Medicare Advantage plans will receive a higher net payment increase in 2027 than originally proposed in the Advance Notice.
The Centers for Medicare & Medicaid Services (CMS) on Monday released the 2027 Medicare Advantage and Part D Rate Announcement, projecting a net increase of 2.48 percent, or more than $13 billion in additional MA payments, compared with 2026 levels.
The agency originally estimated in the Advance Notice that payments would remain relatively flat, stating it expected payments to Medicare Advantage plans to rise 0.09 percent year over year or over $700 million between 2026 and 2027.
But when accounting for underlying risk score trends, the final payment policy now estimates total payment growth of approximately 4.98 percent for 2027. This expected increase includes consideration of elements that impact payments, such as growth rates of underlying costs, 2026 Star Ratings for 2027 quality bonus payments, and risk adjustment updates.
The notice, along with the 2027 Medicare Advantage and Part D final rule that was released on Thursday, April 2, makes annual routine and technical updates to the programs
The final rate notice reflects the agency’s broader effort to balance program stability with enhanced accountability, particularly around risk adjustment policies that have been a point of contention for Medicare Advantage organizations.
Key payment drivers for 2027
The net payment increase is driven primarily by a higher effective growth rate, which CMS finalized at 5.33 percent, reflecting updated estimates of Original Medicare per‑capita cost growth based on more recent experience data through the fourth quarter of 2025.
Other finalized payment factors include:
- Rebasing and re‑pricing adjustments of ‑0.17 percent
- A –0.03 percent impact from Star Ratings changes
- No change to the Medicare Advance coding pattern adjustment
- A –1.12 percent impact from risk adjustment normalization
- A –1.53 percent impact from updated sources of diagnoses policy
Together, these factors result in CMS’ projected 2.48 percent overall expected average change in Medicare Advantage payments for 2027.
The updates should keep coverage affordable and ensure patients get real value from their plans, said CMS Administrator Dr. Mehmet Oz in an announcement.
CMS said it is committed to ensuring Medicare beneficiaries are free to choose the health coverage that best meets their needs, and that such coverage maximizes value. Establishing accurate payments in Medicare advantage and Part D is foundational to this objective and will enable the agency to maintain affordable Medicare coverage while acting as good stewards of a more sustainable and credible program over the long term.
“CMS’ vision for Medicare Advantage and Part D is clear: a great choice for seniors and a smart deal for taxpayers,” said Chris Klomp, director of Medicare and chief counselor of the U.S. Department of Health and Human Services. “The Rate Announcement improves payment accuracy and strengthens competition based on quality—not on coding practices—helping put the program on a more sustainable path for the long term.”
No changes to risk adjustment model
In a move welcomed by many plans seeking predictability, CMS confirmed it will continue using the 2024 Medicare Advantage risk adjustment model for calendar year 2027, rather than implementing the more substantial model revisions proposed in the Advance Notice.
CMS said maintaining the existing model will give plans additional time to adjust following the full phase‑in of the 2024 model, which was completed in 2026. Agency officials emphasized that stability is essential as CMS continues to evaluate longer‑term changes to the risk adjustment framework.
At the same time, CMS reiterated three guiding principles for future risk adjustment reforms: simplicity, fair competition across plans, and payment accuracy that reflects true beneficiary risk rather than coding intensity.
Tighter controls on diagnosis sources
While CMS stopped short of implementing a new risk model, it finalized significant changes to allowable diagnosis sources beginning in 2027.
Most notably, CMS will exclude diagnoses from unlinked chart review records—diagnoses not tied to a specific medical encounter—from risk score calculations, with a limited exception for beneficiaries who switch Medicare Advantage organizations mid‑year.
CMS acknowledged that the policy is expected to have a greater payment impact on plans that rely heavily on unlinked chart reviews to generate risk‑adjustment eligible diagnoses. Without the finalized exception, CMS estimated the impact would have been even larger.
The agency framed the change as part of a broader effort to curb coding practices that increase costs without improving care, reinforcing CMS’ focus on program integrity and long‑term sustainability.
CMS is also finalizing the policy to exclude diagnoses from audio‑only telehealth services, consistent with the current risk adjustment policy for Medicare Advantage
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Part D risk adjustment model
The final rate notice also includes updates to the Part D risk adjustment model, reflecting Inflation Reduction Act (IRA) benefit changes that take effect in 2027, updated cost and diagnosis data years, and structural changes to improve payment accuracy.
CMS finalized policies that:
- Exclude diagnoses from audio‑only services and unlinked chart reviews
- Separate normalization factors for MA‑PD plans and standalone PDPs
- Better distinguish MA‑PD and PDP populations to improve predictive accuracy
CMS said the changes are intended to support more accurate bidding and enhance benefit stability for beneficiaries.