What's Going On With Medicare in 2026?

If you are one of the 40% of clients on a Medicare Supplement or “Medigap” plans as indicated by the letters F, G, N, K, etc, you can rest assured that your benefits are not changing or going away. Simply review your prescriptions and let us know if your Part D needs have changed.

Clients on Medicare Advantage plans are affected by annual changes that revolve primarily around federal funding as well as physician network changes. As you might expect, a plan with no or low premium is entirely dependent on funding from Centers for Medicare and Medicaid Services (CMS/ "Medicare").

Last fall we experienced an unprecedented national loss of Medicare Advantage (MA) plans. 1.8 million MA members were on plans that were discontinued. PPO plans (Preferred Provider Organizations, which allow greater out-of-network access) were disproportionately affected by the new benchmark ratings mentioned below. This negatively affected their funding. PPO’s also have higher administrative costs and higher reimbursement costs over comparable HMO or HMO-POS plans.

While the change we experienced last fall will continue to a small extent this fall (see below, “Why?”), this year, we expect only minor plan reductions affecting a small number of clients. If you are one of them, you should have already received an e-mail or call inviting you to book an appointment.

Why?

Those wanting specific information on the headwinds against Medicare Advantage Plans, this is for you:

• Inflation Reduction Act, 2022 (IRA) Reforms:
  • IRA reforms to Medicare Part D, including out-of-pocket caps and price negotiation mandates reduced federal reimbursements to MA plans, especially those bundling Part D, squeezing margins for insurers
• Medicare Benchmark Rate Adjustments
  • 118^th Congress and CMS set lower-than-expected benchmark rates (“Star ratings”), announced April 1 of 2024, which determine how much the government pays MA plans per enrollee.
  • PPO plans were disproportionately affected by these rate adjustments.
• CMS Regulatory Changes
  • April 2023, CMS finalized a three-year phase-in to a new risk adjustment model (v. 28) that recalibrates how plans are paid based on enrollee health.
  • Full implementation begins next year, 2026
  • The new model reduced payments for certain chronic conditions and made it harder for plans to justify high reimbursement.

What Should I Do?

We recommend reviewing your plan options. Even while your plan might remain, benefits may have changed due to these funding cuts. In some cases, other plans with the same premium might have better benefits for a variety of reasons – lower overhead costs, better star rating, or simply a different priority in benefit allotment.

Perhaps, if you are in good health, or if you have a Guaranteed Issue right, you should consider moving to a Medicare Supplement while you still can. Many Advantage Plan clients have grown tired of the annual changes in the system and they want the stability and reliability of a Medicare Supplement Plan.