Trump Administration Increases Federal Payments to Medicare Advantage Plans for 2026

The Trump administration has announced a significant increase in federal payments to private Medicare plans, with a boost of more than $25 billion for the 2026 plan year, Axios reports.

This decision, finalized on Monday, represents a more than 5% increase in payment rates, providing a financial advantage to major insurers such as UnitedHealth Group, Humana, CVS Health, and Elevance.

This payment hike comes as a surprise, especially given that it is notably higher than the proposal made by the Biden administration just before leaving office. According to the Centers for Medicare and Medicaid Services (CMS), the increase is primarily due to updated data on health spending that was not available when the initial proposal was drafted in January. However, analysts have remarked that the final payment rate is far larger than expected and exceeds the historical average.

Chris Meekins, a managing director at Raymond James, pointed out in a client note that the discrepancy between the proposed and final payment rates may suggest a broader lack of attention to Medicare Advantage (MA) by some policymakers, including those associated with the Democratic side.

The new policy has received praise from proponents of Medicare Advantage, with Mary Beth Donahue, CEO of the Better Medicare Alliance, commending the administration’s move.

“We applaud the Trump administration for protecting seniors and fully funding Medicare Advantage,” Donahue said.

She emphasized that after two years of payment cuts, the increase will bring much-needed stability to millions of beneficiaries who have faced plan closures, higher costs, and reduced benefits.

However, the policy is not without controversy. While the increased payments are welcomed, some changes implemented under the Trump administration since 2023 remain contentious. These include efforts to adjust payments to private plans to make them more accurate, which have been criticized by some insurers. These changes were strongly opposed by certain health insurers, who lobbied for delays in their implementation. The Biden administration, in its January proposal, warned that scrapping these changes could cost an additional $3.4 billion.

Looking ahead, the future direction of Medicare Advantage remains uncertain. Newly confirmed CMS administrator Mehmet Oz, who had previously promoted Medicare Advantage plans during his career as a TV talk show host, has expressed his intention to address issues of overpayments to insurers and prior authorization processes. Despite this, no major policy shifts have been introduced so far under his leadership, though his stance aligns with broader Republican views on making changes to the program.