The Centers for Medicare & Medicaid Services (CMS) has released the Final Medicare Advantage (MA) and Part D Rate Announcement for calendar year (CY) 2026. The announcement encompasses both payment and policy updates for MA plans, which now serve more than half of Medicare enrollees. Here, we break down key differences between the final announcement and the Advance Notice, offering three key takeaways for MA plans to consider in their strategic planning.
Garnering a positive reaction from MA advocates, the Final Rate Announcement confirmed an anticipated average increase in revenue for MA plans of 5.06% or more than $25 billion, a significant uptick compared to the 2.23% (more than $21 billion) projected in the Advance Notice published in January.
|
Impact |
2026 Rate Announcement |
2026 Advance Notice |
|---|---|---|
|
Effective growth rate |
9.04% |
5.93% |
|
Change in Star Ratings |
-0.69% |
-0.69% |
|
MA coding pattern adjustment |
0.00% |
0.00% |
|
Risk model revision and FFS normalization |
-3.01% |
-3.01% |
|
Expected average change in revenue |
5.06% |
2.23% |
Figure 1. Comparison of the 2026 Final Rate Announcement and Advance Notice (Source: CMS fact sheet).
CMS noted the change is “primarily due to the inclusion of additional data on fee-for-service (FFS) expenditures, including payment data through the fourth quarter of 2024, which was not included on account of the early Advance Notice publication.” In a fact sheet, the agency also said the expected average change in revenue does not incorporate an adjustment for underlying MA coding trends, which it expects to increase risk scores by 2.10% on average.
As proposed in the Advance Notice, CMS finalized plans to complete the phase-in of the new CMS-HCC risk adjustment model, which started in 2024. For CY 2026, CMS will calculate 100% of risk scores using only the 2024 CMS-HCC model.
The transition to this new model is coupled with the continued use of the multiple linear regression methodology implemented in CY 2025 for the FFS normalization factor. This adjustment to risk scores aims to account for the expected growth in the average FFS risk score over time, ensuring that payments are reflective of the actual risk. Program of All-Inclusive Care for the Elderly (PACE) organizations are beginning the transition with risk scores being calculated as a blend of 10% using the 2024 CMS-HCC model and 90% using the 2017 CMS-HCC model, with CMS noting a full transition will further enhance risk payment accuracy and reduce the data submission burden.
Consistent with the Advance Notice, CMS anticipates a 0.69% decline in overall Star Ratings quality bonus payments. However, in the Final Rule, released shortly before the Final Rate Announcement, the agency deferred action on most proposed Star Ratings changes, with the notable exception of expanding the Breast Cancer Screening measure to include ages 40–49 beginning in the 2029 Star Ratings.
CMS also stated that it plans to review the Health Equity Index reward, currently slated for implementation in the 2027 Star Ratings, for consistency with Executive Order 14192, along with other regulations and policies. Further, CMS is no longer considering adding the Social Need Screening and Intervention measure to the display page for consumers or the Star Ratings program.
In the Final Rate Announcement, CMS also announced the Health Equity Index will be renamed Excellent Health Outcomes for All (EHO4all), stating that the new name “better captures the goal of ensuring exceptional care for all enrollees.” The agency will consider adding additional factors that go beyond dual eligibility, receipt of the low-income subsidy, and disability to the groups of enrollees that determine this the EHO4all reward. One potential factor is geography, such as urban or rural, a proposal that CMS said garnered mixed support during the public comment period following publication of the Advance Notice.
For a deeper dive into the Star Ratings impact of the 2026 Final Rule and Rate Announcement, sign up for the next installment of our Quality Decoded webinar series on Wednesday, April 23 at 1 pm ET. During this 30-minute webinar, we’ll examine:
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