On April 7, the Trump administration significantly increased Medicare Advantage (MA) payment rates for 2026, with a notable 5.06% benchmark increase. This is the largest increase in the past decade, considerably higher than earlier proposals, including a 2.2% increase that President Biden had proposed in January. The rise reflects adjustments to better align with recent data showing increased Medicare spending. The Trump administration also completed phasing in changes to insurers’ coding practices that were meant to make it harder for insurers to inflate members’ sicknesses to garner higher reimbursement. These coding practices were popular and lucrative for insurers, and the restrictions were unpopular with MA plans, which lobbied heavily to reverse them.
The increase will also accelerate profit margins for insurers. It is expected that, combined with the coding changes, MA plans profits will see increases from 5.1% to 7.2%. Health insurance stocks soared Tuesday morning on the first day of trading after the announcement.
Key Takeaways
For healthcare leaders, this development emphasizes the influence of policy on Medicare reimbursements and the importance of a strong government affairs team. Leaders should be proactive in understanding policy changes and their implications on operational finances and strategic planning. Additionally, the new policies include measures to enhance payment accuracy and curb potential abuses in risk scoring by insurers. This scenario presents both challenges in terms of compliance and opportunities for optimizing revenue streams under the new payment structures.
