CMS 2026 Medicare Advantage and Part D Payments Update: What You Must Know

2026 is not years away anymore! It is almost here. In terms of health IT professionals, payers, and providers, the CMS 2026 Medicare Advantage adjustments are not changes. These recalibrations will have an impact on compliance, beneficiary care delivery, and financial planning. You will overlook the important details if you are only focusing on the surface, especially when it comes to risk score recalculations and the mechanics of the Part D Payments Update. You should not skim right now. Now is the time to comprehend.

What’s Changing in the 2026 Landscape?

In preparation for the CMS 2026 Medicare Advantage and Part D Payments Update modifications, the Centers for Medicare & Medicaid Services (CMS) has published the CY 2025 Advance Notice. Despite its administrative appearance, this will have a big impact.

Phase-in of New Risk Adjustment Model

CMS is completing the 2024 CMS-HCC model’s three-year phase-in. This involves reorganizing condition categories, updating coefficients, and switching from ICD-9 to ICD-10 codes. 2025 marks the start of the second year of deployment, hence, the 2026 environment will include:

 

• The new CMS-HCC model for 2024 has a 67% weight.
• 33% of the prior model’s weight

 

This combination shows a dedication to keeping up with current code standards while preserving transition stability.

Rebasing and Revising Fee-for-Service (FFS) Data

CMS used data from 2023 (rather than 2022) to rebase FFS data. This rebasing has an impact on plan payments, risk score computations, and normalization factors. Regarding CY 2025:

 

• The predicted increase rate for the Medicare Advantage risk score is 2.44%.
• The forecasted increase for the Part D risk score is 0.59%.

 

When compared to millions of beneficiaries, this growth appears insignificant on paper, yet it represents a significant change in budgetary planning.

Effective Growth Rate (EGR) and Rebate Impact

• EGR: 2.44%
• Rebasing lowers benchmarks
• Resulting in lower rebates for plans unless offset by bid strategies

Impact on Plan Payment Benchmarks

The predicted change in income for plans is -0.16%. Adding risk score trends, however, results in an effective projected change of +3.70%. Here, the subtlety is important. At the plan level, changes in coding intensity, Star Ratings, and demographic patterns provide a different picture than the apparent increase in payments.

Star Ratings Factor That Can’t Be Ignored

Influence of the Tukey Outlier Deletion

To eliminate outliers that have an impact on the cut points used to calculate Star Ratings, CMS is continuing to apply the Tukey approach. Although this approach seems statistically solid, it may punish plans with populations that exhibit high levels of performance result variability.

2025 Star Ratings Will Impact 2026 Payments

Plans whose 2025 Star Ratings declined will see a decline in income in 2026. There will be fewer quality bonuses and refunds for 4+ Star programs. This becomes a payer-provider alignment problem rather than merely a performance metric because Star Ratings are partially based on patient experience and results.

Understanding Risk Score Normalization in Plain Terms

CMS uses normalization to ensure that risk scores are not exaggerated. The 2026 model calls for CMS to:

 

• To determine the normalization factor, utilize five years’ worth of FFS risk ratings.
• Utilize normalization variables unique to each model for both the Part D and MA risk models.

 

Model Year	Normalization Factor	Notes
2020	1.075	Pre-pandemic trends
2023	1.118	Includes volatility due to COVID-19
2025	1.08 (proposed)	Updated with 2023 data

 

The revised component increases volatility in plan forecasting models while reflecting post-pandemic changes.

Coding Pattern Adjustment and What It Means

All MA risk ratings are subject to a 5.9% coding pattern modification by CMS. The purpose of this flat decrease is to combat aggressive coding. This can be annoying for plans with strong documentation procedures since correctness is punished in the same way as upcoding.

 

• All portions are subject to adjustments.
• Not dependent on the plan’s actual coding correctness
• It can make predicting and benchmarking less reliable.

Pharmacy: The Overlooked Piece of the Puzzle

There are more changes in the Part D Payments Update than just minor adjustments to prescription coverage. It makes significant adjustments to the plan liability and coverage stages and reorganizes the Part D risk score mechanism.

New Part D Risk Adjustment Model

• Prescription Drug Event (PDE) statistics from 2023
• Includes beneficiaries who are dual eligible.
• Updated classifications of conditions such as depression, CHF, and diabetes

 

This concept brings the treatment of chronic diseases and financial risk closer together. Population health analytics-focused plans will need to review their forecasting methods.

Part D Redesign: Big Shifts in Cost Sharing

It eliminates cost-sharing throughout the catastrophic phase by 2025. Plans will pay 60% of prescription prices, while manufacturers would pay 10%. While patients have significant out-of-pocket relief, the government contributes 20%.

 

Stakeholder	Pre-2025 Share	2025+ Share
Beneficiary	5%	0%
Plan Sponsor	15%	60%
Government	80%	20%
Manufacture	0%	10%

 

As a result of this redistribution, beneficiaries enjoy lower expenses while payers must brace for increased obligations. It is a change in clinical and financial accountability.

Bigger Role of Technology in All This

 

Digital tools are now essential. Proactive data analytics, automation, and robust cross-platform interaction are necessary for the shift. A platform for digital health is necessary to:

 

• Monitor changing risk ratings in real time.
• Adapt to the restructuring of pharmaceutical benefits
• Model Star Ratings have a more precise influence.

 

These platforms allow for clinical, pharmacy, and financial data to merge, improving transparency and forecasting.

Key Pain Points Stakeholders Must Solve

For Health Plans:

• Revenue forecasting uncertainty brought on by normalization volatility
• Member satisfaction and the unpredictability of star ratings
• The financial strain resulting from the Part D redesign

For Providers:

• Pressure on HCC documentation without an ROI guarantee
• Consistent participation is required to affect star ratings.
• Higher administrative lift with little profit potential

For Vendors and Tech Partners:

• Platforms need to accommodate the updated ICD-10 mapping.
• Need to guide customers through the effects of Tukey elimination
• Improvements in reporting accuracy and speed are required.

What Must Be Done Now

It will not be enough to wait for final regulation pronouncements. Operations for 2026 start with data from 2025.

 

• Examine the risk scoring mechanisms in place.
• Reevaluate your pharmacy coverage plans.
• Estimate how lower rebates would affect plan profits.
• Include features for care coordination in a digital health platform.

 

Reactive activities will only lag as a result of these measures, which guarantee resilience and preparedness.

Takeaway

Care documentation, reporting, and reimbursement are changing as a result of the CMS 2026 Medicare Advantage adjustments and Part D Payments Update. They incentivize proactive planning, teamwork, and real-time analytics investment. By the time 2026 rolls around, providers and payers that do not adapt to these changes now will no longer be competitive.

Why Forward-Thinkers Are Turning to Persivia

With a specially designed platform that unifies risk scoring, pharmacy redesign, and quality performance into a single AI-powered framework, Persivia assists healthcare companies in navigating these changes. Accuracy and quickness of reaction are crucial when regulations change. Payers and providers benefit from Persivia’s capabilities.