The VBC Advantage in Medicare Advantage

As most Medicare-eligible patients choose Medicare Advantage (MA) as their preferred coverage option, primary care physicians are increasingly affected by MA policy and rate decisions. The sustainability of the primary care profession relies on adequate payment and a rational delivery model.

Medicare Advantage provides a critical opportunity to achieve both. But the program must be funded appropriately.

Congress created Medicare Advantage (MA) to offer beneficiaries an alternative to the fragmented fee-for-services model that could improve care quality, better manage costs, and provide enhanced benefits—delivering better value for taxpayer dollars.

MA plans increasingly recognize the distinct advantage of partnering with health care providers who are willing to assume accountability for key drivers of value, including overall cost and quality of care. Primary Care Physicians who embrace this opportunity see great potential in a different payment model that rewards them for taking better care of their patients and producing improved health outcomes.

::spoiler alert:: improved health outcomes usually cost less in the long-run.

Value-based care creates a win-win for stakeholders by delivering higher quality care, better patient outcomes and experience, a thriving health care workforce, and more predictable and rational costs.

Value-based care models also help providers navigate financial challenges, whether from pandemics like COVID-19 or fluctuating payments from commercial and Medicaid payors. In some cases, they even keep independent primary care practices afloat, ensuring continued access to care in rural and medically underserved communities.

While these models aim to promote stability and efficiency, they can be impacted by changes in the broader environment, including payment instability in the Medicare Advantage program. This is why we advocate for value-based care policies that support primary care providers taking care of our communities, and ensuring patients receive the best care in their golden years.

The Centers for Medicare & Medicaid Services (CMS) set Medicare Advantage payment rates annually, first releasing an Advance Notice about a year before the effective date (i.e. new Plan year), then finalizing rates and benchmarks a few months later. These benchmarks – which are intended to cover the cost of patient care plus administrative functions – guide plan bids and benefit design for the following contract year. Provider groups sharing financial risk with insurers often receive a percentage of the benchmark, directly linking Medicare Advantage rates to value-based care models.

The rate-setting process is mostly mathematical, but CMS sometimes underestimates costs, resulting in projections that don’t align with actual spending. When this happens for consecutive years, patients and providers feel the impact.

Ultimately, the Medicare Advantage rate-setting cycle is designed to self-correct over time, and the proposed CY2026 rates show movement in that direction. As America’s Physician Groups (APG) note, they better reflect rising costs and may stabilize MA plans and risk-bearing providers in 2026.

The agilon health Physician Network noted the importance of the improved rate proposal but also highlighted the impact of misalignment between costs and payment rates in its recent comment letter on the CY2026 Advance Notice. Other advocates have echoed similar concerns as well, including America’s Health Insurance Plans (AHIP).

We are steadfast in our belief that Medicare Advantage funding must accurately reflect costs in order to sustain primary care, ensure seniors’ access to quality services, and continue the transformation toward value-based care.