CMS outlines policies to improve payment accuracy, sustainability for Medicare Advantage 

WASHINGTON – The Centers for Medicare & Medicaid Services (CMS) has proposed policies that are projected to result in a net average year-over-year payment increase of 0.09%, or more than $700 million, in Medicare Advantage payments to plans in calendar year 2027. 

This expected increase includes consideration of the various elements that impact MA payments, such as growth rates of underlying costs, 2026 Star Ratings for 2027 quality bonus payments, and risk adjustment updates, the agency says. 

“These proposed payment policies are about making sure Medicare Advantage works better for the people it serves,” said CMS Administrator Dr. Mehmet Oz. “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.” 

The policies are outlined in the recently released CY 2027 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and MA and Part D Payment Policies.  

Other highlights from the notice: 

• As the agency considers opportunities for improving risk adjustment both in the 2027 Advance Notice and in the future, CMS is working towards a MA risk adjustment system guided by three principles: 
  • Simplicity to reduce day-to-day administrative burden for both plans and providers; 
  • Competition on creating value for patients where risk adjustment facilitates such competition equally for all varieties of plans irrespective of size or resources; and 
  • Payments that accurately reflect beneficiary health risk and facilitate the efficient use of health care resources, enhanced program integrity, and greater accountability. 
• CMS is proposing to make updates to the MA risk adjustment model that reflect more current costs associated with various diseases, conditions, and demographic characteristics. In addition, CMS is proposing to exclude diagnosis information from unlinked Chart Review Records, which is diagnosis information not associated with a specific beneficiary encounter, from risk score calculation starting in CY 2027.   
• CMS is also proposing updates to the Part D risk adjustment model that include accounting for Inflation Reduction Act changes to the Part D benefit for CY 2027, reflecting more current costs, aligning sources of diagnoses for use in risk adjustment to be consistent with similar policies proposed for MA (e.g., excluding diagnoses from unlinked Chart Review Records), and separately accounting for MA prescription drug plan and standalone prescription drug plan costs in order to improve the accuracy of Part D payments for these two segments of the Part D market. 

The CY 2027 Advance Notice may be viewed at: https://www.cms.gov/files/document/2027-advance-notice.pdf. 

To read the CMS fact sheet on the CY 2027 Advance Notice, visit: https://cms.gov/newsroom/fact-sheets/2027-medicare-advantage-part-d-advance-notice.