2027 Medicare Advantage & Part D Notice

The official 2027 Rate Announcement was published by the Centers for Medicare and Medicaid Services (CMS) yesterday, bringing critical changes that healthcare payers and providers need to optimize clinical and financial performance in Medicare Advantage (MA) plans.

MA changes can be challenging, but they also introduce new opportunities. There is a bipartisan desire right now to “reign in” Medicare Advantage after a Senate committee revealed that these plans were paid $84 billion more than it would have cost to cover the same beneficiaries in Traditional Medicare — resulting in Medicare Part B premium increases across the board. As CMS continues to examine the ways they can prevent overpayment issues and align MA care more closely with other value-based care strategies, health plans and hospitals need to examine how they can turn government policy into an opportunity to demonstrate their efforts at reducing costs and improving quality outcomes.

Based on the announcement, these are the three most significant changes coming in 2027:

2027 Rate Increase of 2.48% is Effectively a Decrease

The effective growth rate for Medicare Advantage payment changes is 5.33% for CY 2027, but CMS plans to make changes to the risk adjustment process (estimated to reduce Part C payments by 1.53%) and conduct their usual annual rebasing rates and updating benchmarks to better reflect the current care environment. With these adjustments, the expected average change for Medicare reimbursements will be only 2.48. That is down substantially from the 5.06% increase in 2026 and 3.7% in 2025.

When you account for increased medical costs, higher utilization, and inflation, a 2.48% increase is closer to a rate decrease. The message from CMS is clear: they want to see actual cost savings from MA plans, and will force reductions in spending to achieve it. Industry analysts fear that a rate adjustment this low could result in higher premiums, reduced benefits, and insurers exiting the market for MA.

Risk Adjustments to Change for Post-Covid Volume

The final announcement withdrew the proposed changes to the CMS-HCC V28 model released in 2024, although CMS did leave the door open for future changes to the model. CMS has historically announced a new model every four years, so we can expect a change in the model in the advance notice for 2028.

However, CMS is implementing one key change that is likely to have a big impact: excluding “unlinked” chart review records, which were often the result of retrospective reviews and not a face-to-face interaction with a provider. This is expected to reduce overall risk scores, and as a result, reduce reimbursements. Other changes to providers’ ability to diagnose and code from audio-only encounters will further impact risk scores for populations more likely to use telehealth services.

These changes are likely to have a significant impact on risk adjustment for Medicare Advantage plans overall. Fortunately, Cedar Gate’s platform is designed to effectively manage patients in value-based models, accounting for risk (including the latest HCC changes) and ensuring accurate reimbursements.

More Difficulty Achieving High Star Rating

The Rate Announcement also includes key changes that will make it more difficult to achieve high star ratings. CMS is planning to remove 11 process-focused or administrative-heavy metrics (such as Pain Assessment and Medication Reconciliation) over the course of the 2028-2029 cycles. Those will be replaced with new metrics that emphasize outcomes, member experience, and analytics.

CMS also canceled the proposed Health Equity Index (HEI) and is instead planning to keep a historical reward factor for high performance, which could stabilize star ratings for certain plans. Finally, CMS is adding a new Part C Depression Screening and Follow-Up measure to address behavioral health gaps, starting with the 2027 measurement year, but will not impact star ratings until 2029.

Cedar Gate’s solutions are designed to help organizations navigate changes like these, preparing you for optimal performance within the continually evolving star rating metrics.

Cedar Gate Helps You Confidently Navigate CMS Changes

Overall, CMS does seem to be tempering some of the more aggressive measures they initially proposed, which is good for reimbursements. However, they are still signaling a clear message that they want to see cost reductions in Medicare Advantage — and if those don’t materialize, future years could include more significant rate cuts or other measures aimed at curbing costs.

While CMS changes are part of healthcare, they don’t have to dramatically disrupt your organization every year. Cedar Gate Technologies, an IQVIA business, is built for the value-based future CMS envisions. Our advanced Analytics, Care, and Payment platform — all built on a single data lake with advanced data management and seamless data sharing capabilities — can help you navigate the changes from year to year, and ensure optimal clinical and financial performance in any risk-based model and every line of business.

Talk to our experienced team today to learn how we can help you navigate the changes coming in 2027 and beyond.