Significant CMS Policy Updates for Medicare Advantage and Part D for 2027
The Centers for Medicare & Medicaid Services (CMS) recently closed the comment period for the 2027 Medicare Advantage (MA) and Part D Advance Rate Notice, marking a significant step in the regulatory timeline. Stakeholders in the insurance industry are now looking forward to the expected release of the final rate notice by April 6, as mandated by law. Alongside this, CMS is anticipated to publish a final rule concerning non-payment issues such as Stars and marketing, though no statutory deadline accompanies this rule, leaving its exact timing uncertain.
Key policies outlined in the advance notice are crucial for shaping the future landscape of MA and Part D. A significant aspect that will influence the plans is CMS's projection of a 4.97% growth rate for fee-for-service (FFS) spending in 2027. This figure was lower than many in the industry had predicted, and it's important to note that CMS likely will have more up-to-date data by the time the final rate is determined.
Skin substitutes have also become a notable discussion point following CMS data indicating that Medicare spending in this area has surged from $256 million in 2019 to over $10 billion in 2024. CMS has revised reimbursement policies to address this, impacting how FFS spending projections are calculated and subsequently affecting MA payment rates for 2026 and 2027.
The proposed updates to the Part C risk adjustment model were met with concern, particularly from stakeholders who viewed the proposed changes, such as modifying the hierarchical condition categories and excluding diagnoses from certain telehealth visits, as potentially reducing risk-adjusted payments by an average of 3.32% in 2027. Advocacy for phased implementation over several years persists in an attempt to mitigate these impacts.
For the Part D risk model, CMS has put forward a plan to differentiate risk adjustment for plans offering MA-PD benefits versus those offering only Part D. While this proposal lacks comprehensive data from CMS on its financial implications, a shift in risk scores is expected. Generally, MA-PD enrollees' risk scores might decrease, while those for PDP enrollees could rise, posing challenges and opportunities within the Part D premium landscape.
A significant policy proposal includes the elimination of "unlinked chart reviews," which could potentially reduce risk-adjusted payments by 1.53% in addition to reductions from other proposed changes. This could limit growth opportunities in 2027, challenging plans as they design benefit structures while aiming to maintain competitive Medicare offerings.
Moreover, the possible discontinuation of the Health Equity Index (HEI) by CMS remains a crucial policy question. The HEI intended to offer a ratings advantage to plans aiding low-income and disabled members, yet some industry analysis suggests that overall ratings bonuses might actually increase with the continuation of existing reward factors. This decision will more directly impact quality bonus payments from 2028 onward, rather than immediate 2027 finances.
Finally, the implementation of the BALANCE model, allowing the coverage of GLP-1 weight loss medications under Part D despite current statutory limitations, is another area of focus. With the model set to initiate in 2027 and plans needing to submit bids by mid-2026, the insurance industry awaits further clarifications from CMS on operational logistics and potential financial repercussions. This model primarily affects Part D, although its integration with MA-PD offerings requires careful consideration by plans, especially given significant costs associated with GLP-1 coverage.
As CMS reviews its final proposals, the industry's attention remains on adapting to forthcoming policy shifts for 2027, ensuring that plans are equipped to manage both regulatory and market challenges efficiently.