Expert Analysis: What is the Medicare Advantage Rate for 2026?

In 2025, more than half (54%) of all eligible Medicare beneficiaries are enrolled in a Medicare Advantage plan [1.6.1]. As this number grows, understanding the financial landscape is critical. This guide breaks down the official answer to: what is the Medicare Advantage rate for 2026?

Quick Summary

For 2026, the Centers for Medicare & Medicaid Services (CMS) finalized a 5.06% increase in payments to Medicare Advantage plans [1.2.1]. This rate refers to what the government pays insurers, not the final premium you will pay.

Key Points

• 2026 Rate Announcement: The Centers for Medicare & Medicaid Services (CMS) finalized a 5.06% increase in payments to Medicare Advantage (MA) plans for 2026 [1.2.1].

• Not a Premium Increase: This rate is the average payment increase from the government to insurers, not a direct increase in beneficiary premiums [1.4.1].

• How Rates Work: Payments are based on a system where plans bid against a county-level benchmark. Bidding below the benchmark allows for rebates and extra benefits [1.4.4].

• Individual Costs Vary: A beneficiary's actual cost depends on their chosen plan's premium, deductible, copays, and out-of-pocket maximum [1.5.1].

• MA vs. Original Medicare: MA plans offer an all-in-one approach with out-of-pocket limits and extra benefits, while Original Medicare offers greater provider flexibility but has no spending cap [1.5.5].

• Plan Details Coming Soon: Specific 2026 plan premiums and benefits will be released in the fall of 2025, ahead of the Open Enrollment period [1.7.6].

Understanding the 2026 Medicare Advantage Rate Announcement

In early April 2025, the Centers for Medicare & Medicaid Services (CMS) released its final 2026 Rate Announcement for Medicare Advantage (MA) and Part D plans [1.7.4]. The headline figure is a projected 5.06% effective increase in payments from the government to private insurance companies that offer MA plans [1.2.1, 1.2.3]. This translates to over $25 billion in additional payments to these plans for the 2026 calendar year [1.2.2].

It is crucial to understand that this is not a direct 5.06% increase in every beneficiary's monthly premium. Instead, it is the average rate change in the capitated payments insurers receive from Medicare to cover the cost of care for each enrollee [1.4.1]. This funding adjustment is influenced by several factors, including the growth in overall Medicare costs and updates to risk adjustment models [1.2.6]. The actual premiums that beneficiaries will see for 2026 plans will be announced in the fall of 2025, just ahead of the Open Enrollment period [1.7.6].

How Are MA Payment Rates Determined?

The process for calculating these rates is complex, revolving around a competitive bidding system against a government-set benchmark [1.4.4].

1. Setting the Benchmark: CMS first calculates a benchmark for each county. This benchmark is based on the average cost of care for a beneficiary under Original Medicare (Parts A and B) in that specific area. It represents the maximum amount Medicare will pay an MA plan for an enrollee in that county [1.4.3, 1.4.5].
2. Plan Bidding: Each insurance company submits a bid, which is their estimate of how much it will cost to provide Part A and Part B services to an average-health beneficiary in that county [1.4.1].
3. Calculating Payments and Rebates:
   • If a plan's bid is below the benchmark, the plan receives its bid amount plus a rebate from the savings. This rebate must be used to benefit the enrollee by offering lower premiums, reduced cost-sharing, or extra benefits like dental, vision, or hearing coverage [1.4.2, 1.4.7].
   • If a plan's bid is above the benchmark, the plan receives the benchmark amount, and the beneficiary must pay the difference as a monthly premium [1.4.1].
4. Risk Adjustment: The payment to the plan is then adjusted based on the health status of each individual enrollee. Plans receive higher payments for beneficiaries with more complex health conditions to cover their anticipated higher costs [1.4.4].

This system encourages insurers to operate efficiently and offer competitive benefit packages to attract enrollees.

Factors That Determine Your Personal MA Costs

While the CMS rate announcement sets the stage, your actual out-of-pocket costs depend on the specific plan you choose. Key variables include:

• Monthly Premium: Many MA plans offer a $0 monthly premium (you still must pay your Part B premium) [1.5.6]. For 2025, the average monthly MA premium was projected to be just $17.00 [1.3.4].
• Deductible: This is the amount you must pay for services before your plan starts to pay.
• Copayments and Coinsurance: These are the fixed amounts or percentages you pay for each service or prescription drug.
• Out-of-Pocket Maximum: All MA plans have an annual limit on your out-of-pocket costs for covered services. Once you reach this limit, the plan pays 100% for covered services for the rest of the year. For 2025, the maximum limit was set at $9,350 for in-network services, though many plans set a lower limit [1.5.2, 1.5.4].
• Provider Network: HMO plans generally require you to use in-network providers, while PPO plans allow out-of-network care, usually at a higher cost [1.5.1].

Comparison: Medicare Advantage vs. Original Medicare

Choosing between MA (Part C) and Original Medicare (Parts A & B) involves weighing costs, coverage, and flexibility. The following table highlights key differences based on 2025 data.

Feature	Original Medicare	Medicare Advantage (Part C)
Monthly Premiums	Part A is usually premium-free. Part B premium is $185/month (in 2025) [1.3.7]. Requires separate Part D (drug) & Medigap plans, each with their own premium [1.5.4].	Often has a $0 plan premium, but you still pay the Part B premium [1.5.6]. The average MA premium in 2025 was $17/month [1.3.4].
Out-of-Pocket Limit	No annual limit on what you could spend, unless you purchase a separate Medigap policy [1.5.5].	Yes, every plan has a yearly maximum out-of-pocket limit for covered services [1.5.2].
Doctor & Hospital Choice	You can go to any doctor or hospital in the U.S. that accepts Medicare [1.5.6].	You generally need to use doctors and hospitals in the plan's network (HMO, PPO) [1.5.1].
Prescription Drugs	Not covered. Requires purchasing a separate Part D plan [1.5.5].	Most plans include prescription drug coverage (these are called MA-PDs) [1.5.5].
Extra Benefits	Does not cover routine dental, vision, or hearing services.	Most plans offer extra benefits like vision, hearing, dental, and fitness programs [1.5.2].

Finding Your Best Plan for 2026

With the 2026 payment structures finalized for insurers, they will now design their benefit packages and set premiums. These details will become public in the fall of 2025. The Medicare Open Enrollment Period, running from October 15 to December 7, is your annual opportunity to compare these new plans and make changes to your coverage.

To prepare, you should:

1. Review your current coverage and how well it met your needs over the past year.
2. Make a list of your doctors and prescription drugs to ensure they are covered by any new plan you consider.
3. Use the official Medicare Plan Finder tool on the Medicare website once the 2026 plan information is released. It is the most comprehensive and authoritative resource available for comparing plans in your area.

Conclusion

The announced 5.06% increase in the Medicare Advantage rate for 2026 is a positive indicator of stable funding for the program, which now serves over half of all beneficiaries [1.6.1]. While this government payment rate provides a foundation, the actual cost to you will depend on the specific plan you select this fall. By understanding how the system works and what factors to compare, you can confidently navigate the upcoming Open Enrollment season and choose the best coverage for your health and budget.

Frequently Asked Questions

What exactly is the Medicare Advantage rate for 2026?

The official 2026 Medicare Advantage rate is a 5.06% average increase in payments from the government to the private insurance companies that offer the plans. This is not a direct increase to your personal premium [1.2.1, 1.2.2].

When will I know my actual Medicare Advantage premium for 2026?

Specific plan premiums, benefits, and costs for 2026 will be made public in the fall of 2025, typically around October 1, just before the annual Open Enrollment period begins [1.7.6].

Why did my friend's premium go up if the average is low?

Premiums are plan- and location-specific. An insurer might change its bid, or the local cost of healthcare may have risen, leading to premium changes for one plan even if the national average is stable or lower.

What is the main difference between Medicare Advantage and Original Medicare?

Original Medicare provides flexibility to see any doctor who accepts Medicare but has no out-of-pocket limit. Medicare Advantage plans are all-in-one plans (often including drug coverage) with network restrictions but have a yearly cap on out-of-pocket costs [1.5.5, 1.5.6].

How are Medicare Advantage plans able to offer $0 premiums?

If a plan can provide Part A and B benefits for less than the government's benchmark cost for that area, they receive a rebate. They can use this rebate to eliminate their monthly premium and offer extra benefits [1.4.1].

What is a risk adjustment in Medicare Advantage?

Risk adjustment is the process where CMS pays MA plans more for enrollees with chronic health conditions and less for healthier enrollees. This ensures plans are compensated fairly for taking on members with higher expected healthcare costs [1.4.4].

What does the growth in Medicare Advantage enrollment mean?

In 2025, over 34 million people, or 54% of eligible beneficiaries, are enrolled in a Medicare Advantage plan [1.6.1]. This continued growth signifies a strong preference among seniors for the all-in-one structure, predictable costs, and extra benefits these plans often provide.