The federal government is going to pay Medicare Advantage (MA) plans a lot more in 2026.
In payment policy updates released on Monday evening, the Centers for Medicare and Medicaid Services (CMS) said MA plans will receive average payment increases of 5.06%—or more than $25 billion—from 2025 to 2026. This is 2.83 percentage points higher than CMS had predicted in its January advance notice of these changes, and more than double the 2.33% increase it had estimated from 2024 to 2025.
“This was the administration’s first chance to pump the brakes on MA, and there was some uncertainty going into the release. The rate notice indicates a desire to drive on—and maybe accelerate,” Luke Hansen, chief medical officer at Arcadia, a healthcare data platform for payers and providers, told Healthcare Brew.
For 2025, the Medicare Payment and Advisory Commission predicted the federal government will pay MA plans $538 billion. (In 2024, it paid $494 billion, per the commission.)
Though the stock market is largely a burning dumpster fire right now, MA providers’ shares are soaring after the news.
The largest MA provider, UnitedHealthcare, saw its stock jump from $524.70 at market close on Monday to $582.17 at market open on Tuesday, though the stock came down to around $553.08 by the day’s end.
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Why so high? CMS said on April 7 that the rate increase is “largely attributable” to an increase in the effective growth rate. This rate represents the average expected change in MA benchmarks, which is the maximum amount the government will pay each Medicare Advantage plan, according to independent research nonprofit the Commonwealth Fund.
Benchmarks are calculated using the average spending in traditional fee-for-service Medicare in each county. That data wasn’t complete for 2024 when CMS estimated a 5.93% effective growth rate in its 2026 advance notice. Now, with the data complete, the effective growth rate is 9.04%, CMS said.
Zooming out. The rate updates and 2026 guidance were released just days after Congress approved Mehmet Oz as the new CMS director on April 3.
The New York Times reported in February that Oz has financial ties to Medicare Advantage companies, like TZ Insurance, sparking concerns about potential conflicts of interest. But during congressional confirmation hearings, Oz addressed bipartisan concerns about prior authorization and overpayment.
CMS will also in 2026 complete reforms to the MA risk adjustment model, which is intended to reduce overpayments, and finalize guidance on the Inflation Reduction Act’s Part D changes, including the Medicare Drug Price Negotiation Program.