Medicare Advantage Plans, Providers Blast Near-Flat Proposed 2027 Pay Rate

 Medicare Advantage (MA) plans and the providers in their networks are crying foul over potentially getting virtually no reimbursement increase from the program in 2027.

On Monday, the Centers for Medicare & Medicaid Services (CMS) announced that the proposed reimbursement for MA in 2027 would be "a net average year-over-year payment increase of 0.09%, or over $700 million in MA payments to plans in calendar year 2027," according to a fact sheet. The agency softened the blow a bit by adding, "When considering estimated risk score trend in MA driven by coding practices and population changes, the expected average change in payments will be 2.54%."

That did not sit well with the plans. "Health plans welcome reforms to strengthen Medicare Advantage," Chris Bond, spokesman for America's Health Insurance Plans, a health insurer trade group that includes many MA plans, said in a statement. "However, flat program funding at a time of sharply rising medical costs and high utilization of care will impact seniors' coverage. If finalized, this proposal could result in benefit cuts and higher costs for 35 million seniors and people with disabilities when they renew their Medicare Advantage coverage in October 2026."

In a press release from America's Physician Groups (APG), which represents providers who participate in physician-run accountable care organizations, President and CEO Susan Dentzer noted that "the fact that average payments to MA plans are expected to increase by just 0.09% from 2026 to 2027 signals a far less favorable environment than many of our organizations and other stakeholders expected, given costs and recent pressures on the system."

The less-than-1% increase was not a complete surprise, according to Michael Baker, director of health care policy at the American Action Forum, a right-leaning Washington think tank. "The topline number is interesting because it is such a drastic difference from last year's 5% bump," he wrote in an email. "On its face it seems unreasonable because of the swing, but I expected the rate increase to be lower regardless of the rest of the policy changes."

"During the last year, CMS has been generally dovish toward insurers as the administration has focused on browbeating the pharma industry through MFN [Most Favored Nation programs] and tariffs," he said. "I think this announcement marks a new effort to tackle the insurer market. A number this low could lead plans to exit markets altogether, however, and thus reduce plan choice for seniors next year."

And things could always change, noted Kirsten Stryker Blasch, a consultant with Avalere Health. "While the proposed calendar year 2027 rate increase is relatively flat as compared to calendar year 2026, it is subject to change when the Annual Notice is released in early April, as CMS may reflect additional claims data and may not finalize all changes to Medicare Advantage risk adjustment as proposed in the Advance Notice," she said in an email.

Matthew Fiedler, PhD, senior fellow at the left-leaning Brookings Institution's Center on Health Policy in Washington, D.C., had a different take. "The actual payment increase that plans will see for 2027 is more than 0.09%," he said. "The 0.09% figure assumes that plans' coding behavior will not change in 2027. That is a bad assumption."

In reality, a footnote in the fact sheet "indicates that CMS projects that rising risk scores in MA will boost payments by 2.45% in 2027," he pointed out. "After accounting for that, the true increase would be more like 2.5%. And that's before accounting for the fact that I expect [another change announced by CMS] to have a smaller impact than CMS is projecting."

The change that Fiedler referred to relates to what the agency will allow in terms of documentation for additional diagnoses that MA plans add to patients' records, which results in a higher per-patient reimbursement -- a practice known as "upcoding," which has drawn a lot of scrutiny from Congress. CMS said it is "proposing to exclude diagnosis information from 'unlinked' [chart reviews] -- diagnosis information not associated with a specific beneficiary encounter -- from risk score calculation starting in calendar year 2027."

This may not be as big a deal as it sounds, Fiedler said. "While CMS projects that this will reduce payments to MA plans by around 1.5%, I expect that the ultimate impact will be a lot smaller," he noted. "In particular, I expect that plans will start submitting many of the diagnoses that are currently submitted on an 'unlinked' basis on a 'linked' basis. ... I would not be surprised to see this offset most of the impact of this change over the long run."

Baker, of the American Action Forum, agreed. "Although CMS's intent is to require diagnoses to be linked to an actual service record for risk score consideration, it's unlikely to end alleged coding intensity practices," he said. "The proposal raises the bar -- you need a defensible service/encounter -- but it doesn't eliminate the ability to create encounters. Plans can still increase risk scores through diagnoses captured during these encounters, including encounters that may have lower clinical intensity (such as a home visit), but 'count' administratively."

The impact will be very plan-dependent, according to Stryker Blasch. "While, overall, this proposal would limit future risk score increases, the effect could vary by plan because plans have different approaches to linking retrospective reviews to a specific medical service encounter," she explained. "For instance, plans that have invested in systems to effectively link chart reviews to an encounter, or that conduct fewer chart reviews, would likely experience a more limited impact if this change is finalized."

APG expressed concern about how that proposed rule would affect its members. "Of particular interest is how these changes will affect diagnoses from chart reviews that are linked to the many non-visit-related clinical activities that APG groups undertake to support patients, as well as the effect on patients in rural areas or with low connectivity who rely on audio-only visits," the group's press release noted.

https://www.medpagetoday.com/publichealthpolicy/medicare/119615