CMS Ups Pay for Medicare Advantage Plans by 2.48% in 2027

The average pay increase for Medicare Advantage (MA) plans in 2027 will be 2.48%, a substantial increase from the 0.09% that the Centers for Medicare & Medicaid Services (CMS) originally proposed in January, agency officials said Monday.

The increase amounts to an additional $13 billion in additional MA payments to plans in calendar year 2027, according to a CMS fact sheet. “When accounting for estimated risk score trend in MA due to factors such as population changes and coding practices, this amounts to a 4.98% increase,” the fact sheet said.

“This is not just a rate notice — it’s a down payment on the promises that we’re making for the healthcare system,” Chris Klomp, director of Medicare, said on a phone call with reporters. “We are focused in this announcement and balancing near-term program stability with long-term program sustainability. What that means in practice is that we want this to be a consistent experience for our beneficiaries to get the highest and best quality care with the best clinical outcomes that they can.”

CMS reconsidered the lower rate after reading stakeholder comments — which totaled up to more than 40,000 — on the proposed rule, according to a senior CMS official, who noted that the agency also announced it was delaying a new risk-adjustment model for MA plans. The model would have updated the diagnosis and expenditure data used in some payment calculations.

“In consideration of the comments that we received during the comment period, we felt that it made sense to have more of a chance for the MA market to absorb those changes and to ensure that we’re striking the right balance between addressing some of the coding games that [plans have been employing], while at the same time ensuring that we’re able to have a stable market in the short term,” the official said.

Although CMS is not implementing all of the new risk-adjustment model, one part of it that they will be adopting forbids MA plans from using only chart reviews — without an affiliated patient encounter — for upcoding patients’ risk categories. “A diagnosis will only be paid for if it’s tied to an actual patient encounter,” said Klomp. “The goal is value-based care … The business model can no longer be about data mining. It must be about delivering value, for aligning incentives for the plans to succeed when they help beneficiaries live healthier lives.”

Some MA plans — including UnitedHealth Group, one of the largest — have been accused of artificially upcoding patient diagnoses in order to get more money from CMS, which pays plans in part based on each patient’s health risk score.

In addition, many MA plans exited the marketplace in 2025, forcing nearly 7% of enrollees to find another plan, a study found; this year, about 1 in 10 MA enrollees — or 2.9 million people — will be forced to do the same.

Asked by MedPage Today whether the 2027 payment increase would be enough to keep MA plans from leaving, Klomp said: “We certainly hope and believe that these rates will be sufficient to maintain choice and competition and a vibrant, thriving Medicare Advantage program across the country. We will continue to watch and observe planned behavior again at the market and the sub-market level.”

However, he added, “The other side of that coin, as we mentioned, is long-term sustainability. We cannot have a healthcare system that is continuously compounding at twice the rate of GDP growth; that is not sustainable.” So CMS also wants to tell other players in the MA market — such as the providers, suppliers, vendors, software providers, device manufacturers, and drug companies — “that we will hold them accountable as well to ensure that healthcare costs are growing at an appropriate level and that it is affordable to all Americans and all Medicare beneficiaries.”

Improving healthcare quality is another emphasis for the program, Klomp said. He referred to a final rule released last week that deleted 11 measures that were components of each plan’s star ratings. “That represented a focus on clinical outcomes and away from measures that [focused] on administration or ‘check-the-box’ exercises,” he said. “We want the quality program to be the place where Medicare Advantage Plans focus their efforts because those measures are those that we believe will lead to healthier beneficiaries and a healthier Medicare population.”

Healthcare groups praised the final rule. “AMGA [the American Medical Group Association] is pleased the Centers for Medicare & Medicaid Services (CMS) did not finalize a 0.09% payment update as proposed, but is concerned the 2.48% update does not address growing beneficiary demand or the significant inflationary pressures facing medical group practices and integrated health systems,” the organization said in a statement.

“We are grateful that CMS listened to stakeholders and made important adaptations in the final rate notice,” Susan Dentzer, president and CEO of America’s Physician Groups (APG), which represents physician-run practices that participate in value-based care arrangements, said in a statement. The organization said the payment increase to 2.48% was “welcome” but added that “APG believes that this average increase in payment will still be below the actual trend line in healthcare spending growth for MA plans.”

APG also said it was disappointed that CMS had decided to exclude from risk adjustment any diagnoses made from audio-only telehealth encounters. “APG had expressed concerns that many vulnerable patients in underserved areas continue to lack reliable access to the internet for video encounters and rely on their phones for contact with healthcare providers,” the group said, adding that it hopes “that CMS will study the effect of this change and determine whether it is truly in the best interests of many patients.”