CMS Proposes Small Rise in Medicare Advantage Payments for 2027

The proposed rate hike will result in more than $700 million in Medicare Advantage payments over the year, according to the agency.

A certified medical assistant applies a dressing after administering a vaccine at Harbor-UCLA Medical Center in Torrance, Calif., on Jan. 21, 2021. Mario Tama/Getty Images

The Centers for Medicare & Medicaid Services (CMS) on Jan. 26 proposed a 0.09 percent increase in average year-over-year payments to private Medicare Advantage (MA) plans in 2027.

The proposed rate hike will result in more than $700 million in MA payments over the year, the agency said in a statement, which is significantly lower than this year’s 5.06 percent increase.

The MA plan, also known as Medicare Part C, is an alternative to a traditional Medicare health plan, which is offered by government-approved private insurers. The plan may include Medicare prescription drug coverage and additional benefits such as dental, vision, hearing care, and wellness programs, according to the Health and Human Services Department.

CMS said the proposed rate takes into account various factors affecting MA payments, such as underlying cost growth, 2026 star ratings used for 2027 quality bonus payments, and risk adjustment updates.

“These proposed payment policies are about making sure Medicare Advantage works better for the people it serves,” CMS Administrator Dr. Mehmet Oz said in the statement.

“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 towards addressing real health needs.”

Risk adjustment is a method designed to estimate the cost of care for patients based on their specific health needs.

CMS said it was working to develop a risk adjustment system that eases administrative burdens for both plans and providers, facilitates fair competition across all plan types to create value for patients, and ensures that payments accurately reflect beneficiary health risk and resource efficiency.

“Improving the risk adjustment system in this way will promote a more stable and sustainable MA program in the long run by giving beneficiaries and taxpayers confidence that CMS is mitigating unnecessary cost growth from coding practices that do not lead to better quality coverage,” the agency said.

America’s Health Insurance Plans (AHIP), the national trade association representing insurers covering more than 200 million Americans, warned that the CMS proposal could lead to higher costs for older adults.

“Health plans welcome reforms to strengthen Medicare Advantage. However, flat program funding at a time of sharply rising medical costs and high utilization of care will impact seniors’ coverage,” AHIP spokesperson Chris Bond said in a Jan. 26 statement. “If finalized, this proposal could result in benefit cuts and higher costs for 35 million seniors and people with disabilities when they renew their Medicare Advantage coverage in October 2026.”

More than half ‍of the people enrolled in the government’s Medicare program for people aged 65 and older or who are disabled receive their coverage through ​Medicare Advantage plans.

CMS said it is accepting public comments on the proposal until April 6.

Reuters contributed to this report.