CMS has released the Calendar Year (CY) 2027 Advance Notice of Methodological Changes for Medicare Advantage (MA) capitation rates and Part C and Part D payments. CMS estimates that the proposed policies would increase MA payments by approximately 0.09% in CY 2027, roughly $700 million more compared to CY 2026.  

The Advance Notice is released amid heightened scrutiny of MA payments and program growth. While enrollment continues to expand, policymakers have raised ongoing questions regarding coding intensity, payment accuracy, prior authorization hurdles and increased costs. According to the Medicare Payment Advisory Commission (MedPAC), the federal government will pay about $76 billion more to cover seniors enrolled in MA this year than it would if those same seniors were in traditional Medicare. Against this backdrop, CMS frames the proposed updates as part of a broader effort to refine the MA program.  

CMS wants to make changes to the MA risk adjustment system. The rule proposes updates to the CMS-Hierarchical Condition Category (CMS-HCC) model to reflect more recent data on costs associated with specific conditions and demographic characteristics. CMS also proposes excluding diagnoses derived from unlinked Chart Review Records (diagnosis submissions not tied to a specific beneficiary encounter) from risk score calculations beginning in CY 2027. Under this approach, only diagnoses associated with documented services would be considered for risk adjustment. CMS estimates that if adopted, this policy would reduce MA payments by 1.53%, resulting in an estimated net savings of $7.12 billion. CMS also proposes to exclude from its 2027 risk score calculation diagnoses from audio-only encounters (as indicated by modifiers “93” or “FQ,” which were first implemented on January 1, 2022). 

The Advance Notice includes parallel updates to the Medicare Part D risk adjustment model. These proposals would account for changes to the Part D benefit enacted under the Inflation Reduction Act, incorporate more current prescription drug cost data, and align diagnosis sourcing policies with those proposed for MA, including the exclusion of unlinked Chart Review Records. CMS also proposes separate cost modeling for MA prescription drug plans and standalone prescription drug plans, which the Agency indicates would improve the precision of Part D payments across different plan types. 

CMS proposes updates to the MA Star Ratings program for the 2027 measurement year. These include publication of the list of disasters eligible for adjustment under the Extreme and Uncontrollable Circumstances policy, non-substantive updates to measure specifications, and updates to the measures included in the Part C and Part D improvement measures and the Categorical Adjustment Index. CMS characterizes these changes as refinements intended to support consistent application of the Star Ratings methodology. 

In addition, the Advance Notice provides preliminary estimates of national per-capita MA growth and fee-for-service growth percentages, which serve as key inputs for county benchmarks and plan payments. CMS notes that these estimates are based on updated actuarial assumptions and the most recent available claims and enrollment data, and that final growth rates will be confirmed in the Rate Announcement. 

CMS will accept public comments through February 25, 2026. The final rule will be finalized no later than April 6, 2026.