The Center for Medicare and Medicaid Services (CMS) announced its  required annual Advance Notice of Medicare Advantage (MA) and Part D payment policy updates late Friday, January 10, 2025, proposing a 4.33% average increase in MA plan rates for Calendar Year (CY) 2026. Historically, MA plan rate increases do not guarantee providers will see a corresponding increase in their payments from the plans. In addition, it appears the plans view this as another year with another rate cut. The Better Medicare Alliance has already asked for swift action from the Trump Administration to make sure that the CY2026 rate increase is aligned with increases in medical costs.

Payment policies adjusting the Effective Growth Rate and MA risk scores would continue under the notice if finalized, according to CMS. Failure to proceed with these two adjustments is estimated to cost more than $10 billion.

CMS plans to complete the MA plans’ transition to the new Part C risk adjustment model (named 2024 CMS-HCC Model) in CY2026. CMS also proposes to initiate this risk adjustment transition for Program of All-inclusive Care for the Elderly (PACE) organizations.

In 2024, CMS initiated policies requiring PACE organizations to submit “more fulsome encounter data” and it expects these submissions to improve further in 2025. Therefore, CMS concluded PACE organizations will be ready to begin transitioning to the new risk adjustment model in CY2026. If finalized, PACE organizations’ 2026 risk scores would be calculated using a blend of 10 percent of the 2024 CMS-HCC model plus 90 percent of the 2017 CMS HCC Model. CMS aims to complete the transition by CY2029 when the risk scores would be based solely on encounter data and FFS claims. CMS argues that this new model will improve payment adequacy as it will be based on more recent cost and diagnosis data along with ICD-10 codes.

CMS also seeks input on future measures and measure concepts for the MA Star Rating program. They are interested in measures with a “focus more on clinical care, outcomes and patient experience.” The notice also outlines further implementation of a number of Part D provisions required as part of the Inflation Reduction Act.

Comments on the Advance Notice are due to CMS no later than 11:59 p.m. ET on February 10, 2025, and CMS will issue the final rate announcement for CY2026 no later than April 7, 2025. It should be noted that the Advance Notice is proposed by the Biden Administration but its final content will be decided by the Trump Administration. The CMS Fact Sheet can be found here and the complete CY2026 Advance Notice here. Please submit any feedback on the proposals in the Advance Notice to Nicole Fallon.