CMS Proposes Major Reforms to Medicare Advantage and Part D for 2027

The Centers for Medicare & Medicaid Services (CMS) has released a proposed rule introducing comprehensive changes to Medicare Advantage (MA) and Part D programs starting in 2027. Key features include significant revisions to the Star Ratings system, codification of provisions from the Inflation Reduction Act, and regulatory relief initiatives. Notably, the proposal recommends the removal of the Health Equity Index reward and cuts 12 Star Ratings measures, alongside adjustments in marketing and enrollment regulations. CMS projects these changes will increase Medicare spending by approximately $14 billion over the next decade, driven largely by higher quality bonus payments linked to the revised Star Ratings. The anticipated financial impact is concentrated in 2028 and 2029, with spending increases of $5 billion and $2.3 billion respectively, reflecting the retention of existing reward factors despite eliminating the EHO4all reward. The agency forecasts that the majority of MA contracts—62%—will see no change in overall Star Ratings, while 13% could experience a half-star improvement, and 26% could see a half-star or one-star decrease. Quality bonus payments are expected to rise for 5% of contracts and fall for 4%, signaling a notable redistribution in incentive payments across plans. CMS is also soliciting stakeholder input on strategies to reduce the delay between performance measurement and distribution of quality bonus payments, aiming to enhance the timeliness and responsiveness of incentive structures. This stakeholder engagement opportunity underscores the importance for healthcare payers, providers, and policymakers to evaluate the implications for quality assessment, risk adjustment, and health equity initiatives. The comment period for this proposed rule is open until January 26, 2026, offering insurance professionals a critical window to influence the final framework shaping Medicare Advantage and Part D program operations in the coming years. Overall, this proposal represents a substantial policy shift with significant regulatory, financial, and operational consequences for Medicare managed care stakeholders.