CMS Announces 2.48% Increase in Medicare Advantage Payments for 2027

In January 2026, the Centers for Medicare & Medicaid Services (CMS) unveiled its Calendar Year 2027 Medicare Advantage (MA) Advance Notice, predicting a modest 0.09% increase in payment rates, roughly equating to $700 million. When factoring in the expected growth in MA risk scores, the projected payment increase was set at 2.54%, or approximately $13 billion. By April, the CMS published the final CY 2027 Rate Announcement, confirming a 2.48% increase over 2026, resulting in over $13 billion. Considering risk score trends, adjustments reached approximately 4.98%, totaling around $26 billion.

This pattern of upward revisions is typical within the MA rate-setting framework, where initial proposals tend to experience increases in final announcements. The CY 2027 Advance Notice initially suggested a more cautious payment approach, signaling slower growth than in preceding years. Key factors influencing the minimal proposed increase involved expected cost growth and policy changes, particularly those impacting coding practices.

However, upon finalizing the CY 2027 Rate Announcement, several elements led to a more significant payment rise. These included refined spending data and reversals of some original policy changes. Historical data demonstrates this revision trend: from 2016 to 2027, final MA payment rates averaged 1.26 percentage points higher than initially proposed.

Two primary factors often drive these adjustments in the MA rate-setting process. Firstly, the effective growth rate frequently increases as more comprehensive Medicare fee-for-service data becomes available, a pattern seen over the last decade. Secondly, CMS often revises or delays policy changes with significant payment impacts, often based on industry feedback. In CY 2027, CMS refined its proposals by excluding certain coding-related changes and choosing not to update the risk adjustment model, influencing the final rate increase.

Regarding the impact, the 2027 MA payment update provides financial prospects for MA plans, with payments expected to rise by about $26 billion, accounting for risk trends. This increment allows greater fiscal flexibility, though it is less compared to some past years. This may pressure plans to adapt, perhaps through higher premiums, benefit changes, or other cost management strategies. Despite these challenges, the MA market is anticipated to maintain a diverse array of plan options and offerings.

The recurring pattern of upward revisions warrants scrutiny of the MA rate-setting process. While some increases stem from updated data, others reflect policy decisions historically favorable to the industry. CMS' choice to delay updating the risk adjustment model for 2027 emphasizes a broader issue of balancing stability with evolving needs. Moving forward, policies might better serve Medicare beneficiaries by focusing on quality care management and minimizing rate discrepancies between proposed and final payments to ensure efficiency and value.