CMS Raises 2026 Medicare Advantage Reimbursement, Adjusts Drug Coverage Policies

Recent changes announced by the Centers for Medicare and Medicaid Services (CMS) are significant for the Medicare Advantage market, reversing some prior policies that had reduced plan availability and increased costs for beneficiaries. Previously, CMS set lower-than-expected reimbursement rates for insurers sponsoring Medicare Advantage plans, resulting in fewer plans being offered, reduced benefits, and higher premiums for many beneficiaries in 2025. This also impacted Part D prescription drug coverage, leading to higher premiums and more limited drug formularies bundled within Advantage plans. Additionally, provider participation in Medicare Advantage plans has declined, reducing treatment options for members.

CMS recently revised its stance by increasing the 2026 reimbursement rate for Medicare Advantage insurers to 5.06% above the 2025 level, up from an earlier proposed 2.23%. This adjustment, reflecting rising medical costs, translates into approximately $25 billion more payments to plan sponsors, potentially averting further plan closures, premium hikes, and benefit cuts. However, CMS also withdrew a prior proposal to expand coverage for obesity drugs under Medicare Advantage, limiting these medications' availability and potentially resulting in out-of-pocket expenses for patients seeking these treatments.

The current administration is rolling out a policy over three years to curb aggressive billing practices by Medicare Advantage plans that aimed to increase reimbursements through diagnostic coding. This measure is intended to prevent exploitation of coding systems and is expected to be fully implemented by 2026, which may influence Medicare Advantage plan revenue models.

Overall, the anticipated stability in Medicare Advantage plan offerings and cost structures for 2026 contrasts with the more disruptive changes seen between 2024 and 2025. Insurers may face fewer pressures to reduce plan options or erode benefits, improving the market outlook ahead of the Open Enrollment period. However, beneficiaries seeking expanded drug coverage for obesity treatments might face continued limitations.

These developments underscore the complex balance CMS seeks between controlling costs, ensuring plan viability, and maintaining beneficiary access and benefits within Medicare Advantage programs. Stakeholders should monitor forthcoming plan details released later this year to assess impacts on coverage, premiums, and provider networks.