a reversal from 2024 and 2025, when the payment benchmark dipped by 1.1% and 0.2%, respectively. A key difference from those years is the effective growth rate, a metric that helps determine the benchmark and represents a measure of per capita costs in Medicare fee-for-service.

When accounting for the projected risk-score trend, plans would receive an average payment increase of 4.33%, or $21 billion, next year.

It will be up to the Trump administration to implement the final rate notice, which is due out in April, roughly 60 days after the comment period on the advance notice ends Feb. 10.

Other MA regulations for 2026 were proposed in a December rule about technical and policy modifications to the program. Big pieces of news in that rule, also subject to change by the Trump administration, were proposals to cover GLP-1 drugs in Medicare and Medicaid when prescribed for obesity and to establish additional guardrails to stem potentially excessive use of prior authorization in MA.

An apparent MA fan

If past statements by a key incoming official are an indication, the Trump administration may look to accelerate MA growth, potentially at the expense of Traditional Medicare. This past year, a record 54% of Medicare enrollees were in MA.

Dr. Mehmet Oz, the nominee to head CMS, coauthored a 2020 Forbes article that supported expanding MA to cover all Americans except for Medicaid enrollees. Part of the context for the proposal was a need to shore up hospitals that were struggling financially during the early stages of the COVID-19 pandemic.

“Medicare Advantage has negotiated payment rates with care providers and already has extensive care networks that could be expanded very quickly to fill gaps needed for our newly insured Americans to receive their care,” wrote Oz and George Halvorson, former CEO of Kaiser Permanente.

When compared with Traditional Medicare, they added, by way of contrasting their proposal with a Medicare for All concept, “Medicare Advantage also has much better benefits, care coordination, quality controls, levels of performance, accountability and cash-flow models for implementing and delivering continuously improving models of care.”

Oz reiterated support for MA expansion while campaigning for a Pennsylvania Senate seat in 2022, including in a Q&A with AARP.

Pushback from the opposition

Last month, key Democratic senators posed questions to Oz in written correspondence. In addition to his stated policy positions on MA, they asked about reports that he owns significant stock in UnitedHealth Group, a leading stakeholder in the program. The concerns are likely to come up when Oz faces the Senate during his confirmation hearing, which has yet to be scheduled.

Amid a push to slash the federal budget deficit, it’s possible some congressional Republicans likewise will have qualms about MA expenditures. However, MA was not mentioned in a lengthy preliminary list of cuts that are being considered for inclusion in the FY25 budgetary reconciliation process.

In a December report on addressing the federal deficit, the Congressional Budget Office (CBO) described options for addressing MA, including saving hundreds of billions of dollars by reducing base-payment benchmarks and risk-score payments. The CBO noted those steps would affect coverage benefits and costs for MA enrollees. Such issues might increase the wariness of legislators to implement those approaches.

One thing that’s clear, at least anecdotally, is the increasing intensity of the headwinds facing the program. A report by Stateline near the start of 2025 open enrollment noted that more than 1 million seniors would need to find new insurance both because insurers were pulling out of markets they assessed as unprofitable and because large health systems and other providers were exiting their MA contracts.

In a published analysis for HFMA, Deepak Sadagopan, chief operating officer with Providence, said the true picture is nuanced: “Health systems are recognizing MA contract models that offer a pathway for better-funded programs that cover the cost of care delivery, and deliver better patient outcomes, while reducing administrative burden on physicians and clinical staff,” he wrote, citing HMO models as an example.

Possible regulatory modifications

If the new administration sees fit to further increase payments to health plans in the 2026 rate notice, it could take steps such as freezing or reversing application of a new risk adjustment model, as well as modifying a technical adjustment to the calculation of graduate medical education costs for services provided to MA beneficiaries.

A change in implementation of both those components would be projected to result in a combined additional increase of $10.4 billion in MA payments “that are not necessary to support stability in the program,” CMS wrote in a fact sheet about the advance rate notice.

A three-year phase-in for the new risk adjustment model began in 2024 and included restructured hierarchical condition categories using ICD-10, among other technical updates. As of 2025, according to the Biden administration, premiums, supplemental benefits and coverage options remained stable, as did MA rebates.

“Plans and providers have implemented the model smoothly and risk adjustment and payment levels have remained stable, and thus CMS is proposing to finish the phase-in as proposed to improve payment accuracy,” the agency wrote.

An increase in payments resulting from a reversal of the technical changes would be ill advised, CMS implied, given that payments to MA plans already are projected to exceed $9 trillion over a decade. The agency suggested changes to key provisions in the 2026 rate notice would make ensuring accurate payments more difficult.

CMS also is working to use plan-submitted encounter data in the risk adjustment model and said those data could be incorporated as soon as 2027. Those plans would be affected if the Trump administration decides to change course with respect to the model.