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April 16, 2026 – The Centers for Medicare & Medicaid Services (CMS) has been busy lately serving up regs. Regs & Eggs certainly has a lot to chew on going forward as, just last week, the agency released new proposed rules around the Medicare inpatient prospective payment system and prior authorization for drugs. However, before these new rules were served up, CMS finalized major policies and payment rates for Medicare Advantage (MA) and Part D. Specifically, CMS released an MA and Part D final rule, a final rate notice, and a request for applications (RFA) for the Better Approaches to Lifestyle and Nutrition for Comprehensive hEalth (BALANCE) model, set to begin on January 1, 2027. My colleague Lynn Nonnemaker and I previewed these policies in Regs & Eggs a few weeks ago, and want to follow up now that the final policies are in place.
The final rule, issued on April 2, puts forth policy and technical changes to the MA and Part D programs for 2027 and beyond.
Health Equity Index: In last fall’s proposed rule for MA and Part D, CMS proposed big changes to the MA Star Ratings, including removing the Health Equity Index (HEI, also known as the Excellent Health Outcomes 4 All factor) which was set to go into effect with the 2027 Star Ratings due out later this year. The HEI would have rewarded plans that improve or sustain quality performance for low-income and disabled enrollees. In its place, CMS proposed to retain an existing reward factor that rewards plans for improving performance across all members. The HEI was important because many plans that have benefited from the existing reward factor would not be rewarded by the HEI.
CMS finalized the proposal in the final rule, and the HEI will not go into effect. That final decision will likely lead to higher average Star ratings for 2027, which would help many health plans. However, not every plan will benefit from the policy.
Star ratings: CMS finalized removal of 11 of 12 Star measures the agency had proposed to cut. The Diabetes Care – Eye Exam measure was the sole measure that CMS decided not to remove, due to concerns the agency received from stakeholders. These measure changes will go into effect beginning with the 2028 and 2029 ratings and will generally lead to lower ratings on average.
Special enrollment period: CMS did not finalize a proposed change related to an enrollee’s ability to have a special enrollment period when they experience a significant change in the plan’s provider network. CMS had proposed to remove the requirement that the network change be determined significant, instead allowing an enrollee to change plans whenever a provider they have seen within a specified time period leaves the network. In the final rule, CMS indicated it was not finalizing the provision at this time, but did not address comments.
This lack of discussion suggests CMS may decide to finalize the provision in a future final rule. CMS is permitted to finalize provisions in a later rule as long as final action happens within three years of the original proposal.
Supplemental benefits: Speaking of finalizing previously proposed policies, CMS decided to finalize a set of provisions from the 2026 proposed rule related to the administration of supplemental benefits using debit cards. Use of debit cards is a common method for giving enrollees access to vision, groceries, over-the-counter health items, and other benefits. CMS proposed new rules to make sure enrollees are using debit-card funds only on allowable benefits, require that enrollees have an alternative way to access the benefits if access via the debit card isn’t feasible (such as in the case of technology failures), and limit benefits to the correct benefit year. In the final rule for 2026, CMS left these provisions unaddressed, perhaps to allow the then-new CMS leadership more time to consider the policy. In last month’s rule, CMS went ahead and finalized the provisions, which will now go into effect beginning in 2027.
Agents and brokers: CMS finalized several other provisions related to marketing rules for brokers and agents, dual-eligible special needs plans, and Part D rules resulting from passage of the Inflation Reduction Act. While these rule changes are likely of limited direct financial impact, they will keep plans busy adjusting systems and processes to make sure they are in compliance with new rules.
On April 6, CMS issued the final rate notice for the 2027 payment year. Stakeholders were watching several key issues that emerged from the advance notice published in early February.
Growth rate: In the advance notice, CMS projected that Medicare costs would increase by 4.97% for 2027, setting a key baseline update for Medicare payments to MA plans in the coming year. Many plans thought the projection was too low and didn’t reflect growth in utilization and prices. They urged CMS to use more recent data and look at evidence of higher costs across the healthcare sector in setting projected costs. The final notice saw a modestly higher growth rate of 5.33%, which CMS said mostly reflected incorporation of data through the end of 2025 in cost estimates. While the increase was good news for plans, they may have hoped for even more. Last year the growth rate jumped by more than 50% between the advance and final rate notices, compared with this year’s 7% increase. Still, the increase is definitely a welcome improvement for plans and the providers with whom they collaborate in value-based and other alternative payment models.
Risk adjustment: The most surprising proposal in the advance notice had been CMS’ plan to update the existing Part C risk model for 2027 to use more recent years of data to recalibrate and rebase the model and modify condition categories related to chronic kidney disease. The proposal caught many stakeholders off guard because CMS just completed phasing in another set of changes to the risk model that has seen average risk scores fall significantly. CMS estimated its latest proposal would reduce MA risk scores by 3.32% in 2027, negating a significant portion of the growth rate update. Plans and providers pushed back hard on the risk-model updates, arguing that the plan to base risk scores on 2023 and 2024 data, years when Medicare spending for skin substitutes exploded, would result in inappropriately large risk factors for some conditions that often involve use of skin substitutes while leading to much lower risk factors for many other conditions.
CMS leadership defended this proposal when speaking about the notice in public, citing the need to ensure that Medicare’s payments to MA plans reflect true medical needs. However, in the final rate notice, CMS announced it would not move forward with the proposed risk model changes for 2027. While CMS defended the use of 2023 and 2024 data despite higher spending for skin substitutes, CMS said the decision to continue with the existing model would allow plans more time to adjust to the previous changes to the model. CMS also warned plans that the decision not to move forward was temporary, and these changes could reappear as soon as 2028. Nonetheless, not moving forward with the risk model changes in 2027 is very welcome news for plans and their provider partners.
Unlinked chart reviews: Another key proposal in the advance notice was CMS’ plan to not allow diagnoses identified from medical-chart reviews that were not linked to an actual clinical encounter. Chart reviews reflect plan efforts to review enrollee medical records to identify diagnoses that may have been missed in the original claim submission process. Diagnoses identified during a chart review that are linked back to the clinical encounter in which they were recorded are allowed. CMS proposed, however, not to allow diagnoses that are not linked to a clinical encounter. This proposal was another hit to payment updates for 2027, with CMS projecting that the proposal would reduce industry-wide risk adjustment payment by 1.53% in 2027. While advocacy around this proposal was less urgent than that around the risk model changes, many plans argued for a delayed implementation to allow plans more time to adjust their chart review practices and asked that CMS make exceptions for new enrollees or diagnoses involving capitated providers who may not submit claims for individual services or encounters.
CMS finalized the proposal to exclude diagnoses from unlinked chart reviews beginning in 2027, but will make an exception for new members who switch from one MA organization to another from one year to the next. CMS makes clear in the final notice that this exception does not apply when an enrollee switches from the original Medicare program to an MA plan.
Overall impact: Other elements of the final rate notice mostly followed the advance notice, including a move to adopt separate risk models in calculating Part D risk scores. Overall, CMS estimates Medicare will pay MA plans about 2.48% more in 2027 than in 2026, on average. That is significantly better than the estimate of 0.09% coming out of the advance notice. In dollar terms, the final estimate for 2027 suggests an increase of about $13 billion in payments to plans. While an improvement, it remains to be seen whether the increase will be enough to ensure a stable marketplace for MA enrollees next year.
| Impact | CY 2026 Final Rate Announcement | Advance Rate Notice | CY 2027 Final Rate Notice |
| Effective growth rate | +9.04% | +4.97% | +5.33% |
| Rebasing/repricing | -0.28% | TBD | -0.17% |
| Change in Star Ratings | -0.69% | -0.03% | -0.03% |
| MA coding pattern adjustment | 0% | 0% | 0% |
| Risk model revision and FFS normalization | -3.01% | -3.32% | -1.12 |
| Sources of diagnoses | N/A | -1.53% | -1.53% |
| Subtotal, basic update to plans | +5.06% | +0.09% | +2.48% |
| MA risk score trend | +2.10% | +2.45% | +2.50% |
| Expected average change in revenue | +7.16% | +2.54% | +4.98% |
The final big announcement in the MA and Part D world last month was CMS’ release of the RFA for the BALANCE model, which would allow coverage of GLP-1 medications for obesity and weight loss in Medicare Part D. Current law explicitly bars Medicare from covering medications used exclusively for weight loss. However, the Center for Medicare and Medicaid Innovation plans to use its authority to modify program rules to allow coverage of the drugs, in part through agreements with drug manufacturers to offer the drugs at reduced prices for enrollees and Part D plans.
While CMS’ release of the RFA signaled the agency is committed to moving forward with the model, it isn’t yet a certainty for 2027. In the RFA, CMS said that in order to move forward, at least 80% of Part D enrollees must be in plans that submit an application to participate. If the 80% threshold isn’t reached the model will not move forward, at least for 2027. Plan applications are due to CMS by April 20, 2026, and the agency says it will announce whether the model will move forward by April 30, 2026.
Some stakeholders believe it may be difficult for CMS to reach the 80% goal given recent changes in the Part D benefit design and rising cost pressures for Part D plans that have pushed up plan bids and enrollee premiums in recent years. It will be interesting to see how plans balance financial pressures with the opportunity to partner with CMS on this high-priority issue by participating. Plans do have additional certainty as they prepare bids by the June 1, 2026, deadline, as the projected 2.48% payment increase was higher than what was initially proposed. Nevertheless, even this higher-than-expected increase for 2027 is well below the increase plans received in 2026. The future of the BALANCE model remains a big uncertainty that will require plans to adjust quickly once CMS makes a final announcement in late April.
Now that the final course of MA and Part D policies and initiatives for 2027 has been served up by CMS, plans, their provider partners, MA enrollees, and Medicare beneficiaries are now chowing down and digesting the meal. If you have any questions about these final policies and their potential implications, please reach out!
Until next week, this is Jeffrey (and Lynn) saying, enjoy reading regs with your eggs.
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