Medicare Advantage Under the Microscope: Why Operational Efficiency Matters Now

Touching Medicare ─ and by extension Medicare Advantage (MA) ─ has long been the one of the traditional third rails of U.S. politics. But this administration is attempting a potentially adroit bit of political jiu-jitsu by leaning into fraud, waste, and abuse as a rationale to bring MA back to the original aspirations of introducing private insurance efficiencies to a public program. What does this mean for the MA payor?

Starting in 1982 with the Tax Equity and Fiscal Responsibility Act, Medicare Advantage (“MA”, formerly Medicare + Choice, aka Part C) ostensibly pursued two stated goals:

1. Expand beneficiary choice; and
2. Realize managed care efficiencies and cost savings in Medicare

Considering MA spending in 2019 was $321 higher per person than traditional Medicare, this hasn’t worked out very well. This is despite other analyses that show a reduction of Part A and B equivalent spend in MA versus traditional Medicare.

This disparity makes MA a key focus area for policy changes. Based on public statements, CMS is aiming to drive savings through three levers:

1. Increased scrutiny of the risk-adjustment program
2. Oversight of payors’ approaches to marketing and prior authorization
3. Reduction in the Medicaid portion of dual coverage, including pilot programs

However, the release of the 2026 Final Rate Notice in April brought some unexpected news: CMS is increasing Medicare Advantage payments by a net 7.16%, including a 5.06% base rate increase and a 2.10% boost from risk score trends. This marks a significant increase compared to the 2025 rate and offers short-term financial stability for MAOs.

That doesn’t mean the pressure is off. CMS is still:

• Finalizing a three-year risk model phase-in that reduces payments by -3.01%
• Applying a -0.69% reduction tied to Star Ratings
• Keeping the minimum 5.9% coding pattern adjustment in place despite calls to increase it

These changes make it clear that CMS is rewarding efficiency, accuracy, and quality. Plans with higher Star Ratings benefit, while others will see reduced payments. Documentation and coding must reflect actual patient needs—not inflated risk scores.

How does a health plan make this work?

Long-term, the strategies of moving toward risk sharing (e.g. ACOs even without the pilot programs) and stronger primary care contracting are key to moving the overall medical cost needle. But these take time and health plans need room to breathe as those efforts come to fruition.

That is why plans must rethink administrative spend. Although complex, the uniformity of the program makes it primed for automation. Automating repeatable, rules-based tasks not only reduces cost but also improves speed and accuracy—critical factors when responding to CMS guidance, preparing for annual bid cycles, and pivoting with frequent regulatory updates.

A single source of truth across departments—actuarial, product, compliance, marketing—ensures that every stakeholder works from consistent, up-to-date data. This eliminates errors caused by version control issues, minimizes rework, and streamlines coordination across teams. The result: faster time-to-market, fewer compliance risks, and more bandwidth for strategic initiatives.

Bottom line: MA plans may see more funding in 2026, but they are also being asked to demonstrate value—not just through outcomes, but through operational efficiency and transparency. In that environment, optimizing internal processes is critical for long-term sustainability.

Sources referenced in this article:

National Library of Medicine
KFF
JAMA Network
Modern Healthcare – HHS restructures duals, PACE offices amid department overhaul
Modern Healthcare – Medicare Advantage under pressure as GOP looks to fund tax cuts
CMS 2026 Medicare Advantage Final Rate Notice (April 2025)