Overview The Centers for Medicare & Medicaid Services (CMS) has officially released the final Calendar Year (CY) 2026 Rate Announcement for Medicare Advantage (MA) and Medicare Part D. Alongside the final rule issued on April 4, these updates shape the financial and operational landscape for all MA and Part D stakeholders going into 2026.
These changes include finalized payment policies, risk adjustment model enhancements, updates to the effective growth rate, and the final implementation of Part D redesign components — all with the goal of ensuring affordability, sustainability, and integrity within the Medicare Advantage program.
Key Highlights of the CY 2026 Rate Announcement
📈 Average MA Plan Payments to Increase by 5.06%
CMS projects a 5.06% average increase in government payments to Medicare Advantage plans from 2025 to 2026 — up from the originally forecasted 2.23% in the Advance Notice. This increase is largely attributed to a higher effective growth rate, now finalized at 9.04% (vs. 5.93% previously).
What Changed? Additional Q4 2024 fee-for-service (FFS) expenditure data was included in the updated calculation, resulting in the upward revision.
✅ Completion of Medical Education Adjustment Phase-In
CY 2026 marks the final year of a three-year phase-in of adjustments related to medical education costs. Starting this year, 100% of MA-related education expenses will be excluded from the growth rate calculations — a technical change, but one that ensures a more accurate accounting of Medicare costs.
📊 Final Year of Risk Adjustment Model Phase-In
CMS continues its strategic updates to the MA risk adjustment model, originally announced in CY 2024. CY 2026 is the third and final year of the model transition, which includes updated HCC groupings and refinements that more closely align with clinical severity and cost prediction.
Why it matters: These updates help CMS better predict true patient complexity while curbing coding inflation.
Part D Redesign: Guidance for 2026 CMS also released the Final CY 2026 Part D Redesign Program Instructions, which further roll out changes initiated by the Inflation Reduction Act. Highlights include:
Updated benefit structure
Detailed implementation guidance for plans
New policies designed to increase beneficiary access to affordable medications
These redesigns underscore CMS's continued shift toward a value-based pharmacy benefit, with stronger focus on affordability and cost-sharing limits.
Implications for Health Plans & Providers
Financial Forecasting: Plans should update budget forecasts using the finalized 5.06% payment increase and risk adjustment changes.
Documentation & Coding: Final year of the risk model transition means coding teams must be fully trained on HCC v28 logic.
Pharmacy Strategy: Ensure Part D plan structures are aligned with the redesign rules and member cost-sharing protections.
Compliance Audits: Verify medical education cost exclusions and risk scoring align with CMS guidelines.
Resources
Conclusion CY 2026 brings meaningful updates that both strengthen the Medicare Advantage and Part D programs and demand strategic adaptations by payers, providers, and policy leaders. The increase in payments, ongoing model refinements, and redesign of the drug benefit program collectively reinforce CMS’s direction toward equity, quality, and sustainability.
Health plans that stay ahead of these updates — through data readiness, provider alignment, and coding accuracy — will be best positioned to succeed in 2026 and beyond.
Released: April 7, 2025
Source: CMS Newsroom Announcement