Biden proposes $21B pay increase for MA insurers
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Annelise Capossela/Axios
Insurers who administer private Medicare plans could see a more than $21 billion pay increase in 2026 under a plan proposed by the Biden administration on Friday.
The big picture: The adjustment would be a boon for UnitedHealth Group, the country's largest Medicare Advantage insurer. Other major MA players like Humana and CVS Health would also benefit.
- The Trump administration will have discretion over how the final policy looks, and analysts expect the ultimate pay increase to be even higher.
Zoom in: The Biden administration proposed raising plans' base payment by about 2% next year. But the insurers in reality would get an average 4.3% increase in overall revenue once rates are adjusted for how sick their enrollees appear, Centers for Medicare and Medicaid Services said.
The proposal would finish phasing in controversial changes CMS began implementing in 2023 that are aimed at making payments to plans more accurate.
- Medicare Advantage insurers get more federal money if their enrollees have more documented health issues, a process known as risk adjustment. The Biden policy aims to stop abuses of that system.
- But health insurers have protested, arguing the policy is akin to cutting seniors' health benefits.
- Some MA insurers did leave markets or scale back offerings this year. But CMS maintains that, on the whole, enrollees' premiums, coverage options and extra benefits have remained stable.
In a cautionary note to its successors, the Biden administration said Friday that pausing the risk adjustment model would unnecessarily increase the government's payment to MA plans by $3.4 billion next year.
- The U.S. government will spend an anticipated $9.2 trillion on MA payments in the next decade. "[I]t is crucial these payments are accurate to prevent wasteful spending," CMS wrote.
Between the lines: Industry analysts expect a better environment for Medicare Advantage insurers under the Trump administration. Mehmet Oz, Trump's pick to run CMS, is a big fan of the privately run Medicare plans.
- But growing tension among Republican policymakers over Medicare Advantage's cost, plus recent public outrage toward health insurers, could complicate Trump 2.0's Medicare agenda.
What they're saying: "The Trump administration will have an important opportunity to strengthen Medicare Advantage beginning on Day One," Mary Beth Donahue, CEO of lobbying group Better Medicare Alliance, said in a statement Friday.
- "President Trump can immediately deliver on his promise to protect Medicare for seniors by examining these policies, including ensuring the rates keep up with increasing medical costs and that the final rate notice provides much needed stability for seniors."
What's next: CMS will accept comments on the payment proposal through Feb. 10. The Trump administration has to release a final policy for 2026 by April 7.
