2027 Medicare Advantage and Part D Rate Announcement

Administration Medicare Part C Medicare Part D Share 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 TBD 1 -0.17% Change in Star Ratings 2 -0.03% -0.03% MA Coding Pattern Adjustment 0% 0% Risk Model Revision and Normalization 3 -3.32% -1.12% Sources of Diagnoses 4 -1.53% -1.53% Overall Expected Average Change 5 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 facil