Executive Summary 

• Medicare Advantage (MA) is a central component of the Medicare program, enrolling more than half of all beneficiaries and channeling a substantial share of Medicare spending through private plans. 
• The Centers for Medicare & Medicaid Services updates MA through an annual, highly structured policy and rate-setting cycle that includes the Advance Notice, Rate Announcement, and MA–Part D regulations; these processes define the environment in which plan participants design benefits, build bids, and market products to beneficiaries. 
• This primer traces the progression of the MA rulemaking cycle from policy and rate-setting through bid submission, review, and approval; it further shows how federal rulemaking influences plan premiums, benefit structures, and market competition. 

This primer is part of a three-part series on Medicare Advantage. Two subsequent papers – the second walking through premium calculation and the third, risk adjustment – will be published in early 2026. 

Introduction 

Medicare Advantage (MA) has become a central component of the Medicare program, enrolling more than half of all beneficiaries – approximately 34 million in 2025 – and channeling a substantial share of Medicare spending through private plans. MA (Medicare Part C), and optional prescription drug coverage (Medicare Part D) were established in the Medicare Modernization Act in 2003, to introduce into Medicare the strengths of the commercial market. 

Under MA, the federal government pays plans a capitated amount to provide Medicare Part A and Part B benefits, and in many cases prescription drug coverage, in exchange for assuming financial risk and complying with program rules. Although beneficiaries encounter MA primarily through plan premiums, benefits, and networks, those visible features are the result of a structured, recurring policy process managed by the Centers for Medicare & Medicaid Services (CMS). Each year, CMS issues an Advance Notice and Rate Announcement to update payment benchmarks and risk-adjustment parameters, and it publishes an MA–Part D proposed and final rule to revise operational requirements such as marketing standards, Star Ratings methodology, and prior authorization policies. In parallel, CMS relies on the Health Plan Management System (HPMS) to communicate detailed guidance, templates, and technical clarifications that plans must follow when they design products and prepare bids. 

This primer shows how the annual rulemaking and regulatory cycle works in practice by tracing the sequence from federal policy decisions to plan bid submissions, CMS review, and the launch of the annual enrollment period. Understanding this sequence is essential context before evaluating and reforming any aspect of MA. Subsequent primers will focus on how MA calculates plan payments and beneficiary cost sharing, and deeper discussion of program features, including risk adjustment and coding.  

A Year in the Life of Medicare Advantage 

Each year begins with CMS updating the financial and policy framework for MA. The core of this process is a pair of documents: the Advance Notice and the Rate Announcement. 

The Advance Notice, subregulatory guidance with a public comment period, is typically released early in the year and outlines CMS’ proposed approach to MA payment for the upcoming contract year. It describes how county-level benchmarks will be updated, how trend factors such as growth rates, fee-for-service normalization adjustments, and Star quality ratings will be incorporated, and what changes CMS is considering for the risk-adjustment and coding intensity models. At this stage, CMS is presenting its program assumptions, relevant technical factors, and model refinements, and inviting feedback on those proposals. 

Stakeholders – including MA organizations, beneficiary advocates, providers, actuarial firms, and others – then submit public comments. They may address whether CMS’ assumptions appropriately reflect regional cost patterns, how proposed risk-adjustment changes could affect different enrollee populations, or whether technical adjustments could have operational or financial implications. Because even incremental changes in benchmarks or risk-score coefficients can affect total payments, stakeholders typically engage actively in this process. 

CMS considers these comments as it prepares the Rate Announcement, which is issued by the first Monday in April. The Rate Announcement finalizes the payment parameters for the next contract year. It includes county-level benchmarks, risk-adjustment model factors, normalization and coding pattern adjustments, and other technical details. Plans and their actuaries use these tables to construct bids and project revenue. For the broader market, headline figures – such as an average percentage change in MA payments – provide a high-level signal about the upcoming year, but for plans the more important information is the detailed, market-level and condition-specific changes. 

The MA–Part D Rule 

While the payment notices establish the financial framework, a separate process updates the operational rules governing MA plans. CMS uses an annual Medicare Advantage and Part D rule to revise program requirements in areas such as marketing practices, broker compensation, prior authorization, network adequacy, Star Ratings methodology, and policies for special needs plans. 

These rules follow the standard Administrative Procedure Act process. CMS issues a proposed rule, often in late fall for a contract year two years in the future, describing proposed policy and technical changes. The agency then accepts public comment for a defined period, usually at least 60 days. 

Recent MA–Part D rules have addressed topics such as: 

• requirements and limitations for third-party marketing organizations; 
• expectations for continuity of care and timeliness in prior authorization processes; 
• methods for setting and updating Star Ratings cut points and measure weights; and 
• implementation of statutory changes, including modifications to the Part D benefit under recent legislation. 

Once finalized, often in the spring, these rules shape the environment in which plans design benefits and develop bids. For example, changes to Star Ratings methodology can affect whether a plan qualifies for quality bonus payments, which in turn affects the rebates available to support supplemental benefits or lower premiums. Adjustments to network adequacy standards or utilization management requirements can affect the cost of delivering care, and those cost changes must be reflected in bid strategy. 

HPMS and Sub-regulatory Guidance 

In addition to formal notices and rules, CMS issues a substantial volume of sub-regulatory guidance. Much of this guidance is delivered through the HPMS, CMS’ online platform for communication and data exchange with MA and Part D sponsors. HPMS is used to distribute technical memos, bid and benefit templates, enrollment and disenrollment instructions, model notices, and various operational clarifications. Plans also use HPMS to submit their bids, benefit packages, and other required materials. 

In practice, many operational details associated with new policies are specified through HPMS guidance rather than in regulation. After CMS finalizes a policy – for example, a new methodology for calculating maximum out-of-pocket limits or a new communications requirement – it often issues HPMS memos that define data fields, file formats, timelines, and examples. For plan staff, especially actuaries and operations teams, these materials translate policy decisions into specific implementation steps and can indicate areas where CMS intends to focus on oversight. 

From Policy to Plan Bids 

Once CMS has set the payment parameters and regulatory requirements for the upcoming year, the focus shifts to MA organizations. By statute, each organization must submit a bid for each plan it intends to offer by the first Monday in June. Each bid reflects the plan’s estimate of the cost to provide traditional Medicare benefits to an average enrollee in a given service area, along with any supplemental benefits the plan chooses to offer. 

Developing these bids is a multi-month process. Using the finalized benchmarks and risk-adjustment factors from the Rate Announcement, along with the requirements in the MA–Part D rules and HPMS guidance, plans model expected medical spending, administrative expenses, potential quality bonus status, and target margins. They then translate these projections into concrete benefit designs, including premiums, cost-sharing structures, network arrangements, and supplemental benefits such as dental, vision, or transportation services. 

Plans submit their bids and benefit package information through HPMS using standardized CMS templates and tools. The final successful upload before the deadline constitutes the official bid. Following submission, CMS conducts a detailed review and, if necessary, a negotiation process. Agency staff assess each bid for compliance with statutory and regulatory standards, including tests related to total beneficiary cost, cost-sharing limits, maximum out-of-pocket requirements, and specific rules applicable to plan types such as dual-eligible special needs plans. 

If a bid fails to meet these standards or appears inconsistent with CMS policy, the agency may require revisions. Plans may then need to adjust benefit or pricing parameters within defined timelines. By late summer, CMS typically completes its review, approves bids, and signs contracts with plan sponsors. 

After this point, CMS prepares and releases the information that beneficiaries see in plan comparison tools, and plans can begin marketing their products on October 1. The annual enrollment period runs from mid-October through early December, but by that time the key policy, payment, and bid decisions for the upcoming year have already been finalized. 

The MA–Part D Lifecycle 

Taken together, this annual “year in the life” of Medicare Advantage defines the operating environment for plans. The payment notices establish the size and distribution of available funding. The MA–Part D rules and sub-regulatory guidance define the program’s operating rules, and the bid and review process translates those rules and parameters into specific premiums, benefits, and networks. Throughout the process, a wide range of stakeholders – including plans and trade groups, providers and beneficiary advocates, oversight bodies, and policymakers – shape the annual Medicare policy cycle through comments, analyses, oversight reports, and legislative or administrative actions. This structure provides the foundation for understanding subsequent topics in the primer, including how premiums are calculated and how risk adjustment and coding practices influence payment flows in the MA program.