Projected Medicare Advantage 2027 payment rate draws concern from plans and providers

CMS’s proposed Medicare Advantage (MA) 2027 payment rate would result in minimal overall growth for health plans, as risk adjustment revisions and new limits on chart reviews offset the projected baseline increase.

Average payments to MA plans are anticipated to essentially stay flat, increasing by 0.09%, as described in the MA advance rate notice published this week.

MA policy increasingly has grabbed headlines in conjunction with the program’s enrollment surge from 33% of Medicare beneficiaries in 2015 to 55% in 2025. The Medicare Payment Advisory Commission (MedPAC) recently reported that MA will cost the government $76 billion in 2026 compared with a scenario in which all beneficiaries were in traditional Medicare, due in part to coding practices of MA plans.

“By strengthening payment accuracy and modernizing risk adjustment, CMS is helping ensure beneficiaries continue to have affordable plan choices and reliable benefits, while protecting taxpayers from unnecessary spending that is not oriented toward addressing real health needs,” Mehmet Oz, MD, administrator of CMS, said in a news release.

Technical updates to the v28 risk adjustment model would more closely reflect up-to-date medical costs and patterns of care, according to the notice. As described in a fact sheet, the projected baseline payment increase of 4.97% would decrease by 3.32 percentage points due to the risk adjustment modifications and by 1.53 points from changes blocking chart review records as a factor in risk scores if the review was not part of a clinical encounter.

Key caveats are that updated Medicare fee-for-service claims data, as used to determine MA payment benchmarks, could alter the 2027 rate change when CMS issues the final notice in April following a public comment period, and that when factoring in coding practices and population changes, the agency currently projects the average payment increase to reach 2.54%.

Financial implications for Medicare Advantage insurers

Adverse impacts from the rate notice likely would be felt by large health insurers, as indicated by stock trading in the 24 hours after the advance notice was issued.

UnitedHealthcare, the largest MA insurer, may further limit its plan offerings and depart from some markets if the advance rate stands, CEO Tim Noel said Jan. 27 during a quarterly earnings call for parent company UnitedHealth Group.

AHIP (formerly America’s Health Insurance Plans) issued a statement saying “flat program funding at a time of sharply rising medical costs and high utilization of care will impact seniors’ coverage,” citing the potential for benefit cuts and higher out-of-pocket costs.

One reason large insurers may be concerned about the rate notice is the widespread use of retrospective coding programs that incorporate unlinked chart review records (i.e., chart reviews not tied to care encounters). Those reviews now will be excluded from risk-score calculations.

Provider-sponsored health plans and other plans for which a greater share of MA revenue is derived from encounter-based diagnoses may be comparatively well off, especially given the requirement for CMS to normalize the risk adjustment model to ensure the model does not change total MA payments year-over-year.

That dynamic may explain why the Alliance of Community Health Plans (ACHP), which represents provider-sponsored plans, had more of a mixed reaction than AHIP.

“Simply, this proposed rate doesn’t cut it,” Ceci Connolly, president and CEO, said in a written statement.

ACHP sees reason for optimism, however, in the proposed risk-adjustment changes, touting “CMS’s efforts to curb incentives that reward coding intensity rather than care delivery.”

The proposal to exclude unlinked chart reviews from risk scores appears to be “a welcome step,” Connolly said.

Provider concerns about care delivery and access

If payment constraints result from the new approach to chart reviews, providers can expect plans to increasingly emphasize that diagnoses need to be addressed during a clinical visit and subsequently highlighted in documentation.

The advance notice also specifies that audio-only encounters will no longer factor into MA risk scores, meaning plans might increasingly discourage any such visits that are not deemed clinically necessary.

Early provider reaction to the advance rate notice was negative.

Susan Dentzer, president and CEO of America’s Physician Groups (APG), said the limited increase “signals a far less favorable environment than many of our organizations and other stakeholders expected, given costs and recent pressures on the system.” She said the notice does not adequately account for the rising utilization seen over the past few years.

The restrained update “will impair the ability of many of our groups to care effectively for beneficiaries and meet their needs,” Dentzer said.

 APG is hoping to get more detail on how the changes will affect “diagnoses from chart reviews that are linked to the many non-visit-related clinical activities that APG groups undertake to support patients, as well as the effect on patients in rural areas or with low connectivity who rely on audio-only visits,” the organization said.

Separate rule addresses network adequacy

The advance rate notice follows a proposed rule setting 2027 policy and technical changes for MA and Medicare Part D. One consideration in the rule is to potentially give plans an exception to MA network-adequacy standards if they can demonstrate that beneficiaries in the market do not have to travel longer distances to receive care compared with enrollees in traditional Medicare. CMS referred to the concept as the pattern-of-care exception.

“It may create a risk that MA plans will treat the exception as an alternate pathway to approval without making the investments needed to meet time/distance and minimum number [network adequacy] standards,” the American Hospital Association (AHA) wrote in comments submitted to CMS. The association called for clearer criteria if CMS chooses to apply the exception.

The AHA also hopes to see network adequacy standards expanded to include all post-acute care settings, saying delays in transitions of care result in “substantially longer inpatient stays” in MA compared with traditional Medicare.

In what may be a hedge against MA plan strategies to establish narrower networks if the pattern-of-care exception is implemented, the proposed rule expands the circumstances allowing beneficiaries to change plans outside of open enrollment. Beneficiaries already can be eligible for a special enrollment period following the network exit of their physician practice or hospital. In a proposed change, the requirement for CMS to assess that the departure is “significant” would cease.

The AHA expressed support for the change but wants to ensure it also applies when the network departure is initiated by the provider instead of only when the plan cuts the provider from the network.