CMS 2027 Medicare Advantage Advance Notice: Key Payment, Risk‑Adjustment, and Star‑Rating Changes and How Plans Should Respond

Medicare Advantage Payments Face Scrutiny with Modest 2027 Rate Proposal

Washington D.C. – A proposed rate increase of just 0.09% for Medicare Advantage (MA) plans in 2027, unveiled by the Centers for medicare & Medicaid Services (CMS) on January 26, 2026, is sparking debate among industry stakeholders. This figure represents a significant decrease from the 5.06% increase finalized for 2026, signaling a potential shift in how the federal government funds this increasingly popular healthcare option. The proposed changes reflect a focus on program sustainability, administrative simplification, and accurate risk assessment.

Key Changes to the Medicare Advantage Program

The CMS declaration outlined several critical adjustments impacting MA plans. These include a recalibration of the risk adjustment model, changes to encounter data requirements, and updates to the Star ratings program. Understanding these modifications is essential for healthcare providers and insurers operating within the Medicare Advantage landscape. The goal is to enhance efficiency and ensure the long-term viability of the program for the growing senior population.

Rate Increase and it’s Implications

The proposed 0.09% rate increase has drawn criticism from industry groups,such as the America’s Health Insurance Plans (AHIP),who argue that insufficient funding could compromise access to care for beneficiaries. CMS officials maintain the adjustment is necessary to stabilize program costs. The impact of these modifications is detailed in the following table:

Impact Area	2027 Advance Notice Adjustment
Effective Growth Rate	4.97%
Change in Star Ratings	-0.03%
MA Coding Pattern Adjustment	0.00%
Risk Model Revision & FFS normalization	-3.32%
sources of Diagnoses	-1.53%
Expected Average Change in Revenue	0.09%

Model V28 Recalibration: A Closer Look

A significant driver of the proposed rate adjustment is the ongoing use of CMS-HCC model version 28 (V28), but with recalibrated data.CMS is shifting its focus to more recent fee-for-service data from 2023 and 2024, rather than 2018 and 2019. This adjustment aims to better reflect current healthcare costs. However, this recalibration is projected to decrease payments to MA plans by 3.32%.

Data Integrity and Encounter Requirements

CMS is also proposing to exclude diagnoses from chart reviews that aren’t linked to a corresponding patient encounter. Moreover, diagnoses derived solely from audio-only encounters will also be excluded from risk adjustment calculations. These changes come after audits by the Office of Inspector General revealed potential upcoding practices within MA plans. This aims to prevent unsupported diagnosis submissions and improve the accuracy of risk scores.

Star Ratings Program Updates

Plans will also need to adapt to ongoing changes in the Star Ratings program. Following previous adjustments, CMS is considering using percentile distribution cutoffs for non-CAHPS measures, providing greater predictability for plans striving for higher ratings. Achieving a high Star Rating–four or more stars–remains critical,as it unlocks bonus payments and boosts marketing opportunities.

Strategic Recommendations for medicare Advantage Plans

Navigating these changes requires proactive planning from MA plans. industry experts suggest three key strategies:

1. Enhance Data Accuracy: Prioritize comprehensive coder and provider education and invest in real-time data monitoring. Ensure every diagnosis is backed by a verified encounter.
2. Focus on Quality Improvement: Proactively address performance gaps within the Star Ratings framework using data analytics.
3. Strengthen collaboration: Foster better communication and shared duty between risk adjustment, quality, engagement, and clinical departments.

With the final rate Announcement expected in April, Medicare Advantage plans must prepare to adapt.staying informed and maintaining agility will be essential to ensure sustainable growth and provide high-quality healthcare to members.

What challenges do you foresee Medicare Advantage plans facing with these proposed changes? How will these adjustments impact the care provided to Medicare beneficiaries?

Disclaimer: This article provides general details and should not be considered financial or medical advice.

What are the key payment, risk‑adjustment, and Star Rating changes in the CMS 2027 Medicare Advantage Advance Notice, and how should plans respond?

CMS 2027 Medicare Advantage Advance Notice: Key Payment, Risk‑Adjustment, and Star‑Rating Changes and How Plans Should Respond

The Centers for Medicare & medicaid Services (CMS) released the Advance Notice for the 2027 Medicare Advantage (MA) and Part D prescription Drug Plan contracts on February 10, 2026. This document outlines proposed changes impacting payment policies, risk adjustment methodologies, and the crucial Star Ratings system. Understanding these shifts is paramount for MA organizations to proactively strategize and ensure continued success in a rapidly evolving landscape. Here’s a detailed breakdown of the key changes and recommended responses.

Payment Updates: Navigating the Financial Landscape

The 2027 Advance Notice proposes a modest average increase in MA revenue. However, the details reveal a more nuanced picture.

* Base Rate Adjustments: CMS is proposing a 3.32% increase to the MA base rate. While seemingly positive, this increase is partially offset by changes in the risk score trend.

* Risk Score Trend: A notable adjustment involves a projected decrease in the MA risk score trend. This means plans can anticipate lower risk-adjusted funding compared to previous years, especially for plans with a higher proportion of chronically ill members.

* Part D Updates: the Advance Notice details updates to the Part D payment structure, including potential adjustments to the Low-Income Subsidy (LIS) clawback and changes to the drug price negotiation program’s impact on plan payments.

* Value-Based Insurance Design (VBID): CMS continues to emphasize VBID models. Plans demonstrating effective VBID implementation may receive favorable payment adjustments.

How Plans Should Respond:

* Detailed Financial Modeling: Conduct thorough financial modeling incorporating the proposed base rate, risk score trend, and Part D changes.

* Benefit Design Optimization: Re-evaluate benefit packages to maximize value for members while remaining financially sustainable. Consider expanding VBID offerings.

* negotiate Strong PMPM Rates: Leverage negotiating power with provider groups to control costs and mitigate the impact of reduced risk-adjusted funding.

Risk Adjustment: adapting to Methodology Shifts

risk adjustment plays a critical role in ensuring equitable funding for plans serving sicker populations. The 2027 Advance notice introduces several key changes to the risk adjustment model.

* HCC Model Updates: CMS proposes updates to the Hierarchical Condition Category (HCC) model, potentially refining the weighting of certain conditions and introducing new HCCs.

* Code Editing and Validation: Increased scrutiny of medical coding practices is anticipated. CMS plans to enhance code editing and validation processes to ensure accurate risk score calculations.

* Data Accuracy & Completeness: The importance of accurate and complete data submission is being reinforced. Plans will be held accountable for data quality issues.

* Supplemental Data Collection: CMS is exploring the potential for supplemental data collection to improve risk score accuracy, potentially including social determinants of health (SDOH) data.

How Plans Should Respond:

* Coding Compliance Review: Conduct a comprehensive review of coding practices to ensure compliance with updated HCC guidelines. Invest in coder training and auditing programs.

* Data Quality Improvement: Implement robust data quality controls to minimize coding errors and ensure data completeness.

* Proactive Data Submission: Submit accurate and timely data to CMS, leveraging available data validation tools.

* SDOH Integration: Explore opportunities to integrate SDOH data into risk adjustment strategies, while adhering to privacy regulations.

Star Ratings: Maintaining and improving Performance

the Star Ratings system remains a critical driver of enrollment and financial performance for MA plans. The 2027 Advance Notice outlines several changes impacting Star Ratings calculations.

* Measure Updates: CMS proposes updates to several existing Star Ratings measures, including adjustments to weighting and methodology.

* New Measures: Introduction of new measures focused on health equity,digital health access,and behavioral health integration.

* Health equity Focus: Increased emphasis on performance gaps across different demographic groups. Plans will be evaluated on their efforts to address health disparities.

* Process and Compliance Measures: Greater weight given to measures assessing plan compliance with CMS regulations and member rights.

How Plans Should Respond:

* Gap Analysis: Conduct a thorough gap analysis to identify areas where performance falls short of Star Ratings targets.

* Targeted Improvement Initiatives: Develop and implement targeted improvement initiatives to address identified gaps.

* Health Equity Strategy: Develop a comprehensive health equity strategy to address performance disparities across demographic groups.

* Digital Health Integration: Invest in digital health solutions to improve member engagement and access to care.

* Member Experience Enhancement: Prioritize member experience and satisfaction to improve performance on consumer-focused measures.

Real-World Example: A Plan’s Response to Risk Score Adjustments

In 2025, a regional MA plan experienced a significant reduction in risk-adjusted funding due to a similar downward adjustment in the risk score trend. The