In a bold shift from prior policy, the Trump administration has announced a significant 5.06% increase in Medicare Advantage payment rates for 2026—more than double the 2.23% rate initially proposed during the Biden administration. This major adjustment is expected to add over $25 billion in funding to Medicare Advantage plans, sparking optimism among major insurers and healthcare providers.
A Windfall for Health Insurers
The payment hike is a major win for companies like UnitedHealth Group, Humana, and CVS Health, all of which have extensive Medicare Advantage operations. Stocks of these insurers are already reacting positively, as the additional funding is expected to expand profit margins and allow for more competitive benefit offerings to enrollees.
Increased reimbursement rates mean plans can afford to enhance member services, reduce premiums, or offer additional supplemental benefits like dental, vision, and wellness programs—popular features that attract enrollees to Medicare Advantage over traditional Medicare.
Agency Head Mehmet Oz Backs the Boost—but Warns of “Upcoding”
Dr. Mehmet Oz, the current head of the Centers for Medicare & Medicaid Services (CMS), expressed support for the increased funding, citing the need to sustain the growing number of seniors enrolling in Medicare Advantage. However, Oz also highlighted a persistent problem in the system—upcoding, where providers or insurers report patients as sicker than they are in order to receive higher payments.
Between 2019 and 2021, upcoding is estimated to have led to over $50 billion in excess payments. While CMS acknowledges these issues, the agency has clarified that it will not retroactively reclaim these funds unless there is clear evidence of intentional fraud. This stance is aimed at preserving financial stability for providers and ensuring continuity of care for beneficiaries.
New Flexibility: Easing Restrictions on AI in Medicare
In a move to modernize Medicare administration, CMS has also announced plans to ease restrictions on artificial intelligence (AI) within Medicare programs. This change is intended to accelerate the use of AI in areas such as:
- Claims processing
- Care planning
- Fraud detection
- Predictive modeling for high-risk patients
The goal is to improve both efficiency and accuracy, while reducing administrative burdens on physicians and insurers. Industry leaders see this as a green light to invest in more advanced health tech solutions, which could help streamline care delivery and reduce waste.
Policy Implications and Political Signals
The dramatic increase in Medicare Advantage funding is seen by many as a political statement from the Trump administration, signaling strong support for privatized healthcare options and market-driven solutions. Critics, however, argue that without stronger oversight, these increases could exacerbate systemic abuse, particularly in the area of risk adjustment and coding accuracy.
Nevertheless, the move is likely to be popular among seniors enrolled in Medicare Advantage plans, which now serve over 50% of all Medicare beneficiaries—a number that continues to climb each year.
Looking Ahead
With a significant funding boost, loosened AI regulations, and no immediate clawbacks on past overpayments, Medicare Advantage plans are poised for substantial growth and innovation in the coming years. As insurers ramp up their efforts to capitalize on these changes, the healthcare landscape for America’s seniors may evolve more rapidly than ever before.
Still, the challenge remains to ensure that greater funding leads to better outcomes, rather than simply higher profits.
