Following significant industry outcry over a proposal to keep Medicare Advantage rates largely flat in 2027, the Trump administration has bumped payments up slightly in the final policy.
The Centers for Medicare & Medicaid Services initially proposed a 0.09% increase in rates as part of the MA and Part D Advance Notice. In the final rule, the increase is instead set at 2.48%, which CMS said equates to about $13 billion in additional payments to plans for the coming plan year.
CMS said that the rate increase accounts for the growth in underlying costs, how 2026 star ratings could impact bonus payments and changes to risk adjustment.
Chris Klomp, director of Medicare and chief counselor for the Department of Health and Human Services, said on a call with reporters Monday afternoon that the final rule aims to balance immediate challenges in the program with the agency’s goals of promoting long-term stability for MA.
He said that while the agency has moved to bump up payments for 2027, it is still focused on addressing insurer behaviors to juice profits in MA, such as upcoding and other strategies to game risk adjustment.
This approach, he said, aligns with the president’s Great American Healthcare Plan, which took aim at health insurance companies for their earnings.
Klomp said in offering a rate boost to insurers, CMS officials expect them “to do their best work in controlling costs.”
“We are focused in this announcement in balancing near-term program stability with long-term program sustainability,” he said.
The industry response to the original proposal was swift and unanimous: flat rates won’t work with healthcare costs and utilization on the rise. Payers warned that the rates set in the proposed Advance Notice could force benefit cuts and further market retreats, both strategies insurers have turned to in a complex cost environment.
Conversation about the rate notice also dominated the Q4 2025 earnings cycle earlier this year, with top executives panning the proposal. Unsurprisingly, insurance companies saw a boost in their stock price at the end of the day on Monday following the news.
The main factor behind the increase, per CMS, is the delay in proposed changes to risk adjustment, which were designed to build on changes implemented under version 28, or V28. On the call, Klomp said the delay—which is indefinite but officials stressed did not amount to scrapping the proposal—would allow time for the V28 changes to “settle.”
Updates to risk adjustment under V28 have been rolled out on a three-year timeline, with the implementation complete as of the 2026 plan year. In addition to giving those changes some breathing room, Klomp said that CMS has seen a chilling effect on participation in value-based care models, a critical priority at the agency under the current administration.
He said that while the proposal was delayed, CMS leaders will keep “a careful eye” on insurers who may engage in practices to game risk adjustment.
“I don’t believe this is contradictory at all to our stated goals,” Klomp said.
In a statement following the final rule, the leading insurance lobbying group, AHIP, said health plans will maintain their focus on affordability.
“As health plans incorporate the policies released in recent days, they will continue to focus on keeping coverage and care as affordable as possible during this time of sharply rising medical costs,” said Chris Bond, spokesperson for AHIP.
Provider organization AMGA, meanwhile, “objected” to the modest increase finalized in the rule, saying that it “fails to keep pace with the real-world costs of delivering care to Medicare patients.”
When rates fail to match the reality of healthcare costs, benefit and plan cuts are inevitable, AMGA said. For example, there were 1.8 million Medicare Advantage enrollees in 2024 whose plans were not available in 2025.
The group also dinged CMS’ decision to exclude diagnoses captured during audio-only telehealth visits from risk adjustment, as well as the approach to chart review records, which could limit valid diagnoses for individuals with chronic conditions.
“This update does not reflect the economic realities our members face every day,” said AMGA President and CEO Jerry Penso, M.D., in the statement. “Workforce costs are rising, supplies are more expensive, and delivering high-quality, coordinated care requires sustained investment. We remain committed to working with CMS to find a path forward that ensures the long-term sustainability of Medicare Advantage.”