The Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2026 Rate Announcement and final rule for the Medicare Advantage (MA) and Medicare Part D Prescription Drug programs. These releases finalize payment policies and make annual routine and technical updates, which we’ve summarized below.
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CY 2026 Final Rule Highlights (issued April 4, 2025)
- CMS Is NOT Finalizing Three Provisions from the Proposed Rule:
- Enhancing Health Equity Analyses: Annual Health Equity Analysis of Utilization Management Policies, Procedures and Ensuring Equitable Access to Medicare Advantage Services
- Guardrails for Artificial Intelligence,
- Part D Coverage of Anti-Obesity Medications (AOMs) and Application to the Medicaid Program) – which would have substantially increased access to GLP-1 drugs for weight loss
- Holding Plans to Approved Inpatient Admission Decisions – Restricts plans’ ability to reopen and modify a previously approved inpatient hospital decision on the basis of information gathered after the approval
- Closing MA Appeals Loopholes
- Clarification that MA appeals rules apply to adverse plan decisions, regardless of whether the decision is made before, after, or during the receipt of services
- Codifying provider and member notification of coverage decisions
- Clarification to ensure that an enrollee always has the right to appeal MA plan coverage denials that affect their ongoing course of treatment
- Inflation Reduction Act (IRA)
- Vaccine Cost Sharing – codifies that the Medicare Part D deductible shall not apply to, and there is no cost sharing for, an adult vaccine recommended by the Advisory Committee on Immunization Practices (ACIP) and covered under Part D
- Insulin Cost Sharing – codifies that the Medicare Part D deductible does not apply to covered insulin products, and the Part D cost-sharing amount for a one-month supply of each covered insulin product must not exceed the covered insulin product applicable cost-sharing amount – for 2026, and each subsequent year, the applicable cost-sharing amount is the lesser of:
- $35;
- An amount equal to 25% of the maximum fair price established for the covered insulin product under the Medicare Drug Price Negotiation Program; or
- An amount equal to 25% of the negotiated price of the covered insulin product under the stand-alone Medicare prescription drug plan (PDP) or MA plan with prescription drug coverage (MA-PD plan)
- Medicare Prescription Payment Plan (M3P)
- New requirements for an automatic election renewal process that extends a Part D enrollee’s participation in the program for the next calendar year, unless the enrollee opts out
- Finalizing the proposed requirement for Part D sponsors to ensure that pharmacies are prepared to inform Part D enrollees of the actual out-of-pocket cost of a Part D prescription processed under the program at the pharmacy point of sale
- Finalizing that CMS is not proceeding with any changes to the 24-hour requirement for election effectuation
CY 2026 Final Notice on Payment Policy Highlights (issued April 7, 2025)
Medical
- Payments from the government to MA plans are expected to increase on average by 5.06% from 2025 to 2026, which is an increase of 2.83% from the CY 2026 Advance Notice
- The effective growth rate is 9.04%, which is higher than the estimate of 5.93% in the CY 2026 Advance Notice; this change is primarily due to the inclusion of additional data on fee-for-service (FFS) expenditures, including payment data through the fourth quarter of 2024
- Includes the 3rd year of the phase-in for removing medical education costs
- Includes the 3rd year of the phase-in for the MA risk adjustment model changes
- For CY 2026, the MA risk score trend will be calculated as the average annual change in MA risk scores over a two-year period (data years 2022 and 2023); for CY 2027, CMS plans to use the three most recently available years of risk scores, as they have done historically
Year-to-Year Percentage Change in Payment
| Impact | 2026 Advance Notice | 2026 Final Rate Announcement |
| Effective Growth Rate | 5.93% | 9.04% |
| Rebasing/Re-pricing | TBD [1] | -0.28% |
| Change in Star Ratings [2] | -0.69% | -0.69% |
| MA Coding Pattern Adjustment | 0.00% | 0.00% |
| Risk Model Revision and FFS Normalization [3] | -3.01% | -3.01% |
| Expected Average Change in Revenue [4] | +2.23% | +5.06% |
[1] Rebasing/re-pricing impact is dependent on finalization of the average geographic adjustment index, which was not available with the publication of the CY 2026 Advance Notice.
[2] Change in Star Ratings reflects the estimated effect of changes in the Quality Bonus Payments for the upcoming payment year.
[3] The impact of the update to the Fee-for-Service (FFS) normalization factors for MA risk adjustment is not shown above separately because there is considerable interaction between the impact of the MA risk adjustment model updates and the normalization factor update. Therefore, the combined impact is shown above.
[4] The total does not include an adjustment for underlying coding trend in MA. For CY 2026, CMS expects the underlying coding trend to increase risk scores, on average, by 2.10%.
Part D
- Annual out-of-pocket (OOP) costs will be capped at $2,100 in 2026, which is the 2025 OOP cap of $2,000 adjusted based on the annual percentage increase in average expenditures for covered Part D drugs in the U.S. for Part D eligible individuals in the previous year
- Annual deductible increase of $615 from $590 in 2025
- Vaccine Cost Sharing – codifies that the Medicare Part D deductible shall not apply to, and there is no cost sharing for, an adult vaccine recommended by the Advisory Committee on Immunization Practices (ACIP) and covered under Part D
- Insulin Cost Sharing – codifies that the Medicare Part D deductible does not apply to covered insulin products, and the Part D cost-sharing amount for a one-month supply of each covered insulin product must not exceed the covered insulin product applicable cost-sharing amount – for 2026, and each subsequent year, the applicable cost-sharing amount is the lesser of:
- $35;
- An amount equal to 25% of the maximum fair price established for the covered insulin product under the Medicare Drug Price Negotiation Program; or
- An amount equal to 25% of the negotiated price of the covered insulin product under the stand-alone Medicare prescription drug plan (PDP) or MA plan with prescription drug coverage (MA-PD plan)
- Medicare Prescription Payment Plan (M3P)
- New requirements for an automatic election renewal process that extends a Part D enrollee’s participation in the program for the next calendar year, unless the enrollee opts out
- Finalizing the proposed requirement for Part D sponsors to ensure that pharmacies are prepared to inform Part D enrollees of the actual OOP cost of a Part D prescription processed under the program at the pharmacy point of sale
- Finalizing that CMS is not proceeding with any changes to the 24-hour requirement for election effectuation
- Establishment of the selected drug subsidy program – Part D sponsors will receive a government subsidy for selected drugs (drugs that are part of the Medicare Drug Price Negotiation Program) equal to 10% of the drug’s negotiated price until the $2,100 cap is met
- Creditable coverage – (referring to entities not offering group health plans that are not applying for RDS for CY 2026 only) non-RDS group health plans are permitted to use either the existing simplified determination methodology or the revised simplified determination methodology to determine whether their prescription drug coverage is creditable; under the revised simplified determination methodology, the group health plan coverage must be designed to pay at least 72% of participants’ prescription drug expenses, versus 60% under the existing methodology
- The premium stabilization demonstration project that was introduced last year that allowed for an additional 2 years is expected to continue in 2026. CMS will determine the amount and risk corridors under the demonstration no later than the annual release of the National Average Bid amount end of July/early August
- Successor Regulation (immediate substitution) – during a selected drug’s price applicability period, Part D plan sponsors may immediately substitute a selected drug that is a brand name drug with a generic drug of the brand name drug, and a selected drug that is a reference product with an interchangeable biological product of the reference product, provided the notice and timing requirements are met; this provides Part D plan sponsors with the same flexibility to manage formularies and promote competition for any selected drug regardless of whether it is a small molecule drug or biological product
- Updates to the Part D risk adjustment models for CY 2026 also include using more recent data years: 2022 diagnoses and 2023 costs; additionally, CMS finalized using the multiple linear regression methodology to calculate separate Part D normalization factors, in alignment with what they started doing in CY 2025 for the Part C risk adjustment models
- Star Ratings updates finalized in the CY 2026 Rate Announcement include providing the list of eligible disasters for adjustment, non-substantive measure specification updates, and the list of measures included in the Part C and Part D Improvement measures and Categorical Adjustment Index for the 2026 Star Ratings
