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March 5, 2026 – As you know, I like food analogies. If Medicare Advantage (MA) and Part D policymaking was a multi-course meal (such as brunch with eggs!), we just finished a major course for plan year 2027. The comment deadline for the 2027 MA and Part D Advance Rate Notice closed last week, and industry stakeholders are ready for the next course. We expect to see the final rate notice by April 6, the date required by statute. The Centers for Medicare & Medicaid Services (CMS) is also expected to issue a final rule for the industry around the same time (although that rule is not required by statute, so CMS isn’t bound by a specific date). That rule would make changes to policies for issues such as Stars, marketing, and other non-payment issues. Plenty of other items on the MA and Part D menu also could be served up soon. To help me plan for those courses, I’m bringing in my colleague Lynn Nonnemaker.
Overall, we are focused on five key policies (three of which come from the advance notice) that will shape the MA and Part D landscape.
As discussed in a previous Regs & Eggs blog post, CMS proposed a nearly flat payment update for MA plans for 2027 in the advance notice. One core component of the update is CMS’s estimate of fee-for-service (FFS) spending for the coming year, which serves as the basis for determining how much plans get paid. For 2027, CMS projected a growth rate of 4.97%, which was well below many observers’ expectations. The final growth rate is always different, as CMS typically has more recent data on which to base its projections. Given the relatively low proposed rate in the 2027 advance notice, some questions come to the forefront when thinking about what the final rate might be:
The answers to these questions will be key for defining the baseline story for 2027 – a year of stable funding and solid growth, or a year of flat revenue that puts more pressure on benefits, premiums, and plan participation.
Another factor to consider is skin substitutes. Traditional Medicare spending on skin substitutes exploded from $256 million in 2019 to more than $10 billion in 2024, according to CMS. In response, CMS made changes to Medicare reimbursement for skin substitutes in the 2026 Physician Fee Schedule final rule and reduced projected FFS spending for 2026 and 2027 when calculating MA payment rates. The accuracy of CMS’s estimate of the payment changes’ impact on skin substitute utilization and costs could affect whether the 2027 growth rate captures true costs trends for the MA industry.
If the projected growth rate in the advance notice was a surprise to some, many stakeholders expressed downright shock at the changes CMS proposed for the Part C risk adjustment model. CMS proposed to update the years of data used to calibrate the risk model, modify the treatment of two hierarchical condition categories related to chronic kidney disease, and remove diagnoses obtained through telehealth visits that only involved audio (i.e., did not include video, which is necessary for the visit to count toward MA enrollees’ risk scores). On paper, these changes might not seem all that impactful, yet CMS estimated they would result in risk scores (and risk-adjusted payments) falling by 3.32%, on average, across the industry in 2027. With an estimated reduction that large, plans and their provider partners have advocated for the changes to be delayed or phased in over several years (or both). Moderating the impact with a longer transition period would be consistent with how the agency has implemented other recent risk model changes.
The Part C model is not the only risk model to which CMS has proposed important changes. For the Part D risk model, CMS wants to create separate models and calculate separate coefficients for plans that combine MA and Part D benefits (MA-PDs) and those that offer Part D benefits only (PDPs). If this change is finalized, Part D risk scores for MA-PD enrollees would mostly fall, while risk scores for PDP enrollees would mostly increase. This proposal has not received the same level of attention as the changes to the Part C model, in part because CMS didn’t say how much the Part D model changes would reduce payments to MA plans. Overall, the impact is likely to be smaller than the hit to Part C risk scores. Also, rising premiums for PDPs represent a significant issue for CMS and the Part D program (and higher risk scores for PDPs would provide at least some relief on that front), which might make it less likely that CMS will change course on the Part D risk model proposals.
The advance notice proposes to stop counting diagnoses taken from so-called “unlinked chart reviews” in enrollee risk scores. Chart reviews are plan-initiated reviews of an enrollee’s medical charts, intended to capture any diagnoses that may have been missed when a provider submitted an encounter claim to the plan. An “unlinked” diagnosis means that the plan identified an additional diagnosis and submitted it to the CMS encounter data system, but did not identify the specific clinical encounter (office visit, hospital stay, etc.) that generated the diagnosis. CMS projects that removing these diagnoses from risk scores will reduce risk-adjusted payments by 1.53% in 2027, in addition to the reduction associated with the risk model changes already discussed. Together, the proposed changes to risk scores negate almost the entire growth rate, potentially setting up 2027 to be a year of lean growth and some challenging choices for the plans developing benefit packages and for the Medicare beneficiaries choosing how to maximize the value of their Medicare benefits.
Looking beyond the advance notice to the 2027 MA and Part D final rule, a significant policy issue will be whether CMS follows through on its proposal to eliminate the Health Equity Index (HEI), which was designed to give a ratings boost to plans that improve performance for low-income and disabled members. CMS proposed to instead continue with the existing reward factor, which considers performance over time for all members in a plan.
Based on CMS’s own analysis, the industry as a whole stands to gain from higher overall ratings and associated quality bonuses if the HEI is scrapped and the reward factor maintained. The MA plans that would see the most benefit from the proposal have likely advocated hard in support of finalization. At the same time, some plans stood to gain from the HEI, and they have urged CMS not to eliminate the new index. If CMS does eliminate the HEI, there is also a question of how CMS would go about its removal. The decision to implement the HEI beginning in 2027 was finalized in 2023, and measurement of plan performance on the individual elements that factor into the HEI ran from January 1, 2024, through December 31, 2025. CMS’s proposal to eliminate the HEI came well after plans had already invested time and resources into the index. Changing direction now undermines the concept that plans can rely on the rules CMS sets through the regulatory process.
While this issue will affect 2027 Star Ratings, it won’t directly affect plan finances in 2027. The quality bonus payments and increased rebates that flow from higher Star Ratings come in the year after the ratings, meaning that the final decision on HEI, which will impact the 2027 Star Ratings, will filter into plan revenues beginning in 2028.
Another big policy issue in play for 2027 is the status of the BALANCE model. Announced in late 2025, the model would allow Part D plans to cover GLP-1 medications for weight loss, coverage that is explicitly barred by statute. The initial announcement provided a general overview of the model and stated that it would begin on January 1, 2027 (with a “bridge” initiative offering Part D enrollees access to the drugs for weight loss beginning in mid-2026, with the government picking up the tab until the BALANCE model begins). CMS asked GLP-1 drug manufacturers and Part D plans to indicate interest in model participation in early January 2026.
With 2027 plan bids due June 1, 2026, plans must soon develop bids that incorporate GLP-1 coverage. CMS plans to release more specific information on the model in the near future that hopefully will help Part D plans decide whether to participate. Key operational questions include:
While on the surface this issue seems to impact Part D rather than MA, most MA enrollees (89%) get their MA and Part D benefits through a single plan and will need to decide whether and how to participate in the BALANCE model. Those decisions will influence how plans think about the broader set of benefits and services they offer for the coming year and how they engage with provider partners to manage utilization, costs, and the health of their enrollees. In some ways, MA-PD plans, which can engage with network providers to manage care and costs, may be better positioned to offer GLP-1 coverage in a cost-effective way than stand-alone Part D plans. At the same time, MA-PD plans may need to balance access to these expensive drugs with other benefit offerings and pressure to keep premiums low.
Given the financial risks and outstanding operational questions, one potential pathway depending on when CMS releases additional information on the model would be for CMS to delay its start until 2028 (or later). That would give plans more time to figure out both financial and operational issues. In the meantime, CMS could offer direct coverage of GLP-1s for weight loss until the model begins. While a longer bridge would add to government cost, it could also increase the likelihood of Part D plans participating in the model going forward. However, given that improving access to GLP-1s is a high priority for this administration, it is unclear whether CMS would entertain any delay to the current model implementation timeline.
In addition to these five issues, there’s a lot on the menu that will influence the 2027 MA landscape for plans, their provider partners, MA enrollees, and Medicare beneficiaries. CMS is finalizing the next course now; the final rule is currently under review at the Office of Management and Budget, and the final rate notice should also go under review soon. Be prepared to sit back down at the table in short order to chow down on the final set of MA and Part D policies and initiatives for 2027.
Until next week, this is Jeffrey (and Lynn) saying, enjoy reading regs with your eggs.
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