CMS Proposed 2026 Rate: MA and D-SNP Implications, Winning Health Plan Strategies
Key Messages:
- A 0.9% “increase” in MA payments behaves effectively like a cut once medical trend, risk‑model changes, and Star volatility are considered, forcing plans to rethink their operating model rather than just trim budgets.
- CMS’s explicit 2030 goal for accountable care means low rate growth is not a temporary squeeze but a deliberate signal that sustainable margin must come from value‑based, accountable delivery rather than legacy FFS contracting.
- MA and D‑SNP plans that win will be those that re‑design products, networks, and provider risk arrangements—and fully leverage modern population‑health technology—to align with this policy end‑state, not those that rely on incremental utilization management alone.
- Plans will struggle to succeed if they focus primarily on traditional cost cutting levers similar to those implemented in 2015. These strategies often included cuts to management infrastructure, an emphasis on the lowest-cost vendors, increased volume in Utilization Management (UM), rate cuts, narrow networks based on pricing alone, and more restrictive benefit packages.
- Given the pressure on Stars performance to improve/maintain base, two things need to be true, plans need to pick the right partners and the technology platform will need to drive actionable insights and contract specific reporting that plans can use to partner with providers in order to drive better quality performance, especially with higher performing large provider groups.
Context and Current Reality of the CMS Proposed 2026 Rate Increase
The federal government’s 0.9% average increase in Medicare Advantage payments for 2026 functions less like a raise and effectively more like a cut once medical trends, risk-adjustment changes, and Star-rating volatility are accounted for. Furthermore, underlying Medicare cost growth and specialty drug inflation are expected to rise faster than the headline update, compressing plan margins even farther unless sponsors restructure how they purchase and deliver care. Importantly, this rate decision is not an isolated budgeting event; it sits within a broader policy arc in which CMS is explicitly steering all of Medicare toward accountable, value based models by 2030. In that context, sustainable profitability for MA and D-SNP is less about incremental utilization management and more about rewiring benefit design, network performance, and provider risk to align with CMS’s accountable care vision.
Historical Precedent: What we Learned from the Mid 2010s
The mid 2010s offer a useful analogue for today’s environment. In 2014–2015, CMS projected only about a 0.4% net increase in MA plan payments and implemented ACA related benchmark cuts, sparking predictions of mass plan exits and benefit erosion. Instead, MA enrollment continued to grow, total revenues and operating profits rose, and MedPAC documented that average plan bids fell below 100% of fee for service costs as plans found efficiencies. Data from that era show that carriers preserved margins primarily by sharpening benefits, tightening networks based mainly on cost, and improving care management rather than abandoning markets. The key lesson is that structurally low nominal updates can be absorbed, but only by plans willing to redesign products and delivery relationships rather than relying on legacy FFS plus prior auth strategies.
What is Different Now: Policy, Risk, and Tech in 2026
What distinguishes today from 2015 is the convergence of explicit CMS policy goals, a more mature risk contracting environment, and far more capable technology. CMS has publicly committed to placing all Medicare beneficiaries in an accountable care relationship by 2030 and has moved a majority of traditional Medicare lives into MSSP ACOs and similar models that have delivered multi billion dollar savings while maintaining quality. Newer models such as LEAD ACO and emerging technology enabled initiatives like ACCESS and related programs further entrench the expectation that risk bearing, outcomes linked payments are the default chassis for federal purchasing. At the same time, the market has seen rapid growth in value based care technology and services, with investors explicitly arguing that MA disruption and reimbursement pressure will increase demand for platforms that manage population risk, Stars performance, and utilization at scale. In addition, the new CMMI models such as *BALANCE, GLOBE, GUARD and WISeR alongside the IRA drug negotiations- underscore CMS’s intent to bend drug and utilization trend through value oriented pricing and AI – enabled oversight*. Together, these shifts mean that in 2026, CMS and capital markets have a more credible expectation that MA and D-SNP sponsors can push deeper into provider risk without destabilizing access—if they fully leverage the available infrastructure and the bend in drug spend.
Economic Reality for MA and D-SNP Under a 0.9% Update
From a plan CFO’s perspective, the 0.9% update lands on top of multiple adverse dynamics. Effective revenue is formed not only by the base rate but also by the ongoing phase in of the updated CMS HCC risk model to 100% V28 for 2026 dropping 2,200 legacy codes, benchmarks that are favorable but projected individual RAF score reduction and therefore require significant redesign of workflows toward severity-qualifying codes or reset profitability projections downward and enhanced scrutiny of coding intensity through RADV audits, all of which can reduce realized per member payments below potential 3-4% increase touted. Meanwhile, mid single digit medical cost trend—driven by utilization rebound post-COVID, higher acuity, more expensive therapies and many would argue culture more inclined to seek care—widens the gap between revenue and cost. In this environment, Star ratings act as powerful rate multipliers: high performing 4 star and above plans receive bonus dollars embedded in benchmarks, while plans that lose Stars feel the combination of a weak base update and lost bonus revenue as a compounded margin hit. Plans that hit 4.0 stars+ will be able to navigate through this, 3.5 star plans will have some challenges, and 3.0 or less plans are dead in the water. That will likely lead towards some attrition in the market at the lower end, which will make it that much harder to maintain 4.0. To keep products sustainable, sponsors will increasingly rely on surgically adjusted supplemental benefits, calibrated cost sharing changes, and more selective networks rather than broad premium hikes that would erode competitiveness. All of this is falling on a plan infrastructure, which, for most, has already undergone multiple rounds of cost take-out efforts and efficiency reviews, removing low-hanging fruit such as vendor contract consolidations.
What Needs to be Thought of Differently in this Moment for Health Plans to Remain Competitive not Just in 2026 but Beyond.
Provider networks as the delivery vehicle for value.
Provider networks are where the policy and financial imperatives converge. MA plans already frequently use narrower physician networks than traditional Medicare, a strategy associated with lower premiums but also greater concern about access for high need and rural beneficiaries. Regulators and advocates are increasingly focused on network adequacy, behavioral health access, and the inclusion of safety net providers, which raises the bar for what constitutes an acceptable narrow or tiered network. In a value based environment, “strategic narrowness” becomes more defensible when networks are built deliberately around providers that take meaningful responsibility for total cost and quality, rather than simply those with the lowest unit prices. For MA and D-SNP sponsors, the network strategy narrative must therefore evolve from cost containment to one centered on accountable, high performing provider ecosystems that can sustain better outcomes under constrained rate growth. Failure to do so will result in downstream loss of competitive advantage. The tech stack for health plans must be capable of analyzing provider performance in terms of cost, utilization, quality, and appropriateness of care measures. This especially the case in the short term when there has been a rise in risk avoidance by providers so relying solely on VBC providers is not a strategy. This analysis is essential for defensible network design and adequacy reviews to create high-performance, tiered narrow networks.
The New Risk Contract Frontier for MA and D-SNP
The experience of MSSP and ACO REACH has normalized provider participation in shared savings and two sided risk models that hold clinicians accountable for total cost and quality performance. Many of the organizations participating in these models—including health systems, physician groups, FQHCs, and rural providers—are the same entities that anchor MA and D-SNP networks, creating a natural bridge for extending more advanced risk arrangements into the Medicare Advantage space. However, the financial fragility of safety net and rural providers means that aggressive risk transfer without appropriate protections could create access problems and political backlash. The strategic frontier for plans is therefore to design risk contracts with corridors, stop loss, and phased ramps that move more of the book into accountable models while explicitly safeguarding provider solvency and mission in underserved markets. The degree to which plans can develop trustworthy value-based payment models aligning incentives for actions as well as performance, coupled with the ability to provide reliable, accurate, and actionable population data to their providers, will prove to be a differentiator.
Technology and Data as Non-Optional Infrastructure
Executing this strategy at scale requires technology that was not widely available in 2015. Modern population health and value based care platforms integrate claims, clinical, and social data to support risk stratification, gap closure, and targeted interventions across MA and D-SNP populations. These tools increasingly link analytics to workflow for both plans and providers, embedding insights into care management, referral, and revenue cycle processes rather than producing retrospective reports. On the administrative side, new CMS rules tighten expectations for timeliness and transparency in MA prior authorization and appeals, making automation and AI enabled decision support important for both compliance and cost control. Plans that move from pilot scale deployments to industrialized, enterprise level use of these platforms will be better positioned to manage risk, meet quality targets, and support provider partners under more demanding financial and regulatory conditions.
Strategic Agenda: How Leading Plans Should Respond
In this environment, leading sponsors will anchor their responses in a coherent strategic agenda rather than a collection of disconnected tactics. First, they will systematically increase the share of membership cared for under well designed, two sided risk arrangements with proven provider partners, while using more conservative models where provider capacity or capital is limited. The philosophical discussion about whether a plan should support capacity building for its provider network to take on more risk is somewhat abstract and should be set aside.
Plans that do not actively participate in supporting capacity building will only disadvantage themselves. Successful plans will:
- Treat Stars and risk adjustment as core revenue engines, focusing investment on measures and programs that move overall Star ratings and ensure compliant, accurate documentation under the current risk model.
- Redesign products for durability—optimizing benefit richness, MOOP, and supplemental offerings to fit the new revenue reality and exiting structurally unprofitable benefit configurations, even when they have been marketing differentiators.
- Build value anchored high performance networks, concentrating membership with providers that demonstrate superior cost and quality performance and can thrive under risk. Even though short term there may be less provides willing to take risk in MA the pressure from CMS will force the pendulum back and plans gain from curating the providers that have experience and perform well.
- Industrialize tech enabled population management, moving beyond experiments to a disciplined operating model that connects data, analytics, workflow, and incentives across the enterprise
Investor and Policy Outlook: What stakeholders Should Watch
Investors will increasingly differentiate Medicare Advantage franchises by their ability to execute this agenda rather than by headline enrollment alone. They are already attuned to Star movements, the depth and quality of risk‑bearing provider contracts, trends in specialty drug spending, and member churn as leading indicators of which plans can sustain margins under tighter policy and regulatory constraints. Investors are also beginning to scrutinize organizational integration more closely, recognizing that legacy silos across policy, technology, care management, network strategy, and contracting must give way to a more unified operating model if plans are to deliver consistent performance.
CMS, for its part, will continue to watch total MA spending relative to fee‑for‑service, quality and equity metrics, network adequacy, and the savings performance of MSSP and ACO models as it calibrates future rate updates and program rules. The emerging equilibrium is one in which sustainable margin in a sub‑1% world accrues to plans that align early with the accountable‑care end state and fully operationalize value‑based, tech‑enabled management tools and networks, rather than those that rely on legacy fee‑for‑service contracting plus incremental utilization management.
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