US to Increase Medicare Payments by $21 Billion in 2026
The US government is set to boost payments for private Medicare Advantage plans by $21 billion in 2026. This proposed increase, announced on Friday, would offer a 4.3% average rise in payments compared to 2025. The policy aims to address insurers’ concerns about insufficient payments that fail to cover rising healthcare costs.
Insurers Gain from Payment Hike
Health insurers like Unitedhealth Group, Humana, and CVS Health stand to benefit significantly from this increase. Following the announcement, their stock prices surged, with Humana gaining 7%, UnitedHealth rising 3.9%, and CVS increasing 2.7%. The proposed changes could improve insurers’ earnings, which have been squeezed by lower payments in recent years.
Largest Medicare Payment Increase Since 2023
If approved, the 2026 payment adjustment will be the largest since 2023. Over the past few years, the Biden administration had tightened payment policies for Medicare Advantage plans, citing concerns about wasteful spending. Insurers have pushed back, arguing that low rates impact their ability to cover healthcare costs and maintain stable services.
A Growing Program
Medicare’s Advantage, a private alternative to traditional Medicares, covers more than half of all Medicare beneficiaries. The program cost $455 billion in 2023 and is expected to grow further. The US government projects it will spend $9.2 trillion on private Medicare plans over the next decade. However, studies suggest Medicare Advantage costs $83 billion more annually than traditional Medicates due to how insurers calculate patient risks.
Ongoing Industry Debates
The proposal has reignited debates about Medicates Advantage payments. Critics, including some lawmakers, argue that insurers exaggerate patient illnesses to secure higher payments. Democratic Senator Elizabeth Warren and Representative Lloyd Doggett have urged stricter oversight to prevent overcharging.
What’s Next?
The Centers for Medicare and Medicaid Services (CMS) will finalize the proposal by April. Industry experts believe the incoming Trump administration may further support favorable changes. With healthcare costs rising, this proposal could shape the future of Medicare Advantage and its role in the US healthcare system.