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Policy & oversight

CMS Says It Will Use Medicare Advantage Rate Data to Help Set What Original Medicare Pays Hospitals

A CMS strategy blog published July 16 describes plans to anchor Original Medicare payment rates in real-world market data, including rates hospitals negotiate with Medicare Advantage plans, a shift that could put downward pressure on what the traditional program pays for inpatient care.

By the Goodsurance editorial teamJuly 15, 2026

CMS published a strategy blog on July 16, 2026, titled Strengthening Original Medicare, outlining initiatives intended to make Original Medicare payment rates more accurate and aligned with real-world market pricing.

The most notable element involves expanding the data sources CMS uses to set Medicare prices. The agency said it has begun incorporating data on the rates that hospitals negotiate with Medicare Advantage plans when developing traditional Medicare payment policy for inpatient services. Because Medicare Advantage plans typically pay hospitals at lower rates than Original Medicare does, applying that data, if formalized through notice-and-comment rulemaking, could put downward pressure on what traditional Medicare pays hospitals.

CMS also said it is collecting data through July 31, 2026, on the rates private payors pay for clinical laboratory services, with the intent to use those market-based rates to calibrate Medicare's lab test payments.

The agency additionally referenced a 2025 RAND analysis finding that Medicare overestimates certain physician anesthesia service times by approximately 20 percent, and said it has already taken steps through the physician fee schedule to begin correcting that inefficiency.

Hospital advocacy groups have long argued that tying traditional Medicare rates to Medicare Advantage negotiated prices would import artificially low rates into a program that serves a different patient mix and lacks the network leverage of a private insurer. CMS has not yet published a formal rule applying these data changes to hospital payments. The blog is a policy direction statement; any binding changes would require separate rulemaking with a public comment period.

In plain words

CMS runs both traditional Medicare and Medicare Advantage. It published a blog post explaining a new strategy for traditional Medicare. One idea is to look at what Medicare Advantage plans pay hospitals. Medicare Advantage usually pays hospitals less. CMS wants to use those lower prices as a guide for what traditional Medicare pays hospitals. That could mean hospitals get paid less by traditional Medicare. The blog is not a final rule. Any actual changes must first go through a public review process. The blog was one of several Medicare policy documents CMS released the week of July 14, 2026.

Understand the basics first

Source: CMS
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