CMS proposes near-flat 2027 Medicare Advantage, Part D payments

The U.S. Centers for Medicare & Medicaid Services (CMS) is proposing to hold Medicare Advantage and Part D payments essentially flat in 2027, while advancing risk-adjustment changes that would have a larger impact on plans that rely heavily on unlinked chart reviews in their risk coding.

In a Jan. 26 news release, CMS said its Calendar Year (CY) 2027 Advance Notice of Methodological Changes would translate into a net average year-over-year payment increase of 0.09%, or more than $700 million in additional Medicare Advantage payments if finalized.

CMS framed the proposal as part of a broader effort to improve payment accuracy and keep the program stable over time. The agency said it expects the policies to support beneficiary choice, help keep coverage affordable and "enable an even more stable MA program in the long run."

"These proposed payment policies are about making sure Medicare Advantage works better for the people it serves," said CMS Administrator Mehmet Oz, M.D., MBA. "By strengthening payment accuracy and modernizing risk adjustment, CMS is helping ensure beneficiaries continue to have affordable plan choices and reliable benefits, while protecting taxpayers from unnecessary spending that is not oriented towards addressing real health needs."

Risk adjustment and chart review changes

A central piece of the advance notice is an update to the Medicare Advantage risk-adjustment model to better reflect current costs associated with specific diseases, conditions and demographic groups.

CMS also proposed a notable change in how diagnosis data from chart reviews would be used. Beginning in CY 2027, diagnosis information from unlinked chart review records — documentation not tied to a specific beneficiary encounter — would be excluded from risk-score calculations.

Under the proposal, only diagnoses reported in connection with a service or visit would count toward risk adjustment. CMS said it expects the payment impact to be larger for organizations that make greater use of unlinked chart review records to report risk-adjustment eligible diagnoses.

On the drug side, CMS outlined updates to the Part D risk-adjustment model that would:

• Incorporate benefit changes required by the Inflation Reduction Act for 2027.
• Use more current cost data.
• Align diagnosis sources with the Medicare Advantage policy, including excluding diagnoses from unlinked chart reviews.
• Separately account for costs in Medicare Advantage prescription drug plans and standalone prescription drug plans to improve payment accuracy.

The advance notice also includes technical updates to Star Ratings. CMS provided the list of disasters that would qualify for adjustment, non-substantive updates to certain measure specifications and the list of measures included in the Part C and Part D improvement measures and the Categorical Adjustment Index for the 2027 ratings year.

CMS is accepting comments on the 2027 advance notice through 11:59 p.m. Eastern time on Feb. 25, 2026. The agency will publish the final rate announcement on or before April 6, 2026.

Health insurer stocks slide on near-flat rates

The market reaction to the proposal was swift.

According to The Wall Street Journal, shares of major health insurers Humana, UnitedHealth and CVS dropped more than 14% in afternoon trading on Jan. 27 after news that Medicare rates will be held nearly flat next year.

The Journal reported that the large carriers collectively depend on Medicare Advantage for more than $500 billion in yearly revenue and that investors had been expecting 2027 to be a rebound year, supported by more generous federal payments.

Instead, the near-flat update weighed on the Dow Jones Industrial Average, even as the S&P 500 hit a new intraday high and the Nasdaq composite rose.