A new $25 billion funding increase for Medicare Advantage is set to reshape coverage in 2026. Learn how this boost could impact seniors, insurers, and the future of benefits like dental, vision, and transportation under Medicare Part C

The federal government recently approved a $25 billion increase in funding for Medicare Advantage plans, with changes set to take effect in 2026. This funding could bring about meaningful changes for seniors and the insurers who provide these plans.

Medicare Advantage, also known as Medicare Part C, is an alternative to Original Medicare (Medicare Part A and Part B) offered through private insurance companies. These plans are popular among some beneficiaries as they can provide additional benefits that Original Medicare does not, such as hearing, dental, and vision coverage, gym memberships, and transportation.

The recent increase in funding may cause providers and insurance carriers to revisit their plans, hopefully providing beneficiaries with more high-quality plan options and benefits.

How Medicare Advantage Plans Are Funded

Medicare Advantage beneficiaries, who are taking a closer look at Medicare costs, will want to understand how Advantage plans are funded. The federal government funds Medicare Advantage plans through a combination of federal trust funds and premiums paid by beneficiaries. Each Advantage plan company receives a fixed monthly payment from Medicare to provide care to people.

Every plan offered by a private insurer submits a bid to the Centers for Medicare & Medicaid Services (CMS), which also sets a benchmark payment for a specific area. If a plan’s bid is below the benchmark, CMS pays the plan the bid amount and provides a rebate to the insurer. The insurer must use that rebate to improve benefits or reduce beneficiary cost-sharing. If the plan’s bid is above the benchmark, the beneficiary must pay the difference through plan premiums.

Payment Increase for Advantage Plans for 2026

In 2024, CMS predicted a 3.7% increase in funding for Medicare Advantage plans in 2025. Now, in 2025, CMS predicts a 5.06% increase to be reflected in plan funding beginning in 2026. This increase will be a $25 billion increase and is expected to affect insurers and the plans they offer to beneficiaries.

This change will hopefully benefit beneficiaries and encourage insurance carriers to design and offer plans that benefit seniors.

How the 2026 Medicare Advantage Changes Impact Insurers

With this change in funding, insurers will likely reevaluate what they offer within their Advantage plans. Many may make adjustments by adding or improving benefits, such as improved dental or vision coverage and lower premiums, especially in competition with other insurers.

Some carriers might also introduce new plan options, larger provider networks, and other changes that might benefit seniors living in rural areas with limited access to Medicare care.

What Seniors Might Expect from the Changes

The latest CMS report shows that 68.5 million people are enrolled in Medicare, and about half are enrolled in Medicare Advantage and other plans. The extra funding for Medicare Advantage may benefit seniors in different ways. They may have additional benefit choices, lower out-of-pocket costs, broader networks, improved care coordination, and more.

This could also lead to changes in how care is delivered, such as more telehealth services or wellness programs that support seniors’ physical and mental health. As competition grows among insurance carriers, beneficiaries may find plans more customized to their needs and lifestyles.

Concerns About Potential Drawbacks

While the increased funding has the potential to benefit insurers, brokers, and beneficiaries, there are some potential negatives. There is a concern that some insurers might prioritize profitability rather than using the funds to improve patient care. In such cases, insurers could increase premiums while offering only minimal benefit enhancements. This would be troubling for seniors living on fixed incomes, who would struggle against any increase in monthly healthcare costs.

Furthermore, not all areas of the country are served equally in some cases. More urban centers might see an increase in competition and benefits as insurers seek new enrollees, while rural areas may remain underserved and see fewer improvements.

It’s also important to consider that increasing funds does not necessarily guarantee an improvement in healthcare quality. Discussions about the quality of Advantage plans and a decrease in providers accepting the plans will likely continue.

Ensuring Accountability

Policymakers and insurers are likely hoping for the good that could come from an increase in funding for Medicare Advantage plans. However, there will likely be pressure to ensure that the funding increase results in tangible outcomes that improve care for beneficiaries.

Insurers can demonstrate accountability to legislators and consumers by crafting plans and pricing that provide true value to beneficiaries.

Conclusion: A Turning Point for Medicare Advantage

As this funding increase goes into effect, the healthcare industry and policymakers will continue to assess its impact. Insurers have an opportunity to improve the quality and accessibility of care for millions of Americans.

At the same time, they will be expected to act responsibly by using these resources in ways that benefit patients first. This investment in Medicare Advantage plans could mark a positive turning point for the program and for those who rely on it.