CMS 2027 Medicare Advantage final rate announcement: What changed, what it means

Regardless of how you feel about Medicare Advantage (MA), CMS is doubling down on the embattled program with the 2027 MA and Part D Rate Announcement.

CMS reversed course on the advance notice and removed a proposed risk model recalibration which would have resulted in a payment cut for most MA plans. Instead, MA plans will see a net average payment increase of 2.48%, or over $13 billion in calendar year 2027.

Per CMS, this expected increase includes consideration of the various elements that impact MA payments, including growth rates of underlying costs, 2026 Star Ratings for 2027 quality bonus payments, and risk adjustment updates.

This abrupt reversal comes as no real surprise to us. Maybe a mild eyebrow raise. Here’s why.

1. CMS received a flood of commentary after the advance notice arguing that its initial rate proposal fell woefully short. Much of that heavy pushback came from the deep-pocked, well-connected insurance industry.
2. The current administration places far more faith in MA—a privately run hybrid administrator of health, answerable to CMS but with a lot of leeway in how it chooses to manage the health of its members—than Traditional Medicare (TM). Dr. Oz unfailingly voices his support for MA in every press release. If he had it his way, MA would replace TM outright.

It’s a fascinating battle, public vs. private administration of our nation’s health, that continues to play out in public view. Score one for MA today, which started out the year with at least three False Claims Act whistleblower body blows and corresponding heavy fines.

Another interesting perspective on that battle comes from the reporting of Fierce Health. Director of Medicare Chris Klomp told MA payers to put cost control above revenue generation as their north star, expecting them “to do their best work in controlling costs.”

(For what it’s worth we like the concept of capitated payment/value-based care over fee-for-service, despite the former’s excesses and often ill execution).

A couple important items that did hold up from the advance notice:

1. CMS is moving forward with its proposal to exclude diagnoses from unlinked chart reviews in risk score calculations.
2. Also disallowed: diagnoses captured during audio-only telehealth visits. The face-to-face encounter requirement is still the standard.

CMS has come to realize that risk adjustment can and has been gamed, and this is one leak that needed caulk. From the final notice (see p. 78):

“CMS has consistently emphasized that risk-adjusted payment should reflect the documented health status of beneficiaries as evidenced by clinical encounters … CMS believes that requiring diagnoses to be linked to an actual service record for risk score consideration supports ongoing efforts to ensure more accurate payments.”

What do you think of the final rate notice and MA in general? Below you’ll find a link to the notice and the press release.

References

• CMS, Announcement of Calendar Year (CY) 2027 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies: https://www.cms.gov/files/document/2027-announcement.pdf
• Fierce Healthcare, “CMS gives Medicare Advantage rates a 2.48% bump for 2027 plan year in final rule”: https://www.fiercehealthcare.com/regulatory/cms-gives-medicare-advantage-rates-248-bump-2027-plan-year-final-rule

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