Trump’s CMS significantly increases Medicare Advantage plan payouts

Medicare Advantage plans received a huge gift from the Trump administration, as the government finalized 2026 payment rates that were far higher than those outlined by Biden administration officials.

After years of rates they said were insufficient, the 5.1% benchmark hike should hasten the privatised Medicare plans’ margin recovery, mainly because those rates corresponded with escalating elder care expenses. Following the announcement of the payment notice, insurer stocks surged.

To make it more difficult for insurers to overstate members’ illnesses to receive more reimbursement, the Trump administration also finished modifying their coding processes. MA Plans strongly fought to get the amendments reversed because they are controversial.

In comparison to the 2.2% rate rise that the Biden administration had suggested in January, the 5.1% rate increase for MA plans is the biggest in the last ten years. Overall, CMS estimates that it will result in more than $25 billion in increased payments to MA plans in the upcoming year.

However, since the CMS estimate excludes the effect of the plans’ coding procedures, the actual amount will be greater. Including the effect of risk scoring, the anticipated shift in income for MA plans increases from 5.1% to 7.2%. The amount which this will increase reimbursement in Massachusetts next year is hard to predict; the program is projected to cost taxpayers almost $600 billion in total by 2025.

However, Lynn Nonnemaker, a senior director at McDermott+, stated that “CMS’ estimate of risk score trend would increase the payments going to MA plans next year even beyond the estimate given in the rate notice.”

Although the gap between the two was more than some experts had anticipated, final rates are often higher than proposed ones. As reimbursement aims to catch up to the cost surge that has hurt payers’ profits over the last year, CMS said the final rate is more generous since it was determined using more recent data that represents even higher expenditure in Medicare.

Trump’s CMS was anticipated to be more accommodating to Massachusetts proposals under newly appointed Administrator Dr. Mehmet Oz, a physician and media personality who has previously voiced support for the privatized Medicare program.

However, Oz walked a tightrope between endorsing MA and promising to stop profiteering in the plans throughout his confirmation process, which has drawn criticism from the American people and congressional scrutiny.

The Trump administration’s initial MA regulations indicate that officials are dedicated to walking that line. Additionally, CMS recently finalised a regulation that places certain restrictions on MA plans’ rejections of coverage, but it chose not to adopt the more drastic measures that its predecessors had suggested.

In an information sheet on their proposed regulation in January, Biden administration regulators expressed concern that the Trump administration would block changes to the way MA plans account for beneficiary risk, describing the reform as “crucial” to guarantee payment accuracy.

According to Nonnemaker, the Trump administration also finalised other payment policies that could reduce the profits of MA plans. These policies include changes to the way normalisation factors, which modify enrollee risk scores, are determined for prescription drug plans. The CMS received a lot of criticism on this proposal in comments on the rate.

Following the rule’s announcement, aftermarket stocks of big MA payers, like as UnitedHealth and Humana, surged. Following the announcement of the rates, Humana, which is especially vulnerable to MA, rapidly increased by 16%.

As seniors in the privatised Medicare plans required more medical care than anticipated last year, insurers’ margins were flattened; the payment increase should help protect them from the worst of the cost increases. To boost profits, national payers have already reduced coverage and pulled out of failing areas for 2025.