April 9, 2025
On April 7, CMS released the Calendar Year (CY) 2026 MA and Part D Final Rate Announcement and the Final CY 2026 Medicare Part D Program Instructions. The Administration strongly defended its focus on fraud, waste, and abuse, while protecting beneficiaries. The final rate notice increases average payments to MA plans by 5.06% up from the proposed 2.23%. The primary driver of higher payments for 2026 is CMS’ projection of higher cost trends in fee-for-service (FFS), which reflects more recent data.
CMS also finalized various technical adjustments and risk adjustment policy changes that reduce payments, leading to rates that will likely remain below the cost of caring for seniors in 2026. As expected, CMS will complete the phase-in of the new MA risk adjustment model that began in 2024. CMS also finalized the method for “normalization,” which alters risk adjustment payments to reflect FFS risk score trends. The combined impact of these policies is an estimated reduction in payments of 3.01%, on average.
Separately, CMS did not raise the coding intensity adjustment above the minimum 5.91% required by statute. CMS will implement updates to the Part D risk adjustment models for CY 2026 reflecting changes by the IRA to the Part D benefit for CY 2026, including the continuation of the Manufacturer Discount Program, the updated out-of-pocket threshold, and negotiated prices for selected drugs under the Medicare Drug Price Negotiation Program.
CMS also indicated it would carefully evaluate the feasibility and timing of any future changes to base the risk adjustment model on MA encounter data rather than FFS data and acknowledged requests for an extended comment period and transparency if a new model is formally proposed.
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