Medicare Advantage payments rise 5.06% for 2026

The Centers for Medicare & Medicaid Services (CMS) has finalized a 5.06% average increase in payments to Medicare Advantage plans for 2026—nearly double its earlier estimate. The announcement marks a major policy shift affecting millions of older Americans, health insurers, and federal spending projections.

CMS confirms higher-than-expected rate hike

Initially proposed at 2.83% in January, the revised 5.06% rate hike reflects increased health care utilization and economic conditions. CMS said the final rate accounts for rising costs associated with delivering services under Medicare Advantage, which now covers over 30 million Americans.

The payment increase applies to both Medicare Advantage and Medicare Part D prescription drug plans, and it will go into effect on January 1, 2026.

Health insurers see market surge

Following the CMS announcement, shares of major health insurance providers surged. Humana stock jumped more than 14% the day of the news, while Elevance Health, CVS Health, and UnitedHealth Group each saw gains between 6% and 8%.

Insurers had previously warned that smaller rate increases could force them to reduce benefits or raise premiums. With this larger adjustment, companies may have more flexibility to preserve plan offerings while managing administrative and medical costs.

Taxpayer costs and federal budget impact

The Biden administration estimates that the 2026 Medicare Advantage payment hike will cost taxpayers more than $25 billion. Critics have raised concerns about whether the higher spending improves patient outcomes or merely boosts insurer profits.

CMS says the changes are necessary to ensure Medicare Advantage plans remain sustainable and competitive, especially given rising labor and operational costs in the health care sector.

What’s next for enrollees?

Beneficiaries enrolled in Medicare Advantage won’t see immediate changes. However, the payment bump could impact premiums, benefit levels, and plan availability during the next open enrollment period, which begins October 15, 2025.

Consumers are encouraged to review their options this fall, especially as plans adjust to the new reimbursement levels.

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