The Centers for Medicare and Medicaid Services (CMS) released the Calendar Year (CY) 2027 Medicare Advantage (MA) and Part D Rate Announcement on Monday, projecting a 2.48 percent or $13 billion rise in MA payments to plans in 2027. This dwarfs the January proposed MA rate hike of only 0.09 percent or $700 million.

“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.

The policies in the Rate Announcement address coding differentials between MA and Original Medicare for CY 2027. CMS said it 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,” the agency said.

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,” the agency said.

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, CMS said.

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

A fact sheet discussing the provisions of the CY 2027 MA and Part D Rate Announcement can be viewed at: https://www.cms.gov/newsroom/fact-sheets/2027-medicare-advantage-part-d-rate-announcement.

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