What the 2026 Medicare Advantage rate update means for payers and providers

The Centers for Medicare and Medicaid Services (CMS) finalized its 2026 Medicare Advantage (MA) rate notice, and it sends a clear signal: the agency is recalibrating expectations for the MA program. After two consecutive years of effective benchmark cuts, the projected growth rate for payment to plans is expected to increase 5.06% in 2026.

The increase is one of the clearest indicators yet that the Trump Administration sees the MA program’s growth and vitality as key to Medicare's future. It increases the likelihood that MA will be positioned as the driver of Medicare program evolution in the coming years.

This update raises the bar on what’s possible — and necessary — for organizations operating in value-based care to be successful and sustainable.

CMS adjusts for rising costs

The final rate incorporates more complete and accurate claims data from 2023 and better visibility into 2024 trends. In its decision, the agency noted revisions to assumptions based on Part A and Part B FFS expenditures. CMS cited higher-than-expected costs among traditional Medicare beneficiaries — especially inpatient and outpatient care — as the basis for its upward revision. While recent years were characterized by disagreement between plans and CMS about the degree of cost increases, this year’s update is indexed to a 9% increase in observed costs.

“This is a dramatic revision,” says Mike Badome, ASA, MAAA, Lead Actuary at Arcadia. “It acknowledges the real cost pressures that plans experienced in 2024 and sets a new precedent for FFS spending assumptions moving forward.”

CMS also confirmed it will fully implement the V28 risk adjustment model by 2026. This update modifies how diagnosis severity is linked to expected costs and continues CMS’ move toward coding reform. Despite industry requests for delay, the agency is holding its course. While the overall rate increase reflects support for the program, the continuation of the V28 transition reflects ongoing commitment to reform the revenue model.

Risk management, not just documentation

For payers, the updated benchmark supports continued investment in supplemental benefits and value-based care contracts. However, success under these new conditions will not be achieved by documentation alone.

Plans that lead will be the ones that manage risk effectively. That means accounting for the full complexity of a member’s experience: clinical status, care utilization, social context, and longitudinal risk. It also means investing in technology and collaboration models that unify insight between payers and providers.

Provider organizations — particularly ACOs and health systems in shared-risk models — should expect higher benchmarks. While that doesn’t automatically translate to more shared savings, it does provide a broader runway for care model innovation and data infrastructure upgrades.

“The revised benchmark offers more flexibility — but also raises expectations,” says Badome. “It’s a shift in margin assumptions that will impact how health plans and providers prepare for 2026.”

What health plans and providers should do now

2024 was a challenging year. Many MA plans saw operating losses for the first time in years. This updated growth rate is a strong signal from CMS, acknowledging market conditions and rising costs — and that the baseline for financial assumptions in Medicare Advantage is changing as a result.

For Payers

The higher benchmark supports continued investment in value-based care and supplemental benefits, which are essential to managing the needs of a growing and more complex Medicare population. Investors responded quickly. Health insurer stocks jumped after the announcement, showing renewed market confidence in MA.

For health systems and ACOs

The final notice means potential for favorable Medical Loss Ratio (MLR) tailwinds in 2026. However, that doesn’t automatically translate into increased shared savings or risk revenue. The opportunity must be met with disciplined execution — aligning clinical operations, data insights, and financial strategy. After a period of retrenchment from risk, provider organizations must be ready to seize opportunities within MA that may be created under the new administration.

This is a strategic moment for healthcare organizations. Higher benchmarks don’t guarantee success. But they offer a chance to realign systems, teams, and technology around a higher-value model of care.

Build resilience into your strategy

Change isn’t a phase — it’s the norm. The most forward-looking healthcare organizations aren’t waiting for things to settle. They’re strengthening their foundation now.

Explore the key pressures shaping the future of care delivery in 10 strategies to succeed in value-based care, our new white paper filled with practical insights for organizations at every stage of the VBC journey.