Senior living operators with value-based offerings are getting a boost from a nearly doubled Medicare Advantage (MA) capitation rate in 2026.
The Centers for Medicare & Medicaid Services (CMS) previously announced a 5.06% increase in MA capitation rates, higher than what some analysts expected, including Macquarie Senior Healthcare Equities Research Analyst Tao Qiu. A capitation rate is a fixed monthly payment that operators or their partners get for beneficiaries of MA and special-needs plans. Senior living operators use value-based care and other kinds of reimbursable plans to coordinate resident care and connect them with certain services without adding to their expenses at the end of the day.
Senior living is a private-pay business and many operators don’t take public dollars. But for those with MA plans or value-based care arrangements, a higher capitation MA rate means providers will receive a greater amount of reimbursement per beneficiary per month, allowing operators to potentially retain more margin and have residents stay longer. That could result in more revenue and an opportunity to expand MA and other kinds of payment options for residents, according to Larry Gumina, CEO of Ohio Living.
“I think it’s opportunistic for us to take risk and to benefit from our ability as an operator, to improve access to care opportunities, get a return on our efficient care and our quality care and recoup some of the savings that we’re generating,” Gumina told Senior Housing News.
Jill Vitale-Aussem, president and CEO of Christian Living Communities, said the capitation rate increase validates and underscores the efforts of organizations like the Perennial Consortium which is an operator-owned MA network that launches special needs plans on a state-by-state basis. The organization’s members include CLC, Juniper Communities, Ohio Living and HumanGood.
The increased capitation rates will likely help offset the costs MA plans will face in the near future, Vitale-Aussem said.
CMS has in the past trended toward modest increases between 2% and 3%. The increase for 2026 reflects the headwinds of medical cost delivery, a growing older population with rising acuity, and ongoing support for supplemental benefits and risk-based models that address social determinants of health and preventive care, according to Vitale-Aussem.
McMinnville, Oregon-based The Springs Living is currently piloting an outside MA plan in three of its communities, and Founder and CEO Fee Stubblefield is optimistic that the capitation rate increase will help fuel its efforts in that regard.
“My hope and excitement around this is that this would fire the entrepreneurial resources to really accelerate the innovation, which we need to deal with the demographics that are so well known,” he said.
‘All of this benefits residents’
The bottom line of new capitation rate increases is that they are potential fuel with which to grow and expand MA plans.
Leaders of senior living operators like Ohio Living have long seen offering services to older adults in congregate settings as among the solutions to manage Medicare spending in the future. Senior living has a “captive audience” in that it houses older adults and can play an outsized role in coordinating their care and keeping them well. He believes that the industry is positioned especially well given that CMS previously pledged to have all fee-for-service Medicare beneficiaries in ACOs by 2030
Ohio Living has expanded its offerings with a new Medicare Advantage drug plan so the company is able to take on risk for people on waiting lists to get into a community, a move Gumina described as meant to “get to know those who we’re going to serve sooner rather than later.”
Westerville, Ohio-based Ohio Living has 11 communities.
The capitation rate increase could lead to an acceleration of providers adopting MA plans or joining provider-aligned MA plans such as the Perennial Consortium, according to Vitale-Aussem.
The increase should also help the group reach its goals of reinvesting back into the care model, supporting senior living providers through gainshare arrangements, enhancing care coordination funding and having fewer barriers to care, she said.
“All of this benefits the residents that we support and care for. We also focus on creating supplemental benefits that make sense for residents in a senior living setting,” Vitale-Aussem said.
Englewood, Colorado-based Christian Living Communities has nine communities.
The change also will benefit residents and their families as well, according to Stubblefield.
“This is not a business unless you know how to provide the quality, the care, and know your impact on the cost structure,” he said. “I think it could really drive a lot of clarity around what business we’re really in, and I think it’s going to focus us on that. I don’t see how that can’t be positive.”
The Springs Living has 20 communities.
Capitation rate increase a ‘green light’ for MA growth
Senior living operators like CLC see the capitation rate expansion as a “green light” that will help them expand MA plans and value-based care arrangements.
The additional incentives should encourage operators to “take on more risk for their covered lives,” Gumina said. Ohio Living has seen a lot of rewards by taking on risk with its MA plans, he said, and while there have been risks along the way, it has allowed the company to bend the cost curve and improve the quality of care for residents.
For senior living companies wary of taking on more risk in the form of acting as insurance for individuals, like Ohio Living does, the increased capitation rate could bring them off the sidelines given they can recoup additional savings through a favorable medical loss ratio. If less is spent than what is dedicated to a resident’s care, the company gets to keep the delta, according to Gumina.
“I think that as the operators look under their hoods and look at the high quality care and efficient care that they’re providing, they’re leaving money on the table,” he said. “They’re leaving margin on the table if they’re not taking risk for those covered lives.”
These increased incentives and potential for stronger margins could also bring additional entrepreneurs into the space, Stubblefield said. Managed care organizations, such as Humana, UnitedHealth and Signa, are expected to receive up to $25 billion in additional revenue with this change, according Qiu, but Stubblefield noted that in working with them before, they can’t pivot in the same way “fresh faces” can in terms of customer experience and innovations despite their scale and infrastructure.
Looking ahead, Vitale-Aussem believes this change only further solidifies the positioning for provider-owned MA plans and providers with value-based partners, and gives even more incentive for operators to “partner with MA plans offering gainshare models, care coordination payments and quality bonuses.” Above all, she said, older adults in communities will see the greatest benefit with improved health outcomes, more coordinated care and impactful benefit plans moving forward.
Stubblefield added plans such as these will likely be the future for senior living, depending on policies, and more operators could take on the risk of offering these plans due to the changes.
“We look at this as a key component to the future of what we do. I don’t know how those rate increases could be bad, depending on any obligations that they come with,” Stubblefield said.
