The Centers for Medicare & Medicaid Services (CMS) has released its Calendar Year (CY) 2027 Medicare Advantage (MA) and Part D Rate Announcement.
These finalized policies aim to improve payment accuracy across both programs and promote a sustainable and stable MA program, offering choice to Medicare beneficiaries and ensuring responsible stewardship of taxpayer funds. These policies are projected to result in a net average increase of 2.48%, or over $13 billion, in additional MA payments to plans for CY 2027.
This anticipated increase considers factors such as underlying cost growth, 2026 Star Ratings for 2027 quality bonus payments, and risk adjustment updates. CMS emphasized its commitment to empowering Medicare beneficiaries to choose health coverage that meets their needs while maximizing value and ensuring program sustainability.
MA Risk Adjustment System Enhancements
The announcement addresses coding differentials between MA and Original Medicare for CY 2027. CMS is developing an MA risk adjustment system guided by three core principles:
- Simplicity: To reduce administrative burden for plans and providers.
- Competition: To foster competition among all plans, irrespective of size or resources, enhancing patient value.
- Accuracy: To ensure payments accurately reflect beneficiary health risk, facilitate efficient healthcare resource use, improve program integrity, and increase accountability.
This approach seeks to promote a stable and sustainable MA program by mitigating unnecessary cost growth from coding practices not directly linked to quality coverage.
MA Risk Adjustment Model: Continuation and Data Exclusions
CMS will continue to use the 2024 MA risk adjustment model for CY 2027, acknowledging its impact between CY 2024 and CY 2026. The agency plans to evaluate public feedback as it considers future updates to the MA risk adjustment model.
Starting in CY 2027, CMS will exclude diagnosis information from unlinked chart review records (diagnosis data not associated with a specific beneficiary encounter) from risk score calculations. An exception is made for beneficiaries who switch between MA organizations. Diagnoses not linked to a service will generally not be considered for risk adjustment. This change is expected to have a greater payment impact on MA organizations that heavily rely on unlinked chart review records to report risk-adjustment eligible diagnoses.
Part D Risk Adjustment Model Updates
Updates to the Part D risk adjustment model include:
- Accounting for changes to the Part D benefit introduced by the Inflation Reduction Act for CY 2027.
- Reflecting more current costs.
- Separately accounting for MA prescription drug plan and standalone prescription drug plan costs to improve payment accuracy for these two market segments.
Additionally, CMS is aligning the sources of diagnoses used for Part D risk adjustment with similar policies finalized for MA, such as excluding diagnoses from unlinked chart review records (with the aforementioned exception).
These updates aim to enhance the stability of prescription drug benefits for all Medicare beneficiaries.