On January 26, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year 2027 Advance Notice of Methodological Changes for Medicare Advantage (MA) capitation rates and Medicare Part D payment policies. CMS projects a net average year‑over‑year MA payment change of just 0.09% — roughly a flat environment once medical trend, utilization, and other pressures are considered. CMS frames the proposal as improving “payment accuracy and sustainability,” with a focus on aligning payments more closely with actual beneficiary risk and care rather than documentation intensity.
What CMS Is Proposing
CMS proposes to update the MA risk‑adjustment model to reflect more current cost patterns and, critically, to exclude diagnoses reported only through “unlinked” chart review records (diagnosis codes not tied to a specific beneficiary encounter) from risk‑score calculations starting in 2027. For MA organizations that rely heavily on retrospective chart reviews to support risk‑adjustment eligible diagnoses, this change could materially reduce risk scores and revenue.
On the Part D side, CMS proposes parallel changes: updating the risk‑adjustment model to account for Inflation Reduction Act benefit changes, reflecting more recent drug cost data, excluding unlinked chart review diagnoses, and separately calibrating payments for MA‑prescription drug plans and stand‑alone prescription drug plans to improve.
How CMS Frames the Direction of Travel
In the Advance Notice, CMS describes three principles for risk adjustment going forward: simplicity to reduce administrative burden, competition based on creating value for patients regardless of plan size, and payments that accurately reflect beneficiary health risk while supporting program integrity. Taken together, the message is that risk adjustment should be driven by encounter‑based clinical information, not by documentation strategies untethered to care, even if those strategies have been permissible in the past.
Next Steps
CMS will accept comments on the Advance Notice until February 25, 2026, and must publish the final Rate Announcement by April 6, 2026. While CMS has sometimes moderated proposals in response to stakeholder feedback, the overall direction is unlikely to change.