CMS Finalizes 2027 Medicare Advantage and Part D Payment Policies

 The Centers for Medicare & Medicaid Services released the Calendar Year (CY) 2027 Medicare Advantage (MA) and Part D Rate Announcement today to improve payment accuracy across both programs. The finalized policies also advance CMS’ vision of a sustainable and stable MA program that offers choice to Medicare beneficiaries and is a responsible steward to taxpayers. 

The policies in this Rate Announcement are projected to result in a net average increase of 2.48%, or over $13 billion in additional MA payments to plans in CY 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.

“Medicare Advantage and Part D should work for the people who rely on them,” said CMS Administrator Dr. Mehmet Oz. “These updates keep coverage affordable and ensure patients get real value from their plans.” 

CMS 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 MA 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.”

The policies in the Rate Announcement address coding differentials between MA and Original Medicare for CY 2027. CMS is working towards a MA risk adjustment system guided by three principles: (1) simplicity to reduce day-to-day administrative burden for both plans and providers; (2) competition for all plans irrespective of size or resources,  creating greater value for patients; and (3) achieving payments that accurately reflect beneficiary health risk and facilitate the efficient use of healthcare resources, enhanced program integrity, and greater accountability. Working towards a risk adjustment system guided by these principles will promote a more stable and sustainable MA program in the long run by giving beneficiaries and taxpayers confidence that CMS is mitigating unnecessary cost growth from coding practices that do not lead to better quality coverage.

In consideration of the impact that the 2024 MA risk adjustment model had between CY 2024 and CY 2026, CMS will continue using the 2024 MA risk adjustment model for CY 2027. The agency will evaluate the public feedback received as it considers future updates to the MA risk adjustment model. 

CMS is excluding 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, with an exception for beneficiaries who switch from one MA organization to another. As a result, aside from the exception, diagnoses that are not associated with a service will not be considered for risk adjustment. CMS expects the payment impact to be greater for MA organizations that heavily rely on unlinked chart review records to report risk-adjustment eligible diagnoses for their enrollee population.

CMS is finalizing 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, 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. Additionally, CMS is aligning sources of diagnoses for use in risk adjustment to be consistent with similar policies finalized for MA (e.g., excluding diagnoses from unlinked chart review records, with an exception for beneficiaries who switch from one MA organization to another). These updates will bring additional stability to prescription drug benefits for all Medicare beneficiaries.

The CY 2027 MA and Part D Rate Announcement may be viewed at: https://www.cms.gov/files/document/2027-announcement.pdf.

https://www.cms.gov/newsroom/press-releases/cms-finalizes-2027-medicare-advantage-part-d-payment-policies-strengthen-accountability-long-term