Understanding the 2026 Medicare Advantage Capitation Rates and Payment Policy Updates
- Micro-Dyn
- Jul 3
- 3 min read
On April 7, 2025, the Centers for Medicare & Medicaid Services (CMS) released its official 2026 Medicare Advantage (MA) Capitation Rates and Part C & D Payment Policies. The finalized announcement introduces a wave of adjustments that reflect evolving actuarial assumptions, risk model updates, payment benchmarks, and cost trends.
Whether you're a provider, payer, or health plan strategist, understanding these changes is critical for financial forecasting and regulatory compliance in 2026.
This comprehensive editorial will unpack key updates in the 2026 Rate Announcement, explore its policy implications, and provide strategic context for MA organizations, PACE plans, and prescription drug plan sponsors.
🔑 Key Takeaway: National Growth Percentages for 2026
CMS announced:
National Per Capita MA Growth Percentage: 10.72% (combined aged and disabled)
Medicare FFS Growth Percentage: 8.81%
These metrics shape county-level benchmarks and drive capitation rate calculations. The growth estimates incorporate actual cost trends through Q4 2024 and reflect updated assumptions in Medicare cost projections.
📊 CMS-HCC Risk Adjustment Model Updates
Non-PACE MA Plans: 2024 CMS-HCC model fully adopted (100% weighting)
This transition finalizes the phase-out of older risk models, aligning scores with more contemporary coding and expenditure data.
PACE Organizations: A blended risk score: 90% weight on the older 2017 model and 10% on the 2024 model. Frailty adjustment for PACE also adopts the same blend methodology.
Normalization Factors:
CMS recalibrated using five-year data (2020–2024) via multiple linear regression:
2024 CMS-HCC Model: 1.067
2017 CMS-HCC Model: 1.187
🩺 ESRD Risk Adjustment for MA Plans
CMS continues using 2023 ESRD HCC models:
Applies to dialysis, transplant, and post-graft populations.
State-based MA ESRD ratebooks persist, with $6/month network withhold introduced in 2026.
PACE ESRD risk adjustment will follow a blend: 90% of the 2019 model and 10% of the 2023 model.
💵 Medicare Part D: Inflation Reduction Act Alignment
2026 Part D payment policies incorporate legislative reforms:
RxHCC Model Update calibrated to 2022 diagnoses and 2023 expenditures.
Reflects Maximum Fair Price (MFP) adjustments from the Inflation Reduction Act.
Normalization factor for MA-PD plans: 1.194.
⚖️ Adjustments to Capitation Rate Components
Several carve-outs and adjustments continue or are completed:
Medical education payments: Phase-in complete; 100% applied.
IME (Indirect Medical Education): Phased out.
Kidney acquisition costs: Carved out with revised methodology.
Puerto Rico adjustment: Maintained to account for zero-claim enrollees.
💰 Benchmark and Rebates
MA benchmarks follow historical methodology based on FFS cost and growth. Star Ratings continue influencing rebate calculations. Clarifications provided on qualifying bonus counties and network areas for PFFS plans (2027 planning).
🌍 Geographic and Enrollment Considerations
CMS provided county-specific FFS expenditure data to support local rate accuracy. Enrollment projections show steady increases, with Medicare Part A enrollees estimated at nearly 70 million in 2026.
✅ What Providers and Plans Need to Do
Review 2026 Ratebooks and Benchmarks from CMS [Link: Ratebooks & Supporting Data | CMS].
Audit your coding patterns to align with new CMS-HCC risk logic.
Evaluate actuarial bids and encounter data under updated RxHCC models.
Ensure proper frailty scoring and documentation for SNPs and PACE.
Align STAR rating strategies for 2026 measures and improvement plans.
💭 Final Thoughts
The 2026 Rate Announcement continues CMS’s trend of aligning Medicare Advantage and Part D payment models with real-world cost data and statutory reforms. To navigate these complexities effectively, organizations must adapt swiftly and strategically.
Start your free trial today to explore how we can assist you in implementing these changes effectively!
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