Medical cost trends for the Medicare fee-for-service (FFS) population have increased significantly in recent years, exceeding previous estimates from the Centers for Medicare and Medicaid Services (CMS). Stakeholders have been grappling with questions about these trends and their impact on healthcare financing. Differences between projected and actual experience can have significant financial repercussions for Medicare accountable care organization (ACOs), whose benchmarks are based in part on the experience of national or regional reference populations. This paper examines recent Medicare FFS cost trends and the implications for ACOs.

Key topics discussed include the following:

• Current Medicare FFS trends: Comparison of the CMS projection of U.S. per capita cost for each spring with the actual trend realized in the following year.
• Financial implications for Medicare ACOs: Impact of differences between the 2025 rate book trend and actual experience for ACO Realizing Equity Access and Community Health (REACH) participants.
• Drivers of recent Medicare FFS trends: Analysis of simulated REACH reference population and the Medicare Shared Savings Program national assignable population at the individual code level, using Milliman’s ACO Builder analytics suite.
• Performance-year 2026: Trend changes and potential outcomes.