CMS Proposes Major 2027 Medicare Advantage, Part D Rule Revisions
Medicare Advantage Is Poised for a Major Reset
What the 2027 CMS Proposed Rule Means for Insurers
When CMS unveiled its proposed rule on November 25, 2025, it signaled one of the most sweeping recalibrations to Medicare Advantage and Part D oversight in years. While some changes streamline operations, others meaningfully reshape how plans are measured, rewarded, and ultimately funded. For insurers, brokers, and partners in the Medicare ecosystem, the proposal is more than regulatory housekeeping. It is a directional shift in how quality and value will be judged for the second half of the decade.
“This proposal is about aligning incentives with meaningful, timely improvements for beneficiaries.”
CMS Official
A Reimagined Star Ratings Landscape
The headline change is a substantial overhaul of the Star Ratings system. CMS proposes eliminating twelve measures and removing the Health Equity Index reward. In its place, the existing reward factor would continue, but with recalibrations that shift how contracts stack up relative to peers.
Preliminary modeling from CMS estimates that:
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Sixty two percent of contracts would see no rating change
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Thirteen percent would improve
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Twenty five percent would decline, with a small portion facing more considerable drops
These shifts matter because bonus payments follow the stars, and the agency anticipates that the new system could increase Medicare spending by nearly fourteen billion dollars over ten years. Most of that lift will hit in 2028 and 2029, tapering afterward as the recalibrated system matures.
Where the Dollars Move
To illustrate the projected financial pattern, here is a simplified look at CMS estimates:
| Year Range | Direction of Financial Impact | Relative Magnitude |
|---|---|---|
| 2027 | Transitional and modest | Low |
| 2028 to 2029 | Peak bonus payment increases | High |
| 2030 and beyond | Stabilization and lower growth | Moderate to low |
Many plan leaders will immediately recognize the operational implications of this curve. Planning cycles, benefit bids, staffing models, provider compensation strategies, and risk adjustment programs typically work on multi year horizons. A financial swell concentrated across two years invites deliberate preparation and tighter forecasting.
What Industry Leaders Need to Watch
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The removal of the Health Equity Index reward and its replacement with the existing reward factor, which may shift performance results for plans serving high need populations
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Modified marketing and enrollment protocols that may lighten administrative burdens but require retraining and documentation updates
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Renewed scrutiny on risk adjustment accuracy and data completeness
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Stakeholder feedback opportunities, especially around reducing the time lag between performance measurement and bonus disbursement, which could materially improve operational predictability
“Shortening the delay between performance and reward would strengthen the connection between quality improvement and financial outcomes.”
Health Plan Executive
A More Timely Future for Quality Incentives
One intriguing component of the proposal is CMS asking the industry whether bonus payments should be issued closer to the actual performance period. Today, the delay can dilute the incentive effect. A more immediate cycle could push plans to prioritize rapid quality response, invest in near real time analytics, and adjust care management tactics faster.
This question alone could reshape how insurers think about network engagement and member experience strategies. It also opens the door to innovation in data infrastructure to keep pace with faster measurement windows.
Regulatory Relief With Strategic Ripples
Although less discussed, CMS also proposes several operational flexibilities. These include reducing certain reporting burdens and clarifying rules that have historically created administrative friction. For many organizations, these may free up resources to focus on member experience and compliance modernization.
Still, the broader regulatory tone suggests that CMS expects plans to deliver higher quality and equity outcomes, even as it trims back some administrative processes.
Preparing for a Pivotal 2027 and Beyond
Public comments remain open through January 26, 2026, giving insurers and allied stakeholders a focused window to shape the final rule. Given the scale of the Star Ratings overhaul and the potential financial impact, participation is likely to be vigorous.
What is clear is that the proposed rule is not a tweak. It is a structural update that will influence plan design, provider partnerships, quality strategy, and compliance planning for years to come.
As the Medicare Advantage market continues to expand, CMS appears committed to ensuring that growth is paired with accountability, performance transparency, and smarter incentive alignment. For insurers, staying ahead of these evolving expectations will be essential to sustaining both competitiveness and compliance.