Trump administration signals there’s widespread desire to curb Medicare Advantage

STAT News – Thursday, January 29, 2026
By Bob Herman

Health insurers have endured a litany of problems with Medicare Advantage over the past three years. They were optimistic things would turn around with the Trump administration in charge.

Tough luck, for now.

The administration stunned Medicare Advantage insurers and their investors by proposing a minuscule pay raise for 2027 and, more importantly, another series of policies that intend to root out unscrupulous behaviors that insurers have used to elevate profits. The proposed regulation from the Centers for Medicare and Medicaid Services wiped away tens of billions of dollars in market value collectively from the largest sellers of private Medicare plans, including UnitedHealth Group, Humana, CVS Health, and Elevance Health.

Now, those companies and their lobbyists will look to push regulators and exaggerate the stakes to the public — with the goal of gaining as much financial relief as possible. But insurers may not be able to bank on Medicare officials reversing course when the final regulation comes out in April. That’s because a major component of the regulation is based on cold, hard data, and the proposals on reining in an industry practice known as upcoding have widespread support from watchdogs, policymakers, researchers, and even some within the industry.

“The changes that they’re making are reasonable, and CMS could go a lot further to address issues of overpayment in the program,” said David Meyers, a health economist and associate professor at Brown University who has extensively studied Medicare Advantage. “It seems like there was just such a massive disconnect between these pretty reasonable changes that CMS is making with what the investors were expecting.”

Medicare Advantage plans have struggled since 2023 largely because they incorrectly predicted how much care their members, most of whom are 65 and older, needed. The Biden administration also phased in a new “risk adjustment” system, intended to more accurately pay insurers based on how sick their members are. The Trump administration, meanwhile, has proposed enhanced auditing of Medicare Advantage plans, building on almost two decades of consternation over these audits.

Now that insurers are operating under newer rules, and with the midterm elections coming up in November, Wall Street investors and insurers expected a reprieve from further changes for a program that covers a politically active population.

“We got it wrong like the rest of the street,” Kim Monk, founding partner of regulatory research firm Capital Alpha Partners, wrote to subscribers Tuesday. “Not so much the what, but the when. We really believed that CMS would wait at least another year before going after coding again.”

Historically, GOP lawmakers have been a bulwark of support for Medicare Advantage. But even Republicans are calling for reforms, as evidence mounts that some health insurers are taking advantage of the system to generate windfalls, while stinting on patient care, as STAT previously reported.

The more regulated environment and proposed changes do not mean Medicare Advantage has become unprofitable — far from it. And after accounting for how intensively insurers code their members’ illnesses, Medicare Advantage plans are still expected to be paid $17 billion more in 2027 than this year, government actuaries said.

However, the new policies have made it more difficult for plans to stay as profitable as they were and some have pruned some fringe benefits as a result.

Medicare experts have said there is still more fat on the Medicare Advantage bone. The Medicare Payment Advisory Commission recently estimated the government is overpaying Medicare Advantage plans by $482 billion from 2020 to 2026, and that’s inclusive of the newer risk adjustment system.

One of the most influential factors in determining Medicare Advantage payments is a number known as the “effective growth rate.” This number reflects the growth in medical costs for those enrolled in the traditional Medicare program — not the medical claims experience of Medicare Advantage insurers.

For 2027, the government pegged the effective growth rate at 5%, while the industry was expecting closer to 10%. Rich Coyle, a top actuary within CMS’ Office of the Actuary, said on a stakeholder call this week that it “would be ideal” to incorporate more recent data on Medicare spending in the final rule.

While the final effective growth rate often is higher than what is proposed — that’s what happened last year — it’s not a given.

The risk adjustment proposals will be most vulnerable to lobbying.

Perhaps least controversially, CMS will base the risk adjustment system on more up-to-date medical claims data. The most controversial changes: Medicare Advantage plans will no longer get paid for diagnoses documented from phone calls, or for diagnoses that are not connected to actual visits with patients’ doctors or other providers.

Medicare Advantage has gradually shifted to a system that pays insurers based on “encounter data.” Most of that data reflects diagnoses that providers submit to insurers, which insurers then submit to the government. A smaller portion reflects what are known as “chart reviews,” in which insurers can tack on extra diagnoses that doctors didn’t capture.

CMS is not proposing to eliminate chart reviews. Instead, the agency is requiring any diagnoses from chart reviews to be tied to specific provider visits. STAT and the Wall Street Journal have reported how UnitedHealth and other Medicare Advantage plans have used chart reviews as a way to get paid billions of dollars even though patients aren’t receiving care for the ailments that are recorded. Recent research has found UnitedHealth uses chart reviews more than any other Medicare Advantage company.

The Office of Inspector General found that in 2016, almost half of all Medicare Advantage insurers “received risk-adjusted payments based on diagnoses from unlinked chart reviews where not a single item or service was provided to the beneficiary.” CMS officials, citing the OIG report and other evidence, wrote in the proposed regulation that “this raises data integrity concerns,” which experts echoed.

“They’re just saying that everything that gets added by the plan needs to be corroborated by a provider,” Meyers said. “Which is reasonable, because risk adjustment is based on the costs that beneficiaries are supposed to be incurring.”

Even some of the biggest industry players have backed this change. Humana supported the policy in discussions with congressional staffers last year, the Wall Street Journal previously reported. The Alliance of Community Health Plans, which represents provider-owned health plans like Kaiser Permanente, has backed this type of policy as well.

“We welcome that proposal,” ACHP CEO Ceci Connolly said. “It’s just not defensible to use chart reviews for risk adjustment that are not linked to an encounter.”

During a webinar hosted by the conservative Paragon Health Institute on Tuesday, Medicare Director Chris Klomp said the Trump administration does “not want risk adjustment to be a source of competitive advantage.” He also defended the proposal on chart reviews.

“We want to see follow-on care, that you help get that beneficiary healthier. And I want to be clear, many Medicare Advantage plans do this,” Klomp said. “We want to support them in that. We want the entire industry to do that. But in the process, somewhere along the way, over the last several years, there has been a breach of trust.”

The insurance industry has already started its opposition campaign. Lobbying groups, such as the Better Medicare Alliance, have warned the proposed policies could lead to more cuts to the benefits offered by Medicare Advantage plans — an identical refrain from the past three years as the government phased in the new risk coding system. Executives at UnitedHealth, the largest Medicare Advantage plan by enrollment and a member of BMA, suggested the company may eliminate more plan options on its earnings call Tuesday.

“As this all sits today … it will mean very meaningful benefit reductions,” said Tim Noel, the head of UnitedHealthcare, which is the health insurance division of UnitedHealth. “And we’ll once again need to take a hard look at our geographic footprint, our product footprint across the country.”

Elevance CEO Gail Boudreaux warned on the company’s earnings call Wednesday that if Medicare Advantage “funding consistently lags the reality on the ground, the levers that we have are benefits, networks, premiums, and exiting geographies. And quite frankly, that’s not good for seniors.”

Despite the angst from large Medicare Advantage groups, the proposed changes remain tame overall, Meyers said. CMS did not ban all types of chart reviews from risk adjustment, and it did not touch in-home assessments, another fraught way that insurers can get paid for adding patients’ diagnoses. The agency also did not increase the minimum “coding intensity adjustment,” which cuts risk scores across the board by 5.9%.

And although Trump officials have shown a willingness to continue risk adjustment reform initiated under the Biden administration, they have made it clear they will not minimize the program.

“Let me not mince words, in the least: We are massively in support of Medicare Advantage,” Klomp said. “It is a critical component of the future of Medicare.”

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