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Exploring CMS’s 2026 Advance Notice: Key Updates for Medicare Advantage and Part D Programs
Summary
The 2026 Advance Notice for Medicare Advantage (MA) and Part D Payment Policies outlines several major updates. Medicare Advantage capitation rates are set to grow by 5.93%, marking the highest increase in nine years. The notice also fully implements the 2024 CMS-HCC risk adjustment model and completes the phase-in of indirect medical education (IME) adjustments.
For the Part D program, a $2,100 annual out-of-pocket cap on prescription drug costs will be introduced. The update also introduces new manufacturer discounts in both the initial coverage and catastrophic phases. Risk adjustment methodology will be updated to reflect the new benefit design and out-of-pocket cap.
Star Ratings improvements include a new Kidney Health Evaluation measure for patients with diabetes, along with increased weighting for metrics that focus on maintaining or improving physical and mental health. The PACE program will begin a gradual transition to the updated CMS-HCC model, starting with a 10% blend in 2026 and reaching full implementation by 2029.
Operational updates include the migration of the MARx system to a cloud-based platform, and normalization factors will be revised to account for trends observed in pre- and post-COVID-19 periods. Overall, these changes are designed to enhance payment accuracy, beneficiary protections, and quality outcomes across Medicare Advantage and Part D programs.