Despite Overpayment Concerns, CMS Finalizes $25 Billion Hike in Medicare Advantage Payments for 2026
CMS’s revised rates for private Medicare Advantage plans are what insurers lobbied for. One positive development: future overpayments should be less.
Earlier this week the Centers for Medicare and Medicaid Services (CMS) announced final payment rates for Medicare Advantage plans for the 2026 enrollment year. In a concerning but typical trend, the payment rates announced in the final notice are higher than initially proposed. Payments to insurers administering MA plans will increase by 5.06% in 2026, a more than $25 billion increase from 2025.
This is an increase of 2.83% over the rates CMS initially proposed for 2026. In contrast, CMS finalized changes to the risk scoring system that’s expected to decrease Big Insurance’s ability to wrongfully increase their payments from the government. This CMS announcement presents new challenges to ensuring Big Insurance is not taking advantage of taxpayers, but it also presents a reason for optimism that CMS will continue to address rampant upcoding in MA by Big Insurance.
Taking a step back, let's review the process by which CMS sets payment rates for MA plans. Around January of the preceding year, CMS releases an Advance Notice with proposed rates for the following calendar year. There is then an opportunity for public comments to be submitted. During this time, Big Insurance does a full court press lobbying anyone who will listen to increase their payment rates, thus increasing their profit margins. (UnitedHealth alone spent more than $18 million to lobby lawmakers and regulators over the past two years.) CMS then issues final payment rates in early April.
In almost every year, the final payment rates are higher than the proposed rates because of industry lobbying. This year was no different, even as the landscape of support for MA plans is shifting. More on that below.
The details
The final payment rates from the government to Big Insurance for MA beneficiaries will increase substantially in 2026 despite studies showing that private insurers already get over $100 billion every year in overpayments, this increase. CMS stated that this increase, which poses a grave threat to Medicare solvency and use of taxpayer dollars, is due to rising medical costs and pricing data that was not included in calculation of rates in the Advance Notice but that is required by statute to be included in final rate calculations.
Though required by law, this excessive increase in payments to Big Insurance – when evidence demonstrates they are already being overpaid – demonstrates the crucial need for Congress to fix the way payment rates for MA insurers are calculated. Sadly, analysts expect the extra payments Big Insurance will get in 2026 will go to increasing profit margins, not increasing benefits or availability of care.
It’s not all bad
The final notice of MA payment rates did contain some positive news. CMS announced that it will continue phasing in updates to the risk adjustment model that were started in 2024 and will be phased in completely next year. These changes to the risk adjustment model aim to decrease a trend known as “upcoding” in which Big Insurance increases the medical codes assigned to a beneficiary in order to increase their payments from the government. Oftentimes, as the Wall Street Journal has documented, the beneficiary is not treated for codes added during upcoding, resulting in extra money going to insurers that is not needed for medical care.
By finalizing the proposed changes to the risk adjustment model, CMS is preventing more than $3 billion in overpayments from going to Big Insurance. Though this is a small portion of total overpayments, it represents important progress in stopping them.
So even as Big Insurance continues to achieve big wins in Washington, steps are being taken to rein in some of insurers’ most egregious practices. The increase in benchmark payments sent insurance stocks soaring, which strengthened the industry on Wall Street. However, the finalization of risk scoring changes is a significant step in ending the profiteering of these companies. In Congress this landscape is clear as well.
Congress has not passed any bills that would curtail insurers ability to game the Medicare Advantage program. But, members from both sides of the aisle have been speaking out and signing letters calling for action on MA.
Rachel Madley is Director of Policy and Advocacy at the Center for Health & Democracy. She previously worked for Congresswoman Pramila Jayapal. She received her PhD from Columbia University and has written for publications including The New York Times.
When will the great wake-up call actually? Medicare Advantage advantages no one other than the health insurance companies issuing the policy. It is a behemoth of bad care and treatment for older American adults (sadly and woefully under-educated about these non-advantageous plans).
Clearly CMS and Senate oversight has ignored the voice of customers -- Medicare (dis)Advantage patients and US Taxpayers by increasing costs by an additional $26 Billion dollars. How dare they do this when the Health insurance companies are ripping us off? It is disgusting and unconscionable. Free enterprise and privatized Healthcare does NOT work for Patients. We The People are to these companies nothing more than exploitable Capitalist commodities. I'm a human being and I detest having my Human Rights violated and my Members of Congress and the Senate take advantage of us constituents, in order to keep this insanely bloated private/public insurance companies rolling in the all mighty dollars, while denying, delaying care and abusing the Medicare Trust System the way they are. It is a National Embarrassment that our insurance companies are not properly regulated leading to third rate health care that everyone else in other advanced economies recognizes and criticizes how ridiculously expensive healthcare is in the USA. It is an international embarrassment as well.