US plans largest Medicare Advantage payment increase since 2023 with a $21 billion proposal

Muscat: The US government has proposed a $21 billion boost in Medicare Advantage payments for 2026, offering a significant financial uplift for health insurers like UnitedHealth Group Inc., Humana Inc., and CVS Health Corp. If approved, the proposal, released Friday, would raise payments to Medicare Advantage plans by 4.3% on average, marking the largest increase in recent years.

The Centers for Medicare and Medicaid Services (CMS) unveiled the plan as the Biden administration prepares to hand over to the incoming Trump administration. Excluding changes in patient risk scores, payments would still rise by 2.2%. Shares of the three major insurers surged in after-hours trading, with Humana gaining 7%, UnitedHealth rising 3.9%, and CVS increasing 2.7%.

The proposed increase seeks to address insurer complaints of insufficient rates that have failed to keep pace with rising medical costs. In the past two years, payment policies squeezed insurer earnings and dampened stock performance. JPMorgan analyst Lisa Gill noted optimism in the industry, writing that a Trump-led CMS could offer more favorable rates.
Medicare Advantage, a private alternative to traditional Medicare, has grown to cover over half of Medicare beneficiaries. The program cost $455 billion in 2023, excluding drug plan payments, and is projected to reach $9.2 trillion in total payments over the next decade, according to CMS.

Despite the financial boost, critics argue that the Medicare Advantage program overcharges taxpayers. Democratic lawmakers, including Senator Elizabeth Warren, have urged reforms, alleging that insurers inflate patient risk scores to secure higher payments.

If adopted, the 2026 payment increase would be the largest since 2023 and comes as CMS finalizes controversial risk coding policies. These policies, which began phasing in last year, faced significant pushback from insurers but have yet to destabilize the market, according to CMS.

The proposal also sets the stage for the Trump administration to influence Medicare Advantage policies further. Historical precedent shows outgoing administrations issuing Medicare rate plans in their final days, as seen in 2021 when the first Trump administration announced its plan shortly before President Biden’s inauguration.

The Medicare Advantage program has been a financial boon for health conglomerates, with companies like UnitedHealth, Humana, and CVS dominating the market. However, watchdogs continue to scrutinize the program’s higher costs compared to traditional Medicare, which amounted to $83 billion more in 2024 alone.