Medicare will spend more than $13 billion this year rewarding private insurers for hitting quality targets in their Medicare Advantage plans, with one company alone in line for nearly $4 billion of it — a program that continues to grow even as the number of plans actually earning the money shrinks.
The Quality Bonus Program’s Price Tag Keeps Climbing
According to a KFF analysis of CMS enrollment and star-ratings data, federal spending tied to the Medicare Advantage quality bonus program will total at least $13.4 billion in 2026, up from $12.7 billion in 2025. The number has been climbing for a decade: total bonus spending has more than quadrupled since 2015, when the program cost the federal government $3.0 billion. The bonus program, created under the Affordable Care Act, raises payments to Medicare Advantage plans that earn a star rating of four or higher out of five, with insurers free to use the extra money for lower premiums, dental or vision coverage, reduced cost-sharing, or simply as additional margin, provided they meet federal limits on how much of every premium dollar goes toward member care.
UnitedHealth Group’s share of that spending is disproportionate to its enrollment. The company covers just over a quarter of all Medicare Advantage enrollees, 26%, but KFF projects it will collect 29% of total bonus spending, or $3.9 billion, in 2026. Humana, the second-largest Medicare Advantage insurer with 20% of enrollment, will receive a smaller share by comparison — 11%, or $1.5 billion — after one of its largest contracts saw its star rating drop from 4.5 to 3.5 for the 2025 plan year, the year used to determine 2026 bonus eligibility.
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Fewer Plans Are Qualifying, Even as the Total Grows
The rising price tag comes alongside a shrinking pool of qualifying plans, a combination that highlights how sensitive the bonus system is to CMS’s annual star-rating recalculations. In 2026, 68% of Medicare Advantage enrollees, or nearly 24 million people, are in a plan that qualifies for bonus payments — down from 75% the year before and the lowest share since 2018. That drop happened because CMS raised the “cut points,” the scores plans must hit to earn each star level, causing the number of contracts reaching at least four stars to fall from 261 to 209 in a single year. Fewer qualifying plans would normally be expected to shrink total spending, but the dollar figure kept rising anyway, in part because Medicare Advantage enrollment overall has roughly doubled since 2015 and now covers 35 million people.
The size of the bonus a plan receives per enrollee also varies sharply by plan type. Employer- and union-sponsored Medicare Advantage plans see the largest average boost, $466 per enrollee, compared with $381 for individual plans and $318 for special needs plans that serve lower-income and dually eligible beneficiaries. More than 80% of employer-sponsored plan enrollees have qualified for the bonus in every year since the program began, while individual and special needs plans have only occasionally cleared that bar.
Why Critics Call the Program an Overpayment, Not a Reward
The bonus program has drawn sustained criticism from the Medicare Payment Advisory Commission and independent researchers, who argue that star ratings measure performance at the insurance contract level rather than the individual plan level, making it a poor proxy for the quality any single enrollee actually experiences. The Congressional Budget Office estimated in 2018 that eliminating the program entirely would save nearly $100 billion over a decade; given that Medicare Advantage enrollment has grown well beyond what CBO assumed at the time, the current savings from ending the program would likely run higher still. A separate CMS rule change to the star-ratings measure set, finalized this year for future ratings, is projected to add another $18.6 billion in Medicare Advantage spending over the next ten years by making more plans eligible for the same bonus payments.
None of that spending shows up as a distinct line item on a Medicare Advantage member’s bill or premium notice, because the bonus is folded into a plan’s benchmark rather than paid out separately. But the money still shapes what a retiree sees at enrollment time — a richer set of supplemental benefits, a lower Part B premium buy-down, or simply a more competitively priced plan than the insurer could otherwise offer, all funded in part by the federal bonus dollars flowing into that plan’s parent company.
This article was produced with the assistance of AI and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
