On January 26, 2026, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2027 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies. CMS proposed a net average year-over-year payment increase of just 0.09%. That represents a departure from the 4–6% increase analysts had anticipated.
The proposal triggered strong and nearly unanimous pushback from major industry trade organizations representing health insurers, regional health plans, physician groups, and beneficiary advocates. In this post, we’ll examine five of those industry organizations and their comments:
What Key Policy Changes Did Industry Organizations Respond To?
The Medicare Advantage (MA) Advance Notice for Calendar Year (CY) 2027 proposes several significant methodological changes to payment and risk-adjustment models. Industry organizations addressed the following key proposed policy changes in their responses:
1. Recalibration of the CMS-HCC (Part C) Risk-Adjustment Model
CMS proposes implementing a “2027 model” for Part C. This continues the transition to the V28 model but updates the underlying data.
Data Update: CMS plans to calibrate the model using 2023 diagnostic data and 2024 spending data. Doing so replaces the 2018/2019 data used previously.
Skin Substitute Distortion: A major point of industry concern is that the 2024 spending data includes historically high expenditures for skin substitutes (over $10 billion). Meanwhile, the 2027 benchmarks reflect new policies that significantly reduce these payments. Industry groups argue this misalignment artificially suppresses coefficients for other chronic conditions.
2. Exclusion of Unlinked Chart Reviews
CMS proposes to remove unlinked chart reviews as a source for diagnoses in risk adjustment for both Part C and Part D.
Rationale: These records lack a specific linked encounter, raising concerns from the OIG and CMS about whether risk-adjustment criteria are actually met.
Industry Response: MedPAC supports this for payment integrity. However, others (like ACHP and AHIP) warn that it creates a structural limitation for new-to-plan enrollees, where plans cannot access prior-year encounter data to link to medical records.
3. Exclusion of Audio-Only Telehealth Services
The proposed policy would use new modifier codes to more completely exclude audio-only services from the diagnostic data used for risk adjustment.
Goal: This ensures that diagnoses are derived only from face-to-face encounters, which has long been a requirement.
Industry Response: Some organizations suggest that while they support data integrity, categorical exclusion might ignore legitimate clinical follow-up care provided via phone to vulnerable populations.
4. Part D (RxHCC) Risk-Adjustment Model Redesign
For 2027, CMS proposes an updated RxHCC model to reflect the benefit redesign mandated by the Inflation Reduction Act (IRA).
Separate Calibration: CMS proposes to separately calibrate the model for MA-PDs and PDPs. It intends to more accurately reflect different coding and spending patterns between the two plan types.
Normalization: CMS intends to continue using separate normalization factors for MA-PDs and PDPs to address diverging risk-score trends.
Industry Response: Part D redesign has divided industry organizations: MedPAC supports separate calibration for MA-PDs and PDPs to improve predictive accuracy. ACHP opposes the segmentation for fragmenting care. AHIP warns it could increase basic Part D premiums for MA-PD plans by an estimated $6 to $10.
5. Coding Pattern Difference Adjustment
CMS proposes to maintain the MA coding pattern difference adjustment at 5.9%, the statutory minimum.
Industry Response: MedPAC noted that while the V28 model has helped reduce coding-intensity variation, the gap between MA and Fee-for-Service (FFS) coding continues to rise annually. AHIP, conversely, argued that CMS’s own analysis shows the actual coding differential is much lower once adjusted for the 5.9% factor.
6. Effective Growth Rate and USPCC Calculations
Industry organizations expressed concern over the proposed 4.97% Effective Growth Rate, arguing it is insufficient to cover rising medical costs.
Cost Trends: BCBSA and AHIP noted that medical cost trends for 2024–2027 are estimated in the 6–8% range, driven by hospital prices and pharmacy costs, which the proposed rate does not fully reflect.
Population Consistency: ACHP and AHIP recommended that CMS exclude beneficiaries enrolled in only Part A or only Part B when calculating the United States Per Capita Cost (USPCC), as MA enrollees must be enrolled in both.
7. Star Ratings Updates
CMS proposed updates to several measures and sought feedback on simplifying the measure set.
Industry Feedback: Organizations encouraged transitioning from “topped-out” process measures toward health outcomes and patient experience. There were also concerns about the aggressive timeline for transitioning to Electronic Clinical Data System (ECDS) reporting.
What impact will the 2027 Medicare Advantage Advance Notice proposed rules have, according to industry organizations?
Industry organizations warn that the proposed changes in the CY 2027 Advance Notice may lead to higher costs for beneficiaries, reduced supplemental benefits, and market instability. They see the proposed growth rate as insufficient to keep pace with rising medical costs.
The organizations identified the following specific potential results:
Impact on Beneficiary Costs and Benefits
Premium and Out-of-Pocket Increases: AHIP and Wakely modeling suggest that to maintain current benefit levels, monthly premiums could rise by an average of $23.
Cuts to Supplemental Benefits: The low payment increase may force plans to make significant reductions to popular supplemental benefits. Wakely estimates 50% cuts to benefits like dental, vision, hearing, and transportation.
Part D Premium Pressure: Industry organizations expect changes to the RxHCC risk-adjustment model, intended to reduce stand-alone PDP premiums, to increase basic Part D premiums for MA-PD plans by an estimated $6 to $10.
Market Instability and Reduced Choice
Plan Exits and Forced Disenrollment: AHIP notes a trend of “forced disenrollments” (2.9 million in 2026) due to plan terminations. This trend may continue or worsen if funding does not meet the expected 6–8% growth in medical spending.
Geographic Disparities: Analysis suggests the impacts will be uneven, with roughly 70% of MA enrollees living in areas that could see cuts in payments to plans. That analysis suggests states like Oklahoma, Kansas, and West Virginia project to be among the most negatively impacted.
Pressure on Regional Plans: ACHP warns that the lack of a “new-to-plan” exception for unlinked chart reviews could penalize regional plans that enroll members from exiting carriers, as these plans cannot access the prior carrier’s encounter data to link to medical records.
Under-recognition of Clinical Risk
Chronic Disease Underpayment: AHIP indicates that the proposed risk model reduces payments for chronic conditions, including lung disease (-15.5%) and kidney disease (-24.9%).
Vulnerable Populations: The National Health Council (NHC) expresses concern that the categorical exclusion of audio-only telehealth diagnoses could lead to systematic under-recognition of clinical risk for beneficiaries with mobility, cognitive, or digital access limitations who rely on telephone encounters.
Cumulative Operational Burden
Stability of the “Universal Foundation”: The NHC and AHIP both highlight that these changes are occurring alongside the ongoing phase-in of the V28 model and major Inflation Reduction Act (IRA) redesigns. They warn that the cumulative effect of these overlapping adjustments makes it difficult for plans to anticipate impacts in real-time. That could result in gradual shifts to provider networks and benefit design.
What’s Next?
Following the publication of the Advance Notice on January 26, 2026, the regulatory process moves through several stages.
Immediate Next Steps
CMS Review and Evaluation: CMS is currently evaluating the extensive feedback provided by these organizations and others. Industry groups have urged CMS to carefully consider the cumulative impact of overlapping adjustments (such as risk-adjustment recalibration and Inflation Reduction Act changes) before moving forward.
Publication of the Final Rate Announcement: The next major formal milestone is the release of the Final Rate Announcement (also referred to as the Final Notice). Previous cycles indicate this typically occurs in early April. For example, the CY 2026 announcement was finalized on April 7, 2025.
Operational Timeline for 2027 Plans
Bid Submissions: Once the Final Rate Announcement is published, Medicare Advantage organizations use the finalized growth rates and risk-adjustment models to develop their bids for the 2027 plan year.
Open Enrollment: Seniors and those with disabilities will begin choosing their 2027 coverage options during the annual enrollment period starting in October 2026.
Effective Date: The finalized methodological changes will go into effect on January 1, 2027.
Industry Recommendations for the “Next Phase”
Several organizations have proposed specific actions they want CMS to take during this transition period:
Phased Implementation: AHIP and other groups have recommended that CMS phase in major risk-adjustment updates over several years, rather than implementing them all at once in 2027. The goal is to avoid market disruption.
Technical Transparency: Stakeholders have requested that CMS release more technical details, such as plan-specific impact analyses and predictive ratios, at least 60 days before finalizing significant changes.
Ongoing Monitoring: The National Health Council (NHC) has urged CMS to establish mechanisms for ongoing monitoring after implementation to identify any unintended consequences for high-need beneficiaries, such as reduced access to specialty care or changes in provider networks.
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