Medicare Advantage Rates Expected To Climb Over 5% In 2026, Easing Pressure On Managed Care

On Monday, the U.S. Centers for Medicare & Medicaid Services (CMS) released its 2026 payment update for Medicare Advantage (MA) and Medicare Part D prescription drug plans.

Government payments to Medicare Advantage plans are expected to rise by an average of 5.06% from 2025 to 2026. That’s 2.83 percentage points higher than what was estimated in a previous notice.

The new effective growth rate is 9.04%, up from the earlier estimate of 5.93%.

The increase comes from updated data on traditional Medicare (fee-for-service) spending. This includes figures from late 2024 that weren’t available when the earlier notice was published.

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CMS also began a three-year plan in 2024 to remove medical education costs from the fee-for-service spending data for setting MA rates. For 2026, CMS will fully implement this adjustment.

In addition, CMS is continuing a three-year rollout of changes to how it adjusts payments based on enrollee health risks, a process that began in 2024.

According to William Blair, the better-than-expected rate update is a “clear positive” for Medicare Advantage. The managed care group struggles to maintain medical loss ratios.

In William Blair’s coverage, Alignment Healthcare, Inc. ALHC is most directly impacted. Analyst Ryan Daniels also sees favorable implications for the broader value-based care universe.

“In particular, we believe that our covered advanced primary care (APC) companies are set to benefit from these improving MA trends,” analyst Daniels writes.

William Blair writes that notable players focusing solely on the MA market include Agilon Health Inc. AGL and P3 Health Partners Inc. PIII.

“Other VBC names, with broader payer exposure (typically working with all payer types, though still caring for MA patients) could also benefit from better industry trends,” William Blair writes.

The analyst notes some players, including Privia Health Group, Inc. PRVA, Astrana Health Inc. ASTH, and Evolent Health, Inc. EVH.

Price Action: ALHC stock is up 10.5% at $19.69 during the premarket session at the last check Tuesday.

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