On January 26, 2026, the Centers for Medicare & Medicaid Services (CMS) released the 2027 Medicare Advantage and Part D Notice.
The good news? CMS plans to increase its payments to insurers. The bad news? Not by much.
Here’s how we interpret the Medicare Advantage and Part D 2027 Advance Notice and what disruption may lie ahead for insurance agents selling Medicare plans.
What Is the CMS Advance Notice?
Every year, officials review and update how much CMS pays Medicare Advantage and Part D plans per member and the way they calculate those payments.
Around January, CMS publishes those proposed updates via their Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and MA and Part D Payment Policies (or “Advance Notice” for short).
The Advance Notice announces how much CMS plans to pay Medicare Advantage and Part D insurers per member for the upcoming plan year and the way they plan to calculate those payments.
What Does the 2027 Medicare Advantage and Part D Notice Tell Us?
How Much CMS May Pay Plans in 2027
For 2027, CMS is proposing to pay Medicare Advantage and Part D plans 0.09 percent more than they paid plans in 2026. In other words, the government wants to pay health insurers close to what they paid them last year for each Medicare Advantage and Part D plan member.
This proposed increase is in stark contrast to the 5.06 percent increase finalized for 2026.
Source: CMS.gov
1Rebasing/re-pricing impact is dependent on finalization of the average geographic adjustment index and will be available with the publication of the CY 2027 Rate Announcement.
2Change in Star Ratings reflects the estimated effect of changes in the Quality Bonus Payments for the upcoming payment year.
3The 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 percent.
4This row shows the average impact of the exclusion of diagnoses from unlinked chart review records on risk scores.
5The total does not include an adjustment for underlying coding trend in MA. For CY 2027, CMS expects the MA risk scores to increase, on average, by 2.45 percent due to the underlying coding trend.
Keep in mind, the exact payments plans receive from CMS will depend on their location, 2026 Star Ratings, the health of their enrollees, and the number of enrollees they have. Additionally, the expected average change in revenue could change before it’s finalized in a few months.
The expected average change in revenue could change before it’s finalized in a few months.
Changes in How CMS Will Calculate Payments
The other rows in the table tell us the changes in how much certain factors will affect the expected average change in payments to plans.
- The rebasing/re-pricing impact on payments is still unknown.
- An Effective Growth Rate percent increase of 4.97% means beneficiaries’ MA plans benefits usage is expected to increase by this figure.
- The Star Ratings 0.03% decrease means quality bonus payments to plans will be slightly lower in 2027.
- The MA Coding Pattern will affect payments the same way it did in 2026.
- A 3.37% decrease in Risk Model Revision and Normalization means that risk-adjusted payments to MA plans will be lower for 2027.
- Excluding certain Sources of Diagnoses will lower plan payments by 1.53%.
Within the full Advance Notice PDF, CMS details some notable proposed changes in their calculations of the different factors that contribute to the expected average change in payment to plans. What stood out to us are the Medicare Advantage risk model changes.
Part D & MA Risk Adjustment Revisions & Normalization
CMS is proposing more changes to the risk adjustment model, including updating the data years used to calibrate the model and risk score calculations. For the calculations, they wish to remove limitations on risk scores for certain chronic kidney disease categories as well as exclude certain diagnoses from risk adjustment.
More specifically, CMS is proposing to use separate Part D and MAPD risk models to try to address the gap between premiums for the two types of plans. (In 2025, they began calculating separate normalization factors for MAPD and stand-alone prescription drug plans.)
CMS wishes to exclude diagnoses from audio-only encounters in risk adjustment calculations. (These were not eligible for risk adjustment in the past; however, CMS had not fully applied the policy.)
Additionally and more significantly, they propose excluding diagnoses submitted through chart review records not linked to a specific encounter record.
Stock Market Reaction to the Announcement
The news had a negative impact on stocks for the following major, publicly traded Medicare Advantage companies.
MA Carriers’ Closing Stock Prices After CMS Released the 2027 Advance Notice
Source: Investing.com
How Could the 2027 Advance Notice Affect Medicare Plans This AEP?
With hardly any projected increase in payment from CMS, we believe Medicare Advantage and Part insurers will continue to be under increasing cost and operational pressures. As a result, we could see:
- Higher monthly premiums
- Increased cost-sharing on the beneficiary
- More cuts to supplemental benefits (e.g., dental, vision, hearing, travel, spending cards, etc.)
- More service area reductions
- More plan exits
Overall, plans may cost members more for fewer benefits. We could also see fewer plan choices available for beneficiaries to choose from.
Everyone will be watching for CMS’ Rate Announcement, typically published in early April. Plans will then use that to finalize and submit their 2027 bids to CMS for approval.
How Should Agents Prepare for This Annual Enrollment?
With the 2027 Medicare Advance Notice in mind, agents should prepare to see more disruption this Annual Enrollment Period. Right now, agents can take steps to:
- Better assist clients in finding a new plan if their current one will no longer be an option due to termination, service area reduction, or higher costs
- Achieve operational efficiency, streamline appointments, and communication with clients
- Keep a diverse portfolio in case plans leave your market or cut commissions
- Start offering ancillary insurance coverage — those supplemental benefits may become even more important for those with MA plans
- Stay on top of carrier news
Nothing is certain until the 2027 final rate notice comes out and insurers finalize their plans for 2027.
With the 2027 Medicare Advance Notice in mind, agents should prepare to see more disruption this Annual Enrollment Period.
When Will the 2027 Medicare Advantage & Part D Rate Announcement Be Available?
We expect to see the final Rate Announcement published in early April.
Does the Payment Percentage Usually Change from the Advance Notice to the Rate Announcement?
Yes, we tend to see the payment percentage increase from the Advance Notice to the final Rate Announcement, but it is not a given.
Increases in CMS’ Payments to Medicare Advantage & Part D Plans
Source: CMS.gov
The 2027 Advance Notice indicates that Medicare Advantage and Part D carriers and insurance agents could be in for a tough time this AEP. We won’t know for sure until CMS’ Rate Announcement in April. Until then, agents should take care to prepare for potential market disruption as we approach 2027.
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