CMS Proposes Nearly Flat 2027 Medicare Advantage Payment Rates

CMS released its 2027 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies, proposing a net average year-over-year payment increase of .09% in addition to notable updates to risk adjustment.¹

While a press release from CMS claims the nearly flat rate increase and proposed policy updates will support payment accuracy, maintain beneficiaries’ choices, ensure affordable coverage, and ensure the program’s sustainability,¹ experts and advocacy organizations warn that the proposed rates will lead to increased costs for insurers and beneficiaries.^2-4

The changes for MA capitation rates and Part C and Part D proposed policy rates are projected to net a .09% year-to-year payment increase—more than $700 million in additional MA payments in the calendar year (CY) 2027.¹ However, the projected increase is significantly lower than the mid-single-digit percentage increase of approximately 4% to 6% that payers expected based on previous years.²

With the payment increase remaining flat, experts predict insurers will likely pass on the cost to consumers in higher premiums, overall costs, and health benefit cuts.

“Health plans welcome reforms to strengthen Medicare Advantage,” AHIP spokesperson Chris Bond said in a statement.⁵ “However, flat program funding at a time of sharply rising medical costs and high utilization of care will impact seniors’ coverage. If finalized, this proposal could result in benefit cuts and higher costs for 35 million seniors and people with disabilities when they renew their Medicare Advantage coverage in October 2026.”

The CMS proposal was designed to address major areas of risk adjustment within the MA and Part D risk adjustment model, according to the press release.¹ The 3 guiding principles aim to reduce administrative burdens, create equal competition that facilitates risk adjustment for patients, and ensure payments accurately reflect the patients’ needs.

“These proposed payment policies are about making sure Medicare Advantage works better for the people it serves,” CMS Administrator Mehmet Oz, MD, said in the press release.¹ “By strengthening payment accuracy and modernizing risk adjustment, CMS is helping ensure beneficiaries continue to have affordable plan choices and reliable benefits while protecting taxpayers from unnecessary spending that is not oriented towards addressing real health needs.”¹

The proposal also addresses the coding differences between MA and traditional Medicare, excluding diagnoses from unlinked chart review records (CRRs) from risk score calculation, which the press release describes as a significant improvement to the risk adjustment system. An updated Part D risk adjustment model will also account for changes in the Inflation Reduction Act, reflecting more current costs associated with health services.

Eliminating the practice of diagnoses based on unlinked CRRs would mean that payers can no longer bill CMS or add a diagnosis to MA beneficiaries’ medical records but would not affect reimbursement for diagnoses linked with medical encounters.² This effort reduces incentives that “reward coding intensity rather than care delivery,” according to a press release from the Alliance of Community Health Plans.³

Still, the proposed policies would significantly reduce margins for payers. Despite CMS’s move for transparency, payers are expected to make up for the expected revenue elsewhere, thus shifting financial burdens onto beneficiaries.

“The proposed Advance Notice for Medicare Advantage announced today is disappointing and wholly unrealistic as medical costs and acuity continue to rise,” Alliance of Community Health Plans president and CEO Ceci Connolly said in a statement.³ “Without sufficient payment updates, health plans and providers will continue facing challenges to invest in care coordination, supplemental benefits, and innovative approaches that improve quality and outcomes for seniors.”

More than 35 million Americans rely on MA, and many seniors are already struggling to meet current costs. With the 0.09% year-to-year payment increase coupled with rising costs of medical services, seniors are “feeling the strain of rising health care costs,” Better Medicare Alliance President and CEO Mary Beth Donahue said in a statement.⁴

MA beneficiaries save a mean of $3500 a year in health insurance costs when compared with traditional Medicare beneficiaries. They also receive certain benefits, such as dental, vision, and hearing coverage at no extra cost.

“Today’s Advance Notice falls short of what is needed to provide stability for the more than 35 million Americans who rely on Medicare Advantage,” Donahue said.⁴ “After years of underinvestment, seniors are already feeling the strain of rising health care costs. A proposal that results in effectively flat funding does not keep pace with rising medical costs and utilization, making it more difficult for plans to keep premiums affordable and maintain the supplemental benefits beneficiaries value most.”

CMS will accept comments on the CY 2027 Advance Notice until February 25, 2026, at 11:59 p.m.¹

References

1. CMS proposes 2027 Medicare Advantage and Part D payment policies to improve payment accuracy and sustainability. Press release. CMS. January 26, 2026. Accessed January 27, 2026. https://www.cms.gov/newsroom/press-releases/cms-proposes-2027-medicare-advantage-part-d-payment-policies-improve-payment-accuracy-sustainability

2. Mathews AW, Weaver C. Trump administration proposes keeping steady the rates Medicare pays insurers. The Wall Street Journal. January 26, 2026. Accessed January 27, 2026. https://www.wsj.com/health/healthcare/trump-administration-proposes-keeping-steady-the-rates-medicare-pays-insurers-34ca4e3a?

3. ACHP Statement on CY2027 Medicare Advantage and Part D Advance Notice. ACHP | Alliance of Community Health Plans. January 26, 2026. Accessed January 27, 2026. https://achp.org/statement-2027-ma-part-d-advance-notice/

4. Better Medicare Alliance statement on 2027 Medicare Advantage Advance Notice. News release. Better Medicare Alliance. January 26, 2026. Accessed January 27, 2026. https://bettermedicarealliance.org/news/bma-statement-on-2027-medicare-advantage-advance-notice/

5. AHIP statement on advance Medicare Advantage & Part D rate notice. News release. AHIP. January 26, 2026. Accessed January 27, 2026. https://www.ahip.org/news/articles/ahip-statement-on-advance-medicare-advantage-part-d-rate-notice