The Trump administration is favoring enrollment in Medicare Advantage by seniors. It is doing so through a series of regulatory moves, including increasing payments to insurers, loosening regulations and changing auto-enrollment for beneficiaries from traditional Medicare to Medicare Advantage.

The administration finalized a 2027 payment rate increase of 2.48% to privately run Medicare Advantage plans that was far larger than the 0.09% rate initially proposed in January. In aggregate, this amounts to a $13 billion boost in federal government payments to private insurers to run health plans for people over 65 and certain individuals with disabilities. The higher rate is thought to help insurers stabilize their businesses as they face rising medical costs.

The Trump administration also last year decided upon a generous payment increase to Medicare Advantage plans of 5.1% for 2026. This constituted a $25 billion boost and differed substantially from the 2.2% increase proposed by the Biden administration in the waning days of its tenure.

What’s the Difference Between Traditional Medicare And Medicare Advantage?

Medicare serves roughly 68 million elderly and disabled Americans. At age 65, most Americans are automatically enrolled in Medicare to cover costs related to hospital and physician (as well as outpatient) services, known as Part A and Part B, respectively.

Often, each healthcare service is billed and reimbursed separately, hence the name “fee-or-service” Medicare. However, since 1983, Medicare has operated a diagnosis-related group-payment system that standardizes reimbursement rates for patient stays in the hospital, varying by disease and condition category.

Beneficiaries in traditional Medicare can also sign up for prescription drug coverage (Part D) through stand-alone plans that manage the pharmacy benefit.

Alternatively, those eligible for Medicare can enroll in Medicare Advantage, called Part C. Here, private insurers receive a set monthly fee per enrollee from the government to cover health services, including hospital, outpatient and physician services as well as in most plans, prescription drug coverage, all integrated under one insurer.

Attracted by low premiums and supplemental benefits such as vision and dental care not offered by traditional Medicare, the share of beneficiaries enrolling in Medicare Advantage has increased every year over the last two decades, along with a rise in the number of available plans. Medicare Advantage now enrolls more than 50% of the Medicare-eligible population.

How Could Seniors Be Affected By Changes To Medicare?

The current default is the original fee-for-service Medicare. Medicare Advantage is available to those who specifically select it. Now, however, Medicare Director Chris Klomp is actively considering auto-enrollment of beneficiaries in Medicare Advantage plans, reversing the default option.

The Medicare Advantage program generally lowers out-of-pocket costs so long as beneficiaries stay within the designated network but often restricts choices of doctors and healthcare providers. On the other hand, original Medicare offers broader physician and healthcare provider access and flexibility.

Furthermore, in stark contrast to traditional Medicare, involuntary disenrollments are a growing threat to Medicare Advantage plan recipients. A Johns Hopkins Bloomberg School of Public Health analysis found that approximately 10% of Medicare Advantage enrollees — roughly 2.9 million seniors — are being forced to find new coverage in 2026 as insurers exit markets. The average disenrollment rate for Medicare Advantage beneficiaries jumped from 1% in 2018-2024 to 7% in 2025, and then to 10% (nearly 3 million people) in 2026. In Vermont, 92% of enrollees had to find alternative plans or revert to original Medicare.

Growth in Medicare Advantage enrollment has been slowing recently. But contrary to predictions last autumn that there would be a decline, there was a slight increase in the numbers of people signing up: 34.4 million people enrolled in a Medicare Advantage plan in 2025, up from 33.4 million in 2024. Regardless, nearly every major insurer got rid of enrollees, with two exceptions: Humana and Kaiser Foundation Health Plan, which saw increases of 1.3 million beneficiaries and 64,000, respectively.

How Could the Administration’s Changes Affect Medicare Advantage Plans?

The headwinds facing Medicare Advantage plans include rising medical costs and increased utilization of healthcare services and technologies by beneficiaries. The Inflation Reduction Act’s redesign of the outpatient drug benefit called Part D also presents challenges because it exposes payers to much greater cost liability, especially regarding high-cost beneficiaries.

Nevertheless, the Trump administration’s most recent regulatory moves could reverse the downward trend in enrollment growth. This includes a loosening of regulations with respect to the so-called star ratings system. Earlier this month, the Centers for Medicare and Medicaid Services eliminated 11 of the quality and care metrics Medicare Advantage plans are graded on including, among others, call center performance, appeals and complaints. The evaluations are designed to measure the quality and performance of health plans on the basis of patient satisfaction and the use of clinically appropriate tests and treatments. By lowering the number of metrics plans are held accountable for, this may generate close to $19 billion for insurers in bonuses over the next 10 years.

At times, the rhetoric of the president and CMS administrator has seemed critical of Medicare Advantage plans. Recently, Trump accused insurers of “making a killing” in terms of profits while CMS Administrator Mehmet Oz promised to go after plans that were overpaid by the government on the basis of untoward billing practices.

But aside from these mixed messages, it’s safe to assume that this administration’s preference is to grow the Medicare Advantage market. Not only is this stipulated in Project 2025, a conservative blueprint on policy, prior to his assuming the administrator role at the CMS, Oz declared he favored a Medicare Advantage for All healthcare system. This would extend beyond the confines of Medicare, suggesting a role for Medicare Advantage as a possible model for broader healthcare reform.