CMS Boosts Medicare Advantage Payments While Members Face Rising Out-of-Pocket Costs

Medicare Advantage (MA) is entering its most paradoxical year yet: as insurers enjoy a 5.06% average payment rate increase (totaling $25 billion in new revenue), beneficiaries are absorbing the financial strain, with deductibles more than doubling year-over-year, according to new data from eHealth.
This growing divide—where payer profitability rises and member affordability declines—is drawing criticism from provider groups and fueling debate over the future of the Medicare Advantage program under the current administration.
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📈 The 2026 Rate Announcement: Big Win for Insurers
On April 7, 2025, CMS finalized the 2026 Rate Announcement, increasing the average MA benchmark payment rate from the proposed 4.33% to 5.06%. That’s a $4 billion jump over original projections.
Markets responded predictably: shares of publicly traded MA giants UnitedHealth Group, Elevance Health, and CVS Health climbed between 6–19% following the news.
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🧾 Meanwhile… Member Cost-Sharing Doubles
According to eHealth’s review of over 250,000 MA applications submitted during the 2025 Annual Enrollment Period:
• Average MA plan deductibles more than doubled from $132 (2024) to $315 (2025)
• Medicare Part D premiums rose 24% year-over-year
This cost burden disproportionately impacts seniors on fixed incomes and low-income retirees—many of whom were originally drawn to MA plans for their affordability and expanded supplemental benefits.
“CMS’s rate increases have not kept pace with real-world cost drivers like medical inflation and post-COVID healthcare demand,” said Fran Soistman, CEO of eHealth. “That’s why enrollees are now facing significantly higher out-of-pocket expenses.”
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⚖️ Physician Cuts & Regulatory Shifts
The AMA sharply criticized the rate hike, citing continued Medicare physician payment cuts for the fifth year in a row.
“The contrast between insurers seeing above-inflation increases and physicians absorbing cuts should concern both taxpayers and policymakers,” said AMA President Dr. Bruce Scott.
Meanwhile, CMS is advancing several key regulatory changes for MA plans, including:
• Risk Adjustment Model Phase-In – Adjusts how diagnostic codes are weighted based on patient demographics and health status to prevent upcoding and overpayments.
• GLP-1 Oversight – Defers requirements for weight-loss drugs under Part D and Medicaid.
• AI Oversight & Star Ratings Updates – Postponed.
• Health Equity Index Renamed to “Excellent Health Outcomes for All (EHO4All)” and stripped of its current reward factor, aligning with anti-DEI federal policies.
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💡 What’s Next Under Trump’s Administration?
Despite public distancing from Project 2025, the Trump Administration’s policies thus far suggest alignment with its blueprint—especially in terms of reducing CMS oversight and expanding MA plan autonomy.
Key proposals from Project 2025 include:
• Making MA the default option when beneficiaries first enroll in Medicare
• Eliminating regulations that “micromanage” plan design
• Expanding market-based reforms with fewer cost containment requirements
Translation for Plan Sponsors & Labor Groups: MA plans are likely to remain well-capitalized and politically favored—but that won’t automatically translate to lower costs for retirees or improved benefits without oversight and negotiation.
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🧠 SHN’s Take
At Solidarity Health Network, we recognize the widening gap between CMS funding and the retiree experience. As deductibles climb and pharmacy costs spike, plan fiduciaries must take a more proactive stance:
• Audit MA contracts for value and member protections
• Monitor benefit design shifts tied to CMS guidance
• Leverage transparency tools to challenge hidden PBM incentives
• Protect retirees from becoming the financial buffer in an increasingly profitable system
If your members are feeling the squeeze despite billions in new plan funding, we can help realign your strategy—before renewal season locks you in.