CMS-2026 Medicare Advantage and Part D Updates: What Beneficiaries Need to Know
The Centers for Medicare & Medicaid Services (CMS) has finalized its Contract Year (CY) 2026 Medicare Advantage (MA) and Part D payment and policy updates, introducing a 5.06% increase in Medicare Advantage payments, refinements to risk adjustment models, and major prescription drug changes driven by the Inflation Reduction Act (IRA).
These CMS-2026 updates are not just routine payment adjustments. They directly influence plan premiums, benefit design, prescription drug costs, provider reimbursement, and compliance requirements across the Medicare system.
For Medicare beneficiaries, the changes affect:
Out-of-pocket prescription drug costs
Medicare Advantage plan benefits and availability
How plans manage chronic conditions through risk adjustment
Access to medications under the redesigned Part D benefit
At the same time, healthcare providers and Medicare Advantage organizations must adapt to updated CMS risk adjustment methodologies, stricter documentation expectations, and enhanced oversight tied to CMS audits and compliance programs.
In this guide, we break down what the CMS-2026 Medicare Advantage and Part D updates mean, how the 5.06% payment increase works, and what beneficiaries and providers should expect as these changes take effect.
BLOG OUTLINE
- What Beneficiaries Need To Know
- What’s New in the CY 2026 Payment Policy?
- How Will the 5.06% Payment Increase Affect MA Plans?
- Part D Updates and Risk Adjustment Model
- The Role of the Inflation Reduction Act (IRA) in These Changes
- How Will These Changes Affect Beneficiaries?
- Conclusion
- Frequently Asked Questions
What’s New in the CY 2026 Payment Policy?
The Centers for Medicare & Medicaid Services (CMS) has finalized the Contract Year (CY) 2026 Medicare Advantage and Part D payment policies through its annual rate announcement and related policy updates. These changes establish how Medicare Advantage organizations and Part D sponsors will be paid in 2026 and how benefits must be structured moving forward.
Key CY 2026 Payment Policy Highlights
For 2026, CMS finalized several important updates that directly affect Medicare Advantage and Part D plans:
A 5.06% average increase in Medicare Advantage payments, reflecting updates to benchmarks, risk adjustment, and cost trends
Ongoing refinements to Medicare Advantage risk adjustment, continuing the phased implementation of the updated CMS-HCC model
Part D payment and risk adjustment updates aligned with the redesigned Part D benefit structure
Integration of Inflation Reduction Act (IRA) provisions, including changes affecting prescription drug cost sharing and plan liability
Together, these updates are intended to ensure payment accuracy, promote program sustainability, and support beneficiary access to care while maintaining fiscal oversight.
Why CMS Updated the 2026 Payment Policy
CMS adjusts Medicare Advantage and Part D payment policies annually to reflect:
Changes in healthcare utilization and costs
Updates in beneficiary health risk profiles
Program integrity and risk adjustment accuracy
Legislative requirements, including those established under the Inflation Reduction Act
For CY 2026, CMS emphasized payment accuracy and fairness, ensuring plans are compensated appropriately based on enrollee health status while limiting incentives for inappropriate coding practices.
Medicare Advantage and Part D Alignment
Another important aspect of the CY 2026 update is continued alignment between:
Medicare Advantage payment methodology
Part D risk adjustment and benefit design
As Part D undergoes structural changes under the IRA, CMS has adjusted payment and risk models to reflect new plan liabilities and beneficiary cost-sharing protections, helping maintain stability across both programs.
Key CMS 2026 Changes at a Glance
| Update | Details |
| Payment Increase for MA Plans | 5.06% increase in federal payments, totaling $25B more than 2025 |
| Risk Adjustment Changes | Adjustments to MA and Part D risk models to account for health status and fairness |
| Part D Redesign | Changes to prescription drug coverage, including IRA provisions |
| Impact of IRA | Lower drug prices through Medicare negotiation starting in 2026 |
How Will the 5.06% Payment Increase Affect MA Plans?
CMS finalized an average 5.06% increase in Medicare Advantage payments for Contract Year (CY) 2026, reflecting updates to benchmarks, risk adjustment, and expected healthcare cost trends. While this increase represents a meaningful rise in federal payments, it does not automatically translate into lower premiums or richer benefits for all beneficiaries.
What the 5.06% Increase Represents
The 5.06% payment increase is derived from several CMS-calculated components, including:
Growth in per-capita Medicare costs
Updates to Medicare Advantage benchmarks
Continued implementation of the updated CMS-HCC risk adjustment model
Adjustments related to coding intensity and normalization factors
CMS refers to this as an average effective growth rate, meaning actual payment changes may vary by:
Geographic region
Plan bid structure
Enrollee risk profile
Star Ratings performance
As a result, individual Medicare Advantage plans may experience higher or lower payment impacts depending on these factors.
How MA Plans May Use the Increased Payments
CMS requires Medicare Advantage organizations to allocate payments in accordance with program rules, including medical loss ratio (MLR) requirements. Plans must use the majority of funds for:
Covered medical services
Prescription drug benefits (for MA-PD plans)
Care coordination and supplemental benefits permitted by CMS
Administrative expenses and profits are capped under MLR standards, limiting how plans can use additional revenue.
However, CMS does not mandate that payment increases be used specifically to:
Reduce premiums
Expand benefits
Lower cost-sharing
Plan design decisions remain subject to annual bid submissions and CMS approval.
Risk Adjustment and Compliance Implications
The CY 2026 payment increase coincides with ongoing refinements to the Medicare Advantage risk adjustment model, which directly affect how plans are reimbursed based on enrollee health status.
CMS continues to emphasize:
Accurate diagnosis documentation
Appropriate coding under the updated CMS-HCC model
Increased oversight through audits and risk adjustment data validation (RADV)
As a result, Medicare Advantage organizations and providers must ensure that risk coding reflects true clinical conditions, as improper coding may lead to payment adjustments or recoveries.
What This Means for Providers
For healthcare providers participating in Medicare Advantage networks, these changes may result in:
Greater focus on documentation accuracy
Increased collaboration with MA plans on risk adjustment reporting
Potential changes in prior authorization and utilization management
Providers should be prepared for stricter compliance expectations as MA organizations adapt to CMS-2026 payment and audit standards.
Part D Updates and Risk Adjustment Model
CMS’s Contract Year (CY) 2026 updates include significant changes to the Medicare Part D program, reflecting the continued implementation of the Inflation Reduction Act (IRA) and necessary adjustments to Part D payment and risk adjustment models. These updates reshape how prescription drug coverage is financed, how plan liability is calculated, and how beneficiary costs are capped.
Part D Benefit Redesign for 2026
The term “Part D redesign” refers to structural changes implemented under the Inflation Reduction Act that reshape how prescription drug costs are shared among beneficiaries, plans, manufacturers, and Medicare.
For 2026, the redesigned Part D benefit includes:
A $2,000 annual out-of-pocket cap for covered prescription drugs
Removal of prior catastrophic cost exposure for beneficiaries
Adjusted plan and manufacturer liability to reflect the new benefit structure
While the redesign improves cost predictability, beneficiaries should note that:
Formularies may differ by plan
Monthly premiums may vary
Drug coverage rules remain plan-specific
Reviewing Part D plan details during open enrollment remains essential.
Part D Risk Adjustment Model Updates
To support the redesigned benefit, CMS finalized updates to the Part D risk adjustment model, ensuring payments more accurately reflect enrollee health status and expected drug utilization.
Key objectives of the 2026 Part D risk adjustment updates include:
Aligning risk scores with the new cost-sharing and liability structure
Promoting fairness between standalone Part D plans and MA-PD plans
Reducing unintended payment distortions resulting from the redesigned benefit
CMS’s adjustments aim to ensure that plans enrolling beneficiaries with higher prescription drug needs continue to receive appropriate and actuarially sound payments.
Impact on Medicare Advantage Prescription Drug (MA-PD) Plans
For Medicare Advantage plans offering prescription drug coverage (MA-PDs), the Part D changes interact directly with:
Overall plan bidding strategies
Benefit design and formulary management
Risk adjustment and payment reconciliation
CMS has emphasized that MA-PD plans must incorporate the redesigned Part D structure into their bid submissions, while continuing to comply with risk adjustment, reporting, and program integrity requirements.
Program Integrity and Oversight
CMS continues to monitor Part D risk adjustment closely to maintain program integrity. Plans are expected to:
Submit accurate prescription drug event (PDE) data
Maintain compliant documentation and reporting practices
Align risk adjustment reporting with CMS audit standards
These safeguards are intended to protect both beneficiaries and the Medicare Trust Fund as Part D undergoes substantial structural changes.
The Role of the Inflation Reduction Act (IRA) in These Changes
The Inflation Reduction Act (IRA) plays a central role in CMS’s Contract Year (CY) 2026 updates to Medicare Advantage and Part D, particularly in how prescription drug costs are structured, shared, and limited for beneficiaries. CMS’s 2026 payment and policy changes reflect the continued implementation of IRA provisions that were enacted to improve affordability while maintaining program sustainability.
Medicare Drug Price Negotiation
One of the most significant IRA provisions affecting CMS-2026 is the introduction of Medicare drug price negotiation. Beginning in 2026, Medicare will apply negotiated prices for a limited number of high-cost prescription drugs covered under Part D.
Key points beneficiaries should understand:
Negotiated prices apply only to selected drugs identified by Medicare
Not all prescription drugs are subject to negotiation
Negotiated prices are incorporated into Part D benefit design and plan payments
Savings vary depending on the medication and beneficiary usage
CMS has integrated these negotiated prices into Part D payment calculations to ensure accurate plan reimbursement and beneficiary cost sharing.
Out-of-Pocket Cost Protections
The IRA also establishes stronger cost-sharing protections for Part D enrollees, culminating in the $2,000 annual out-of-pocket cap on prescription drugs beginning in 2026.
This cap:
Applies to all Medicare Part D beneficiaries
Limits total annual spending on covered prescription drugs
Improves cost predictability for individuals with high medication needs
CMS’s 2026 Part D redesign reflects this cap by adjusting plan and manufacturer liability while removing the prior catastrophic exposure faced by beneficiaries.
Impact on Low-Income and High-Need Beneficiaries
The IRA further strengthens protections for:
Beneficiaries with chronic or complex conditions
Individuals with high prescription drug utilization
Certain low-income Medicare enrollees receiving assistance with drug costs
CMS has aligned Part D payment and risk adjustment updates to ensure plans serving higher-need populations are compensated appropriately under the redesigned benefit structure.
How the IRA Influences CMS Payment Policy
CMS’s role in CY 2026 is to operationalize the IRA through:
Updated payment methodologies
Adjusted risk models
Revised benefit design requirements
Enhanced oversight to ensure compliance
These changes aim to balance affordability for beneficiaries with financial stability for Medicare Advantage and Part D plans, while protecting the Medicare Trust Fund.
How Will These Changes Affect Beneficiaries?
The CMS-2026 updates to Medicare Advantage and Part D are designed to improve cost predictability, payment accuracy, and program sustainability, but the actual impact on beneficiaries will vary depending on the plan they choose, their healthcare needs, and prescription drug usage.
Prescription Drug Costs
For many beneficiaries, the most noticeable change in 2026 will be the $2,000 annual out-of-pocket cap on Part D prescription drugs. This cap limits total yearly spending on covered medications and reduces the risk of high, unpredictable drug costs—particularly for individuals with chronic or complex health conditions.
While this cap improves affordability, beneficiaries should be aware that:
Monthly premiums may still vary by plan
Formularies and cost-sharing structures can differ
Not all drugs are subject to Medicare price negotiation
Medicare Advantage Plan Benefits
The 5.06% average payment increase to Medicare Advantage plans supports plan operations but does not guarantee enhanced benefits or lower premiums for all enrollees.
In 2026, beneficiaries may see:
Continued availability of supplemental benefits offered at plan discretion
Changes in benefit design based on plan bids and CMS approval
Adjustments to provider networks or utilization management policies
Plan offerings will continue to vary by region and insurer.
Access to Care and Utilization Management
As CMS strengthens oversight and payment accuracy, some Medicare Advantage plans may refine:
Prior authorization requirements
Care coordination programs
Provider documentation standards
These measures are intended to align services with medical necessity and payment rules, but beneficiaries should review plan materials carefully during annual enrollment
Impact on Beneficiaries With Chronic Conditions
CMS-2026 updates emphasize accurate risk adjustment to ensure plans enrolling beneficiaries with complex health needs are paid appropriately. This supports:
Care management programs
Disease-specific services
Access to necessary treatments
Beneficiaries with multiple or chronic conditions may benefit from more targeted care coordination, depending on plan implementation.
What Beneficiaries Should Do
To make informed decisions for 2026, beneficiaries are encouraged to:
Review Annual Notice of Change (ANOC) documents
Compare plan formularies and cost-sharing
Confirm provider network participation
Evaluate total out-of-pocket costs—not just premiums
Medicare Advantage Plans in 2026: What’s Changing for Enrollees
In 2026, Medicare Advantage plans will continue to operate under CMS’s annual bidding and approval process, but several CMS-2026 policy updates may influence how plans are structured and offered to beneficiaries.
Plan Availability and Market Variation
CMS does not guarantee that Medicare Advantage plans will expand, reduce premiums, or add benefits in response to the 2026 payment update. Plan availability in 2026 will continue to vary based on:
Geographic region
Insurer participation
Provider network arrangements
CMS bid approvals
As a result, beneficiaries may see different plan options depending on where they live, even though federal payment policies apply nationwide.
Benefits and Cost Sharing
While CMS finalized an average payment increase for 2026, benefit design decisions remain plan-specific. Some Medicare Advantage plans may adjust:
Supplemental benefits
Cost-sharing structures
Provider networks
However, these changes are determined through the annual bid process and are not mandated by CMS.
Utilization Management and Care Coordination
CMS-2026 continues to emphasize appropriate utilization and medical necessity. As a result, some Medicare Advantage plans may refine:
Prior authorization policies
Care management programs
Documentation requirements
Beneficiaries should review plan materials carefully during enrollment to understand coverage rules and provider access.
Conclusion
The CMS Contract Year (CY) 2026 updates to Medicare Advantage and Part D represent a significant step in reshaping how Medicare balances affordability, payment accuracy, and program oversight. With an average 5.06% increase in Medicare Advantage payments, continued refinement of risk adjustment models, and full integration of Inflation Reduction Act provisions, CMS is reinforcing both beneficiary protections and fiscal responsibility.
For beneficiaries, the most meaningful change is the $2,000 annual out-of-pocket cap on Part D prescription drugs, which improves cost predictability for those with ongoing medication needs. At the same time, Medicare Advantage plans and providers face heightened expectations around documentation accuracy, compliance, and reporting, as CMS continues to emphasize payment integrity.
As these policies take effect in 2026, beneficiaries, providers, and plan sponsors should closely review plan materials, coverage options, and compliance requirements. Understanding how CMS-2026 policies operate in practice is essential for making informed healthcare and operational decisions.
