On January 26, 2026, the federal government released the 2027 Advance Notice, or the Calendar Year (CY) 2027 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies. The Centers for Medicare & Medicaid Services (CMS) releases advance notices as part of its annual rate-setting process for MA and Part D plans.
We’ll explain key takeaways along with the potential impact if finalized on or before April 6, 2026, in the 2027 Rate Announcement.
Flat Payment Rates
The 2027 Advance Notice proposes a benchmark growth rate of 4.97% driven mostly by the growth in per capita costs for Original Medicare. This will drive a proposed 0.09% base payment year-over-year increase, about $700M in payments to MA plans before coding trend. This increase is relatively flat compared to the 2026 plan year and significantly lower than the 5.06% update finalized for 2026. When factoring in CMS’s projected 2.45% average rise in risk scores, the expected effective average payment increase is 2.54%.
Net Payment Impact
Year-to-Year Percentage Change in Payment Parameters
| 2027 Advance Notice | 2026 Final Notice | 2026 Advance Notice | 2025 Final Notice | 2025 Advance Notice | |
| Effective Growth Rate | 4.97% | 9.04% | 5.93% | 2.33% | 2.44% |
| Rebasing/ Re-pricing | TBD[1] | -0.28% | TBD | 0.07% | TBD |
| Change in Star Ratings[2] | -0.03% | -0.69% | -0.69% | -0.11% | -0.15% |
| MA Coding Pattern Adjustment | 0% | 0% | 0% | 0% | 0% |
| Risk Model Revision & FFS Normalization [3] | -3.32% | -3.01% | -3.01% | -2.45% | -2.45% |
| MA Risk Score Trend[4] | CMS did not include | CMS did not include | 2.10% | 3.86% | 3.86% |
| Sources of Diagnoses[5] | -1.53% | – | – | – | – |
| Expected Average Change | 0.09% | 5.06% | 4.33% | 3.70% | 3.70% |
[1] Rebasing/re-pricing impact is dependent on the finalization of the average geographic adjustment index and will be available with the publication of the CY 2027 Rate Announcement.
[2] Change in Star Ratings reflects the estimated effect of changes in the Quality Bonus Payments for the upcoming payment year.
[3] The impact of the update to the normalization factors for MA risk adjustment is not shown in the fact sheet separately because there is considerable interaction between the impact of the MA risk adjustment model updates and the normalization factor update. Therefore, the combined impact is shown in the fact sheet. If CMS did not update the risk adjustment model, the impact of normalization would be -1.50%.
[4] The MA risk score trend is the average increase in MA risk scores, not accounting for normalization and coding pattern adjustments to MA risk scores, which are shown in separate rows. For CY 2026, the MA risk score trend represents the estimated average annual change in MA risk scores from 2025 to 2026, calculated by using MA risk scores from 2022 to 2023 and using the 2024 CMS-HCC risk adjustment model. The trend is an industry average and individual plans’ experience will vary.
[5] NEW for 2027: This shows the average impact of the exclusion of diagnoses information from audio-only encounters and from unlinked chart review records on risk scores.
Health insurers have expressed concerns that the proposed flat program funding won’t address rising medical costs and increasing utilization trends. As reported by Fierce Healthcare, major MA insurers warn of potential benefit cuts, higher costs for seniors, and market exits if finalized. The comment period for the 2027 Advance Notice is open through February 25, 2026, and provides an important opportunity for stakeholders to engage with CMS before rates and policies are finalized.
Risk Adjustment Model Changes
Part C & Part D
For both the Part C and Part D risk adjustment models, CMS proposes to exclude diagnosis information from audio-only encounters and “unlinked” chart review records, or those not associated with a specific encounter. Plans can continue to submit unlinked chart reviews, but those diagnoses alone would no longer count toward risk score calculation. CMS’s intended goal is to curb insurers from “upcoding” enrollees in order to increase their payout. Insurers would use a qualifying provider encounter to prove delivery of corresponding care.
Part C
Proposed changes to the current Part C risk adjustment model (2024 CMS-HCC) include the use of more recent data to reflect current costs. The underlying Original Medicare data would be updated to use diagnoses from 2023 FFS claims predicting 2024 expenditures (from 2018 and 2019, respectively, which were pre-pandemic datasets). CMS also proposes to update the denominator year to 2024 (from 2020). These changes, combined with the proposed exclusion of diagnoses from audio-only encounters and unlinked chart review records, would reduce MA payments by more than 3% absent other offsets.
Part D
Proposed changes to the current Part D risk adjustment model (CMS-RxHCC) also include the use of more recent data. The underlying Original Medicare data would be updated to use diagnoses from 2023 FFS claims and MA encounter data records and gross drug costs from 2024 Prescription Drug Events (PDEs). CMS also proposes to update the denominator year to 2024 (from 2023), and the exclusion of diagnoses information from audio-only encounters and from unlinked chart review records.
In 2027, CMS proposes the continued application of normalization and coding pattern adjustments. This includes the use of different normalization factors for PDP vs MAPD plans. For the 2026 plan year, this difference resulted in a reduction in revenue for the Part D portion of MAPD. For this reason, carriers offered “unbundled” standalone MA and PDP options for groups at or above 2,000 lives. For the 2027 plan year, it is not clear yet whether unbundling the MAPD product will continue to provide cost savings.
Part D Changes
The Medicare Part D standard benefit is defined by the financial structure of the cost-sharing. In 2027, CMS is proposing to increase the standard deductible for Part D enrollees to $700 (up from $615 in 2026) and the standard out-of-pocket (OOP) spending cap to $2,400 (from $2,100 in 2026).
Part C & D Star Ratings
CMS is proposing additions, changes, and removal of some Part C and D measures while soliciting feedback on updates to current and new measures.
For more details, download the Fact Sheet from the CMS Newsroom and view the CY 2027 Advance Notice.
To submit comments or questions on the CY 2027 Advance Notice online, visit regulations.gov, enter the docket number “CMS-2026-0034” in the “search” field, and follow the instructions for ‘‘submitting a comment.’’
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