2027 Medicare Advantage and Part D Rate Announcement
Today, the Centers for Medicare & Medicaid Services (CMS) released the Announcement of Calendar Year (CY) 2027 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (the CY 2027 Rate Announcement).
In the CY 2027 MA and Part D Advance Notice, CMS proposed updates to payment factors for CY 2027 and received a wide variety of comments on the proposals. CMS appreciates the submitted comments. We carefully considered all applicable comments as we finalized the policies contained in the CY 2027 Rate Announcement. The final policies in the CY 2027 Rate Announcement are projected to result in an increase of 2.48% or over $13 billion in payments to MA plans in CY 2027. When accounting for estimated risk score trend in MA due to factors such as population changes and coding practices, this amounts to a 4.98% increase.
This fact sheet discusses the provisions of the Rate Announcement, which can be viewed by going to: https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics/announcements-and-documents and selecting “2027 Announcement.”
Net Impact
The table below provides the expected average impact of the proposals on MA payment components compared to last year.
Year-to-Year Percentage Change From 2026 to 2027
| Impact | 2027 Advance Notice | 2027 Rate Announcement |
|---|---|---|
| Effective Growth Rate | 4.97% | 5.33% |
| Rebasing/Re-pricing | TBD1 | -0.17% |
| Change in Star Ratings2 | -0.03% | -0.03% |
| MA Coding Pattern Adjustment | 0% | 0% |
| Risk Model Revision and Normalization3 | -3.32% | -1.12% |
| Sources of Diagnoses4 | -1.53% | -1.53% |
| Overall Expected Average Change5 | 0.09% | 2.48% |
1 Rebasing/re-pricing impact is dependent on finalization of the average geographic adjustment index, which was not available with the publication of the CY 2027 Advance Notice.
2 Change in Star Ratings reflects the estimated effect of changes in the Quality Bonus Payments for the upcoming payment year.
3 For the Advance Notice, the impact of the update to the normalization factor for MA risk adjustment was not shown in the Fact Sheet separately because of the considerable interaction between the impact of the MA risk adjustment model updates and the normalization factor update. Therefore, the combined impact was shown in the Fact Sheet. Because CMS is not implementing an updated risk adjustment model for CY 2027, the impact shown in the Rate Announcement Fact Sheet is entirely due to the normalization factor update.
4 For the 2027 Advance Notice, this row reflects the average impact of the exclusion of diagnoses from all unlinked chart review records (CRRs) on risk scores under the proposed 2027 MA risk adjustment model. CMS is not implementing the proposed 2027 MA risk adjustment model and is finalizing an exception for unlinked CRRs for beneficiaries who switch from one MA organization to another. Therefore, the impact shown in the Rate Announcement Fact Sheet reflects the impact on risk scores under the 2024 MA risk adjustment model of excluding diagnoses from all unlinked CRRs except those submitted for beneficiaries who switch from one MA organization to another. Without the exception, the impact of excluding unlinked CRRs would be -1.78%. The impact of excluding audio-only services identified using modifiers is 0%, on average.
5 The overall expected average change does not include an adjustment for underlying coding trend in MA. For CY 2027, CMS expects the MA risk scores to increase, on average, by 2.50% due to the underlying coding trend.
Growth Rates
The Effective Growth Rate reflects the current estimate of the growth in MA benchmarks used to determine payment for MA plans. This growth rate is largely driven by the growth in Original Medicare per capita costs, as estimated by the Office of the Actuary. Each year for the Rate Announcement, CMS updates the growth rates to be based on the most current estimate of per capita costs, based on the available historical program experience and projected trend assumptions at that time. The growth rates change between the Advance Notice and the Rate Announcement as CMS incorporates updated data and assumptions. This year, the change in growth rates from the Advance Notice to the Rate Announcement is due primarily to incorporation of additional data, including Original Medicare program experience and incurred dates through fourth quarter 2025.
Part C Risk Adjustment Model
CMS is committed to the sustainability of the MA program. As the agency considers opportunities for improving risk adjustment both in the 2027 Rate Announcement and in the future, 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, based on creating 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.
CMS proposed to update the Part C risk adjustment model using more recent underlying Original Medicare data (updated from 2018 diagnoses and 2019 expenditures to 2023 diagnoses and 2024 expenditures) to reflect more current costs associated with various diseases, conditions, and demographic characteristics and excluding diagnoses from audio-only encounters. In addition, CMS proposed to exclude diagnosis information from unlinked chart review records (CRRs) – diagnosis information not associated with a specific beneficiary encounter – from risk score calculation starting in CY 2027. CMS noted that MA organizations may continue to submit diagnoses using unlinked CRRs, however, those diagnoses would no longer be used for calculating risk scores.
For CY 2027, CMS will continue to use the 2024 MA risk adjustment model which was calibrated with Original Medicare 2018 diagnoses and 2019 expenditures data and fully implemented in CY 2026, in lieu of the updated risk adjustment model calibrated with Original Medicare 2023 diagnoses and 2024 expenditures data that was proposed in the CY 2027 Advance Notice. Continued use of the 2024 MA risk adjustment model will allow the MA market more time to adjust to the recently completed phase-in of the 2024 MA risk adjustment model. For risk score calculation for CY 2027, CMS is finalizing the exclusion of diagnoses from audio-only encounters and diagnoses from unlinked CRRs, with an exception to include diagnoses from unlinked CRRs for beneficiaries who switch from one MA organization to another.
Part C Risk Adjustment Model for PACE Organizations
As noted in previous Advance Notices and Rate Announcements, CMS intends to transition Program of All Inclusive Care for the Elderly (PACE) organizations from submitting risk adjustment data to the legacy Risk Adjustment Processing System (RAPS) to fully submitting risk adjustment data to the encounter data system (EDS) consistent with the rest of the industry, and to align the model used to pay PACE organizations with the model used to pay organizations other than PACE. It is imperative to continue to align with the most current version of the MA model being used for the rest of the industry during the transition. For CY 2027 payments to PACE organizations, CMS is finalizing the accelerated transition to move PACE organizations to the same risk adjustment model as MA. To align with the model that will be used by the rest of industry during the transition, for CY 2027, CMS will calculate risk scores for PACE organizations by blending 50 percent of the risk score calculated using the 2024 MA risk adjustment model and 50 percent of the risk score calculated using the 2017 MA risk adjustment model.
Puerto Rico
CMS is finalizing several policies specific to Puerto Rico, including basing the MA county rates in Puerto Rico on the relatively higher costs of individuals in Original Medicare who have both Medicare Parts A and B and applying an adjustment regarding the proportion of individuals with zero claims.
Part D Risk Adjustment
CMS is finalizing updates to the Part D risk adjustment model to reflect Inflation Reduction Act (IRA) changes to the Part D benefit that will be in effect in CY 2027 – such as an increased manufacturer discount for specified small manufacturers having their discounts phased-in over time – as well as more recent data years (2023 diagnoses and 2024 costs). As proposed, the updated model also excludes diagnoses from audio-only services and from unlinked CRRs. Finally, CMS will improve the model’s predictive accuracy for beneficiaries in MA prescription drug (MA-PD) plans and standalone prescription drug plans (PDPs) by finalizing the updated model, which distinguishes the MA-PD and PDP populations, as well as continuing to calculate separate normalization factors for MA-PD plans and PDPs. The updates to the Part D risk adjustment model are essential for plan sponsors to develop accurate bids for CY 2027.
Part C and D Star Ratings
In the Advance Notice, CMS provided information and updates in accordance with the Star Ratings regulations at 42 C.F.R. §§ 422.164, 422.166, 423.184, and 423.186. We appreciate commenters’ suggestions on future measures and concepts as we continue to enhance the Star Ratings over time.
Star Ratings updates in the CY 2027 Rate Announcement 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 D improvement measures and Categorical Adjustment Index for the 2027 Star Ratings. In the CY 2027 Advance Notice, CMS also solicited initial feedback on substantive measure specification updates, comments on new measure concepts, and potential methodological enhancements. CMS also sought comments on updates to display measures which we publicly report but do not include in Star Ratings. The agency will consider these comments as we contemplate proposing future changes to the measures. All substantive measure specification changes, the addition of new measures, and methodological changes must go through rulemaking.
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