Medicare in 2026: A Summary of Major Policy Changes in the First Half of the Year
- Mike Rawaan
- 12 minutes ago
- 10 min read
July 07, 2026 | Medicare Policy Roundup
Mike Rawaan, Founder and Managing Director
The first half of 2026 delivered more Medicare policy movement than most years see in their entirety. Payment rate changes, drug price negotiation milestones, eligibility restrictions, Star Ratings overhauls, and a landmark proposed rule on drug negotiation all landed between January and June. What follows is a concise summary of the major actions: what changed, what it means, and where things stand heading into H2.
1. Medicare Parts A & B: Premium and Deductible Updates (Effective January 1, 2026)
Effective: January 1, 2026
The standard monthly Part B premium increased to $202.90 in 2026 — up $17.90 from $185.00 in 2025. The annual Part B deductible rose to $283, up $26 from $257 in 2025. [1]
Part A inpatient hospital deductible changes include a coinsurance of $434 per day for days 61–90 of a hospitalization (up from $419), and $868 per day for lifetime reserve days (up from $838). Skilled nursing facility coinsurance for days 21–100 increased to $217.00 per day (up from $209.50). [1]
CMS attributed the Part B premium increase primarily to projected price changes and utilization increases consistent with historical experience, partially offset by a 90% reduction in skin substitute spending following payment reform finalized in the 2026 Physician Fee Schedule. CMS estimated the skin substitute reform alone prevented a roughly $11/month larger premium increase. [1]
2. CY 2026 Medicare Advantage Rate Announcement (Released April 7, 2025, Effective January 1, 2026)
Effective: January 1, 2026
CMS finalized a 5.06% increase - over $25 billion - in total MA payments to plans for CY 2026, which is up from the 4.33% projected in the February Advance Notice. The upward revision was driven primarily by higher-than-expected growth in Medicare FFS per capita costs, incorporating additional payment data through Q4 2024. [2, 3]
Key structural changes embedded in the Rate Announcement:
Risk Adjustment Model Phase-In Complete: CMS completed the three-year phase-in of the updated 2024 CMS-HCC risk adjustment model. The model transition, launched in CY 2024, is now fully implemented — improving payment accuracy while reducing the coding-driven overpayment patterns that had drawn scrutiny. [2]
Medical Education Cost Adjustment: CMS finalized the 100% application of the technical adjustment removing indirect and direct medical education costs associated with MA enrollees from FFS cost calculations, completing another three-year phase-in. [2]
Part D Risk Adjustment Update: CMS updated Part D risk adjustment models for CY 2026 to reflect IRA-driven changes to the Part D benefit, using 2022 diagnoses and 2023 cost data. [2]
With approximately 35 million Americans enrolled in Medicare Advantage in 2026, the rate announcement carries significant downstream consequences for plan bids, supplemental benefits, and network contracting across the country. [4]
3. CY 2026 MA and Part D Final Rule (CMS-4208-F, Effective January 1, 2026)
Effective: January 1, 2026
CMS released two final rules for CY 2026: the April 2025 Rate Announcement and a separate policy rule (CMS-4208-F) that codified key IRA requirements and finalized several program changes. Key provisions:
IRA Drug Benefit Codification: CMS codified the IRA's vaccine ($0 cost sharing for ACIP-recommended adult vaccines) and insulin cost-sharing requirements ($35/month cap or 25% of negotiated price, whichever is lower) as permanent Part D rules. [5]
Medicare Prescription Payment Plan (M3P): CMS finalized requirements for the automatic election renewal process, extending a Part D enrollee’s participation in the M3P monthly payment smoothing program to the next calendar year unless they opt out. [5]
Inpatient Admission Decision Protections: CMS finalized a provision restricting MA plans from reopening and modifying a previously approved inpatient admission decision — a direct response to prior authorization abuse patterns in the MA market. [5]
Provider Directory Transparency: MA plans must submit directory data to CMS for online publication in the Medicare Plan Finder, update that data within 30 days of a change, and attest to its accuracy annually. [6]
D-SNP Integration Requirements: Strengthened requirements for Dual Eligible Special Needs Plans around care coordination and integration with state Medicaid programs. [5]
CMS did not finalize three notable provisions from the proposed rule: the Annual Health Equity Analysis of Utilization Management Policies, AI guardrails for MA, and Part D coverage of anti-obesity medications (AOMs). [5]
4. CY 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F, Effective January 1, 2026)
Effective: January 1, 2026
The 2026 PFS final rule delivered the first meaningful physician payment increase in several years — but with structural offsets that left many specialties worse off than the headline numbers suggest.
Conversion Factor Increase: CMS finalized two separate conversion factors for the first time under MACRA. Qualifying APM participants: $33.57 (up 3.77%). Non-qualifying participants: $33.40 (up 3.26%). The 2.5% OBBBA increase accounts for the majority of the gain; it expires after 2026. [7, 8]
Efficiency Adjustment (−2.5%): CMS finalized a −2.5% efficiency adjustment to work RVUs for non-time-based services, calculated using a five-year MEI productivity adjustment. This directly offsets the OBBBA increase for procedure-heavy specialties. Specialties including cardiac surgery, radiology, radiation oncology, and neurosurgery face work RVU reductions of approximately 1% or more. [7, 8]
Skin Substitutes Reform: CMS collapsed skin substitute reimbursement from ASP-based rates (which had driven spending from $252M in 2019 to over $10 billion in 2024) to a single rate of approximately $127.28, reducing spending by an estimated 90%. [8]
Telehealth Permanent Extensions: CMS permanently removed frequency limits on telehealth services for patients in hospitals and SNFs, allowed virtual direct supervision for most services requiring supervision, and streamlined the process for adding services to the Medicare Telehealth Services List. [9]
Advanced Primary Care Management (APCM) Codes: CMS finalized three new G-code add-ons for APCM services, expanding the reimbursable framework for complex chronic care management. [8]
The AMA noted the 2.5% increase is a step forward but warned that without a permanent, inflation-adjusted update mechanism, Medicare physician payments have declined 33% in real terms since 2001. [9]
5. Medicare Drug Price Negotiation: First Negotiated Prices Take Effect (January 1, 2026)
Effective: January 1, 2026
2026 marked the first year that Maximum Fair Prices (MFPs) negotiated under the IRA’s Medicare Drug Price Negotiation Program went into effect; a historic milestone for a program that had been prohibited from directly negotiating drug prices since Part D’s creation in 2003.
CMS negotiated prices for 10 Medicare Part D drugs in the first cycle, projected to save enrollees an estimated $1.5 billion annually and save the Medicare program $6 billion per year. The negotiated prices represent a minimum 38% reduction from 2023 list prices. [10, 11]
The ten drugs with MFPs effective January 1, 2026:
Eliquis - Blood clot prevention/treatment and atrial fibrillation. Negotiated price: $231 (down from $521 list)
Jardiance - Type 2 diabetes and heart failure. Negotiated price: $197 (down from $573)
Xarelto - Blood clot prevention/treatment and reducing risk in coronary/peripheral artery disease. Negotiated price: $197 (down from $517)
Januvia - Type 2 diabetes. Negotiated price: $113 (down from $527, a 79% discount - the largest of the ten)
Farxiga - Type 2 diabetes, heart failure, and chronic kidney disease. Negotiated price: $178 (down from $556)
Entresto - Heart failure. Negotiated price: $295 (down from $628)
Enbrel - Rheumatoid arthritis, psoriasis, and psoriatic arthritis. Negotiated price: $2,355 (down from $7,106)
Imbruvica - Blood cancers (chronic lymphocytic leukemia, mantle cell lymphoma). Negotiated price: $9,319 (down from $14,934). Note: the highest-cost drug on the list at roughly $121,000/year per patient
Stelara - Psoriasis, psoriatic arthritis, Crohn's disease, and ulcerative colitis. Negotiated price: $4,695 (down from $13,836)
NovoLog/Fiasp - Type 2 diabetes (rapid-acting insulin). Negotiated price reflects a 68% discount off list price
In 2022, Part D spent approximately $46.4 billion on these ten drugs alone — 19% of all Part D spending. [10, 12]
In parallel, CMS selected 15 additional drugs for the second cycle of negotiations in 2025, with MFPs for those drugs taking effect January 1, 2027. 2026 also marked the first year CMS was required to negotiate physician-administered Part B drugs. [13]
6. Medicare Drug Price Negotiation Proposed Rule (CMS-4215-P, Released June 12, 2026)
Released: June 12, 2026 | Comment Deadline: August 17, 2026
On June 12, 2026, CMS released its first formal proposed rule for the Medicare Drug Price Negotiation Program — the most significant structural evolution of the program since its creation. With IRA authority to implement the program by guidance expiring after IPAY 2028, formal rulemaking is now legally required. The proposed rule establishes the permanent regulatory framework governing drug selection, negotiation procedures, manufacturer reporting, and MFP implementation beginning with Initial Price Applicability Year 2029. [14]
Key provisions in the proposed rule:
Drug Selection Scope: Beginning with IPAY 2029, CMS will select up to 20 negotiation-eligible Part B and Part D drugs annually, an expansion from prior cycles. [14]
Fixed-Combination Products: CMS proposes treatment of fixed-combination drugs (those with two or more active ingredients), which is a structural loophole manufacturers had used to potentially avoid negotiation eligibility through reformulations. [14]
Anti-Circumvention Provisions: CMS broadens compliance, reporting, and enforcement requirements to prevent manufacturers from restructuring products through alternative routes of administration or reformulations to avoid negotiation. [14]
Small Biotech and Orphan Drug Exceptions: The rule codifies and updates exceptions, incorporating the OBBBA’s broadened orphan drug exclusion (Section 71203) which exempts more drugs from negotiation eligibility. [13]
The proposed rule is open for public comment through August 17, 2026. Manufacturers with high-spend biologics or products approaching negotiation eligibility should evaluate the proposal carefully. [14]
7. CY 2027 MA and Part D Final Rule (Released April 2, 2026, Effective June 1, 2026)
Released: April 2, 2026 | Effective: June 1, 2026 | Applicable: January 1, 2027
While primarily applicable to CY 2027, CMS released this final rule in April 2026 with provisions relevant to H1 2026 planning. The rule signals the direction of the MA program heading into next year.
Star Ratings Overhaul: CMS streamlined and refocused the MA Star Ratings measure set, removing measures focused on administrative processes and areas where CMS determined beneficiaries cannot differentiate performance between plans. Measures related to appeals and provider complaints were among those removed. [4]
Enrollment Process Streamlining: CMS finalized updates to simplify certain MA and Part D enrollment processes. [4]
Marketing and Communications: New marketing and communications policies take effect October 1, 2026, for all CY 2027 marketing activities. [15]
Special Enrollment Period (SEP) for Provider Terminations: CMS declined to finalize a proposed SEP triggered by provider network terminations, indicating it may revisit in future rulemaking. [4]
8. OBBBA Medicare Eligibility Restrictions (Section 71201, Effective January 4, 2027)
Enacted: July 4, 2025 | Effective: January 4, 2027 | Planning Window: H1 2026
While the effective date is January 4, 2027, Section 71201 of OBBBA is an H1 2026 planning priority — and it directly mirrors the Medicaid eligibility restrictions in Section 71109. Medicare eligibility is now narrowed to the same four non-citizen categories: U.S. citizens, lawful permanent residents, Cuban and Haitian entrants, and COFA migrants.
Key operational provisions:
New Medicare enrollees as of July 4, 2025 must already meet the narrowed eligibility criteria to enroll.
Current Medicare enrollees who do not fall into one of the four named categories will have their coverage terminated on January 4, 2027. The Social Security Administration is required to terminate enrollment for those who no longer qualify. [16]
Some older immigrants who are dually eligible for both Medicare and Medicaid will lose both sources of coverage simultaneously, which can end up as a compounding access crisis for a medically complex, high-need population.
Plans, hospitals, and health systems serving significant immigrant populations should be modeling the impact now. The operational work required to identify affected enrollees, provide advance notice, and stand up transition support needs to begin well before January 2027.
9. The Structural Problem Underneath All of It: Physician Payment Sustainability
Every PFS update in 2026 - the 2.5% OBBBA increase, the MACRA conversion factor bifurcation, and the efficiency adjustment - is a workaround for a payment system that has never been structurally fixed. The numbers tell the story plainly:
Medicare physician payments have declined 33% in real terms since 2001 when adjusted for inflation. [9]
The 2.5% OBBBA increase is a one-year provision. It expires December 31, 2026. Without congressional action, 2027 reverts to the baseline MACRA update — 0.25% for most physicians.
The efficiency adjustment that offset the OBBBA increase for procedure-heavy specialties is not one-time. It is a new methodology that CMS will apply going forward.
81% of infectious disease physicians face cuts of 5% or more in 2026 after netting the efficiency adjustment against the conversion factor increase. [9]
The AMA, the AHA, and virtually every specialty society have called for permanent, inflation-adjusted Medicare physician payment reform. The 2026 PFS delivered a temporary reprieve, not a solution. The structural gap between what Medicare pays and what it costs to deliver care continues to widen with direct consequences for access, consolidation, and the viability of independent practices.
Bottom Line: What H1 2026 Tells Us About H2
The first six months of 2026 established the financial and regulatory contours of the Medicare program for years to come. The drug negotiation program is now in its third cycle and heading toward permanent rulemaking. MA payments are up, but risk adjustment accuracy reforms have compressed the favorable selection advantage plans had built their business models around. Physician payments improved nominally but remain structurally broken. And the OBBBA's eligibility restrictions are creating a ticking clock for plans, hospitals, and states that haven't started their implementation work.
The policy pace is not slowing. CMS has active rulemaking open on drug negotiation through August 2026, and the CY 2027 MA rule's Star Ratings overhaul will reshape plan quality strategies starting with the 2026 performance year. Organizations that treat these changes as compliance exercises will fall behind those that treat them as strategic inputs.
Covalence Health tracks Medicare policy across all program areas: MA, Part D, fee-for-service, and value-based care. Contact us to discuss how these changes affect your organization.
Sources and Citations
[1] CMS. "2026 Medicare Parts A & B Premiums and Deductibles." Fact Sheet. https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
[2] CMS. "2026 Medicare Advantage and Part D Rate Announcement." Fact Sheet. https://www.cms.gov/newsroom/fact-sheets/2026-medicare-advantage-part-d-rate-announcement
[3] CMS. "CMS Finalizes 2026 Payment Policy Updates for Medicare Advantage and Part D Programs." Press Release. https://www.cms.gov/newsroom/press-releases/cms-finalizes-2026-payment-policy-updates-medicare-advantage-part-d-programs
[4] AHA. "CMS Finalizes Policy and Technical Changes to Medicare, MA, Part D for CY 2027." April 2, 2026. https://www.aha.org/news/headline/2026-04-02-cms-finalizes-policy-and-technical-changes-medicare-ma-part-d-cy-2027
[5] Federal Register. "Medicare and Medicaid Programs; Contract Year 2026 Policy and Technical Changes to the Medicare Advantage Program" (CMS-4208-F). https://www.federalregister.gov/documents/2025/04/15/2025-06008/medicare-and-medicaid-programs-contract-year-2026-policy-and-technical-changes-to-the-medicare
[6] AHA. "CMS Issues Final Rule on CY 2026 Policy and Technical Changes to Medicare Programs." September 19, 2025. https://www.aha.org/news/headline/2025-09-19-cms-issues-final-rule-cy-2026-policy-and-technical-changes-medicare-programs
[7] Forvis Mazars. "Key Updates on the 2026 Medicare Physician Fee Schedule." November 17, 2025. https://www.forvismazars.us/forsights/2025/11/key-updates-on-the-2026-medicare-physician-fee-schedule
[8] CMS. "Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F)." Fact Sheet. https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-final-rule-cms-1832-f
[9] AMA. "What to Expect from the 2026 Medicare Physician Fee Schedule." December 11, 2025. https://www.ama-assn.org/practice-management/medicare-medicaid/what-expect-2026-medicare-physician-fee-schedule
[10] CMS. "Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026." Fact Sheet. https://www.cms.gov/newsroom/fact-sheets/medicare-drug-price-negotiation-program-negotiated-prices-initial-price-applicability-year-2026
[11] Medicare Rights Center. "Negotiated Prices Take Effect for Ten Drugs in 2026." October 9, 2025. https://www.medicarerights.org/medicare-watch/2025/10/09/negotiated-prices-take-effect-for-ten-drugs-in-2026
[12] ASPE. "Medicare Drug Price Negotiation Program: Medicare Prices Negotiated for 2026 Compared to List and U.S. Market Prices." https://www.aspe.hhs.gov/reports/medicare-prices-negotiated-2026
[13] KFF. "Key Facts About Medicare Drug Price Negotiation." March 2026. https://www.kff.org/medicare/key-facts-about-medicare-drug-price-negotiation/
[14] Holland & Knight. "CMS Issues First Proposed Rule for IRA Medicare Drug Price Negotiation." June 2026. https://www.hklaw.com/en/insights/publications/2026/06/cms-issues-first-proposed-rule-for-ira-medicare-drug-price-negotiation
[15] Federal Register. "Medicare Program; Contract Year 2027 and Certain Contract Year 2026 Policy and Technical Changes." April 6, 2026. https://www.federalregister.gov/documents/2026/04/06/2026-06600/medicare-program-contract-year-2027-and-certain-contract-year-2026-policy-and-technical-changes-to
[16] Medical Daily / Justice in Aging. "H.R. 1 Ends Medicaid on October 1, 2026 and Medicare on January 2027 for Hundreds of Thousands of Legal Immigrants." https://www.medicaldaily.com/immigrants-lose-medicaid-medicare-october-2026-january-2027-hr1-475767
© 2026 Covalence Health, LLC. All rights reserved. This brief is intended for informational purposes only and does not constitute legal or regulatory advice.
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