2026 Medicare Advantage and Part D Advance Notice Fact Sheet

The Centers for Medicare & Medicaid Services (CMS) recently released the 2026 Medicare Advantage (MA) and Part D Advance Notice, outlining proposed changes to payment rates, risk adjustment models, and updates related to the Inflation Reduction Act (IRA). These updates are designed to improve payment accuracy, ensure program sustainability, and maintain benefits for enrollees. Comments on the proposal are open until February 10, 2025, with the final Rate Announcement expected by April 7, 2025.

Key Highlights of the 2026 Advance Notice

Payment Adjustments

• CMS projects a 4.33% net increase in MA payments for 2026, amounting to over $21 billion in additional funding.
• The effective growth rate of 5.93% reflects increases in Medicare Fee-for-Service (FFS) costs and adjustments for medical education expenses.

Risk Adjustment Model Updates

• CMS proposes completing the three-year phase-in of the 2024 CMS-HCC risk adjustment model to improve payment accuracy and predictability.
• The updated model incorporates more recent ICD-10 data and better reflects current medical practices.
• For PACE organizations, CMS will gradually transition to the 2024 CMS-HCC model, beginning with a blended approach in 2026.

Part D Updates

• The IRA mandates several changes to the Part D benefit, including:
  • Out-of-pocket cost cap: Set at $2,100 for 2026, adjusted from the 2025 threshold.
  • Insulin cost-sharing cap: Enrollees will pay the lesser of $35 or 25% of the negotiated price.
  • No cost-sharing for vaccines: Adult vaccines recommended by the Advisory Committee on Immunization Practices remain fully covered.

Star Ratings and Quality Improvements

• CMS aims to refine Star Ratings by focusing more on clinical care, patient outcomes, and experience measures.
• Feedback is solicited on potential updates to reporting measures and methodologies to enhance program transparency and equity.

Implications for Medicare Advantage and Part D Plans

Increased Costs and Sustainability

The projected growth in MA payments underscores the federal government’s significant investment in the program. Total MA spending is expected to reach $590.9 billion in 2026, with $9.2 trillion allocated over the next decade. Ensuring accuracy in payments will help prevent wasteful spending while maintaining program stability.

Beneficiary Impact

Enrollees can expect stable premiums and benefits, with enhanced access to supplemental benefits like transportation and healthy food assistance through MA plans. The updates aim to balance affordability with quality care.

Plan Sponsor Considerations

Plan sponsors must adapt to new risk adjustment models, pricing structures, and IRA-mandated benefits. Accurate bids and efficient management will be critical as these changes are implemented.

Conclusion

The 2026 Medicare Advantage and Part D Advance Notice reflects CMS’s commitment to promoting transparency, enhancing beneficiary access, and maintaining fiscal responsibility. By finalizing the phase-in of updated risk adjustment models and implementing IRA provisions, CMS aims to improve program sustainability while protecting enrollees’ access to quality care.

Agents and stakeholders are encouraged to review the proposed changes, submit comments by February 10, 2025, and prepare for the final Rate Announcement in April. These updates present opportunities for insurers and agents to optimize strategies and serve clients effectively in the evolving Medicare landscape.

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