Major U.S. health insurers secured a massive victory worth an estimated $13 billion after successful lobbying efforts led the Trump administration to roll back proposed payment reforms for Medicare Advantage, according to reporting by STAT.
The Centers for Medicare and Medicaid Services (CMS) announced Monday that companies selling private versions of Medicare will receive an average 2.5% pay increase in 2027.
This final rate is significantly higher than earlier proposals and follows two months of intense industry pressure against reforms to the lucrative, taxpayer-financed program.
A central component of the industry’s win was the administration’s decision to scrap a proposed risk adjustment model. The abandoned plan would have utilized updated data to determine “risk scores,” which dictate how much extra insurers are paid based on the health of their members. Industry groups fiercely opposed the update, which would have lowered government payments for various conditions such as diabetes and morbid obesity.
Instead, the administration will continue using a system based on 2018 data.
CMS officials acknowledged that delaying the update makes it more difficult to ensure insurance payments are as accurate as possible. Chris Klomp, the administration’s director of Medicare, characterized the decision as a “reasonable and prudent landing place” while the agency continues to monitor program integrity.
“We’re certainly not abdicating responsibility, nor are we saying that we are done,” Klomp told reporters, per STAT.
The policy reversal triggered a surge in healthcare stocks. Shares of the three largest Medicare Advantage providers—UnitedHealth Group, Humana, and CVS Health—each climbed by more than 8% in after-hours trading. Together, these three firms cover nearly 60% of all people enrolled in the program.
Medicare Advantage currently serves approximately 35.5 million people, representing about 55% of all Medicare beneficiaries. Congressional advisers estimate the program is expected to cost taxpayers $76 billion more this year than traditional Medicare.