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Medicare Advantage Gets a Fat Payday: Your Premiums Are Next
Finance

Medicare Advantage Gets a Fat Payday: Your Premiums Are Next

While insurers celebrate billions in new payments, beneficiaries brace for rising costs.

By Neil D'Monte, Palmelle Editorial Team · Reviewed by Neil D'Monte · 7 min read · 2026-07-09
SHORT ANSWER
Medicare Advantage insurers are receiving billions in increased federal payments, which could indirectly lead to higher premiums and out-of-pocket costs for all Medicare beneficiaries.

The direct answer

The conventional wisdom is that Medicare costs are a steady, predictable burden. However, recent moves by the Centers for Medicare & Medicaid Services (CMS) suggest a significant shift, with Medicare Advantage (MA) plans poised to receive substantial financial windfalls. CMS finalized its 2027 Medicare Advantage and Part D payment policies, projecting a net average 2.48% increase, which translates to over $13 billion in additional payments for MA plans

. This is a far cry from the 1.0% increase many anticipated

. This influx of cash is already boosting the stock prices of major MA players like UnitedHealth Group ($UNH) [c3, c4]. The Trump administration also finalized a Star Ratings overhaul, injecting an additional $18 billion into health insurers, directly benefiting companies like $UNH, $HUM, and $CVS

. While these payments are aimed at MA plans, the ripple effect on standard Medicare premiums, including Part B, is a growing concern for beneficiaries.

The Billion-Dollar Boost for Insurers

The Centers for Medicare & Medicaid Services (CMS) has finalized payment policies for Medicare Advantage and Part D plans, projecting a net average increase of 2.48% for 2027. This amounts to more than $13 billion in additional payments flowing to Medicare Advantage plans

. This figure far exceeded expectations, with many industry analysts bracing for a much lower 1.0% increase

. Adding to this financial windfall, the Trump administration's finalization of a Star Ratings overhaul is set to inject an additional $18 billion into health insurers

. These enhancements are specifically designed to benefit major players in the Medicare Advantage market, including UnitedHealth Group ($UNH), Humana ($HUM), and CVS Health ($CVS), leading to significant after-hours stock jumps for companies like $UNH [c3, c4].

What This Means for Your Wallet

While the direct beneficiaries of these CMS decisions are the private insurance companies offering Medicare Advantage plans, the financial implications for all Medicare beneficiaries are significant. The substantial increase in payments to MA plans, coupled with the Star Ratings overhaul, creates a financial incentive for insurers to expand their offerings and potentially enroll more beneficiaries. However, this doesn't automatically translate to lower costs for everyone. The conventional narrative often focuses on the sticker price of Medicare Part B premiums, which are projected to rise nearly 10% to $202.90 per month in 2026. The substantial financial gains for MA plans raise the question: will these insurers use this extra capital to improve benefits, or will it be absorbed into profits, leading to continued upward pressure on all Medicare-related costs, including potentially higher Part A and Part D expenses?

The Unlinked Chart Review Loophole

A key component of the CMS's finalized 2027 payment policies involves maintaining the 2024 Medicare Advantage risk adjustment model. Crucially, this decision will exclude most unlinked chart review diagnoses from risk calculations

. This is a significant move because unlinked chart reviews, often conducted by third-party vendors, can inflate the perceived health status of beneficiaries, leading to higher risk scores and, consequently, greater payments to insurers. By excluding these, CMS is attempting to curb what it views as overpayments. However, the continued reliance on the existing risk adjustment model, even with this exclusion, suggests a complex system where insurers still benefit from sophisticated data analysis to maximize reimbursements, a system that is far from transparent to the average beneficiary.

Common mistakes

PALMELLE'S VIEW
In our view, the recent CMS decisions to significantly boost Medicare Advantage payments are a clear win for the insurance industry, not for beneficiaries. While CMS claims these moves are about 'payment policies,' the reality is a massive cash injection into private plans

. This includes an $18 billion boost from a Star Ratings overhaul

. The market reaction, with stocks like $UNH surging [c3, c4], confirms this is a lucrative development for insurers. The critical question left unaddressed is how these increased payouts to private insurers will ultimately affect the out-of-pocket expenses for the millions of seniors enrolled in traditional Medicare or facing rising Part B and Part D premiums.

BOTTOM LINE
Ask your Medicare Advantage provider for a clear breakdown of how their increased federal payments translate to your specific out-of-pocket costs and benefits for next year.
WHEN THIS CHANGES
The financial landscape for Medicare Advantage plans is subject to annual policy updates from CMS. Significant changes in risk adjustment models, Star Ratings criteria, or overall payment rates could alter the profitability for insurers and, consequently, impact beneficiary premiums and out-of-pocket costs. Keep an eye on CMS announcements typically made in the spring or early summer each year for the following calendar year's adjustments.

Frequently asked

How much are Medicare Advantage plans getting in new payments?

CMS finalized policies projecting a net average increase of 2.48% for 2027, translating to over $13 billion in additional payments for Medicare Advantage plans. Additionally, a Star Ratings overhaul is injecting another $18 billion into health insurers [c2, c1].

Will my Medicare premiums go up because of these payments to MA plans?

While these direct payments are to Medicare Advantage plans, the increased profitability for insurers could indirectly lead to higher premiums across all Medicare plans, including traditional Medicare Part B, as costs are potentially passed on to beneficiaries.

What is an 'unlinked chart review' in Medicare Advantage?

These are reviews of patient charts that are not directly linked to a specific encounter or visit. They can sometimes be used by insurers to inflate diagnosis codes and increase risk scores, leading to higher payments from Medicare. CMS is excluding most of these from risk calculations starting in 2027 [c2].

Sources

  1. Casey | Trade Tracs
  2. Wall St Engine
  3. TrendSpider
  4. Stocker-Man

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