CMS Proposes Key Changes to Medicare Advantage Star Ratings and Regulatory Streamlining for 2027

The Centers for Medicare & Medicaid Services (CMS) released a proposed rule outlining policy and technical changes for the Medicare Advantage (MA) and Part D programs for 2027 and beyond. A significant element of the proposal is a revision to the Star Ratings system, specifically the elimination of the Health Equity Index (HEI) which was initially intended to replace the historical reward factor. CMS now proposes continuing with the historical reward factor instead, aligning with deregulation efforts to maintain consistent Star Ratings methodology. This change may impact quality bonus payments and plan ratings, potentially favoring plans that benefit from the existing reward system while disadvantaging others who had prepared for the HEI implementation. Additionally, CMS proposes removing 12 measures from the Star Ratings system starting in 2027, primarily targeting operational and administrative measures such as foreign language support, call center requirements, and appeals timeliness. This reflects CMS's intent to address these aspects through compliance oversight rather than rating metrics and to eliminate measures where performance is uniformly high, thus affecting plan differentiation. The rule estimates a shift in bonus eligibility with 5% of MA contracts gaining bonuses and 4% losing them, and projects an increase in program spending by $13.8 billion through 2036 due to these adjustments. The proposed rule also includes provisions aimed at reducing regulatory burdens, such as rescinding notifications about unused supplemental benefits, lessening health equity analysis requirements in utilization management committees, lowering call center operation hour mandates, and shortening sales and marketing call retention periods. These changes align with executive directives to streamline regulations and reduce administrative overhead for plans. Notably, the proposal does not address coverage for GLP-1 drugs for weight loss despite earlier announcements hinting at potential inclusion. Instead, CMS may explore alternative pathways like demonstration models through the CMS Innovation Center for GLP-1 coverage. Prior authorization policies also see minimal change, with CMS refraining from introducing new restrictions following recent agreement with plan representatives to enhance speed, reduce covered services, and improve transparency, signaling a possible pause on further rulemaking in this area. The rule includes several requests for information (RFIs) highlighting CMS's interest in gathering input on various programmatic concerns, suggesting areas of focus for future rulemaking. Stakeholder comments are due by January 26, 2026, with finalization expected by April 2026. This timing allows MA plans to incorporate these policy updates into their 2027 bidding processes. The proposal represents a broader CMS trend towards regulatory simplification and continuity in program incentives while maintaining oversight on operational performance and cost implications.