The Centers for Medicare and Medicaid Services (CMS) on Jan. 26 released the Calendar Year (CY) 2027 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and MA and Part D Payment Policies (the CY 2027 Advance Notice).

The annual release proposes routine and technical updates that the agency said will ensure MA and Part D payments are accurate.

“If finalized, the proposed policies are projected to result in a net average year-over-year payment increase of 0.09 percent, or over $700 million in MA payments to plans in CY 2027,” CMS said. “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.”

CMS said it also expects that the CY 2027 Advance Notice’s proposed policies will “promote even greater payment accuracy, maintain beneficiary choice, help ensure affordable coverage for Medicare beneficiaries, and enable an even more stable MA program in the long run.”

Risk Adjustment Changes

Specifically, the proposed changes in the Advance Notice address coding differentials between MA and Original Medicare for CY 2027.

In the Advance Notice, 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,” the agency said.

As a result, diagnoses that are not reported or associated with a service would not be considered for risk adjustment.

CMS expects the payment impact of this proposal to be greater for MA organizations that use more unlinked Chart Review Records to report risk-adjustment eligible diagnoses for their enrollee population.

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.

Star Ratings Updates

CMS said Star Ratings updates in the Advance Notice include providing the list of eligible disasters for adjustment, non-substantive measure specification updates, and the list of measures included in the Part C and Part D improvement measures and Categorical Adjustment Index for the 2027 Star Ratings.

CMS will accept comments on the CY 2027 Advance Notice Feb. 25, 2026, before publishing the final Rate Announcement on or before April 6, 2026. The CY 2027 Advance Notice is at https://www.cms.gov/files/document/2027-advance-notice.pdf.

The CMS fact sheet is at https://cms.gov/newsroom/fact-sheets/2027-medicare-advantage-part-d-advance-notice.

Questions or comments? Contact Patrick Connole at pconnole@parkplacelive.com.