CMS has released proposed 2027 Medicare Advantage and Medicare Part D payment changes, signaling a major shift in how plans are paid and how risk is measured. These updates focus on improving payment accuracy, strengthening risk adjustment rules, and ensuring the long term financial sustainability of the Medicare program.
The proposal reflects CMS’s growing effort to reduce payment distortions and align reimbursements more closely with real patient health needs. Instead of allowing inflated payments based on aggressive coding practices, CMS aims to create a more balanced and fair system for health plans, providers, and taxpayers.
These changes matter for several groups. Medicare Advantage insurers may see shifts in revenue and benefit strategy. Healthcare providers and billing teams will need to adapt to stricter documentation and coding expectations. Medicare beneficiaries could experience indirect effects on premiums, benefits, and drug coverage. Meanwhile, policymakers are focused on protecting public funds while maintaining access and affordability.
In this blog, we will break down what CMS is proposing for 2027, why these changes are happening, how they impact Medicare Advantage and Part D, and what insurers, providers, and healthcare organizations should prepare for moving forward.
What CMS Is Trying to Fix in Medicare Advantage Payments
Medicare Advantage spending has grown rapidly over the past decade, driven by increasing enrollment and rising plan payments. While the program continues to expand, CMS has raised concerns about whether current payments accurately reflect patients’ health risks.
A key issue is risk score inflation, where some Medicare Advantage plans report more diagnoses than traditional Medicare. This can lead to higher payments without clear evidence that patients are sicker or receiving more complex care. CMS views this trend as a contributor to Medicare Advantage overpayments.
The central challenge is balancing fair compensation for plans that care for high-risk patients with the need to prevent excess payments tied to coding behavior rather than real medical need. CMS wants payments to reflect actual clinical risk, not paper-based diagnoses or chart-review tactics.
The broader goal is to create a fair, sustainable, and data-driven payment system. By tightening risk adjustment rules and improving how diagnoses are counted, CMS aims to protect taxpayer dollars while ensuring Medicare Advantage remains viable, competitive, and focused on patient outcomes.
CMS Medicare Advantage Rate Update 2027
CMS has proposed a Medicare Advantage rate update for 2027 that signals slower payment growth than insurers had anticipated. The base payment increase is estimated at approximately 0.09 percent, which translates to roughly $ 700 million in additional funding across the program.
While this headline number appears modest, CMS notes that coding trends and risk score growth could raise the effective payment increase closer to 2.5 percent. This means real-world plan revenue growth may exceed the base rate.
Many insurers expected a larger increase due to rising medical costs, inflation, and enrollment growth. As a result, the proposal has triggered concern across the Medicare Advantage industry. Some plans have warned of tighter margins, benefit adjustments, or more cautious expansion strategies.
From a market perspective, the update signals CMS’s intention to control spending growth while improving payment accuracy. The long-term impact will depend on how insurers adapt to tighter reimbursement and stricter risk adjustment rules.
CMS Risk Adjustment Changes Medicare Advantage and MA Coding Reform
One of the most significant parts of the proposal involves risk adjustment and coding reform. CMS is targeting payment practices that it believes have led to inflated risk scores and excess spending.
Risk Management
Risk adjustment is the process CMS uses to adjust Medicare Advantage payments based on patients’ health status and complexity. Plans that enroll patients with more serious health conditions receive higher payments to reflect the cost of care.
Diagnosis codes play a major role in this system. The more valid medical conditions a patient has documented, the higher the plan’s risk score and reimbursement. This creates a strong financial incentive for accurate coding, but it can also create incentives for overcoding if not properly controlled.
CMS wants risk adjustment to reflect true patient health needs, not documentation tactics that inflate payments without improving care.
Chart Review Diagnosis Exclusion CMS
CMS is proposing to exclude diagnoses that are not tied to real clinical encounters, a policy known as the chart review diagnosis exclusion.
Under this proposal, diagnoses identified through chart reviews alone will no longer count toward risk-adjustment payments unless linked to an actual patient visit or service. CMS believes that some organizations have used chart reviews to add diagnoses that were not actively treated or clinically relevant.
CMS considers this a payment accuracy risk because it can lead to higher reimbursements without meaningful care changes. The goal is to ensure that every diagnosis used for payment reflects real clinical interaction and patient management.
This change could have revenue implications for Medicare Advantage plans that rely heavily on aggressive coding or retrospective chart review programs. Plans that depend more on direct clinical documentation may see less disruption.
Medicare Advantage Risk Score Changes
CMS is also updating the Medicare Advantage risk adjustment model to better reflect current healthcare costs and disease severity patterns.
The revised model incorporates new cost data and updated condition weights to ensure payments more closely align with actual care complexity. Some conditions may carry different financial weights than in prior years, based on updated utilization and expense trends.
These updates are designed to improve fairness across plans, reduce distortions, and ensure high-risk patients are appropriately funded. Financial impacts will vary by organization depending on patient mix, coding practices, and care delivery models.
Overall, CMS is shifting toward a more clinically grounded, financially sustainable risk-scoring system.
Medicare Part D Payment Changes 2027
CMS is also proposing meaningful updates to Medicare Part D payment policies for 2027, with several changes tied to the Inflation Reduction Act and drug benefit restructuring.
Inflation Reduction Act Integration in Part D Payments
The proposal updates Part D payment formulas to reflect new drug pricing rules and benefit structures introduced under the Inflation Reduction Act. These changes alter how drug costs are shared between plans, manufacturers, and the Medicare program.
CMS aims to stabilize plan financing while improving cost predictability for beneficiaries. The updated structure is intended to balance plan liability while maintaining access to prescription medications.
Part D Risk Adjustment Updates and Diagnosis Accuracy
CMS is refining Part D risk adjustment to improve accuracy across different plan types, including Medicare Advantage Prescription Drug plans and standalone Part D plans.
The agency is also proposing to exclude unsupported diagnoses, similar to the Medicare Advantage risk adjustment changes. This ensures that drug plan payments are based on verified medical conditions tied to real clinical care rather than administrative data alone.
These adjustments are meant to improve fairness, reduce payment distortions, and strengthen program integrity.
Key Takeaways
CMS is prioritizing accuracy over inflation with the 2027 Medicare Advantage payment policy. Payment growth will be more controlled, and reimbursements will reflect real patient health needs rather than chart-based coding.
Organizations that prioritize care quality and accurate documentation are likely to benefit, while aggressive coding tactics may result in reduced revenue.
For providers and billing teams, now is the time to review documentation and optimize coding. Partnering with a trusted medical billing service can help ensure compliance, maximize reimbursement, and prepare for 2027 CMS rules.
Frequently Asked Questions
- What are the CMS 2027 Medicare Advantage payment changes and how will they affect providers?
CMS 2027 Medicare Advantage payment changes focus on improving payment accuracy, updating risk adjustment, and controlling overpayments. Providers and billing teams may need to improve clinical documentation and coding accuracy to stay compliant and maximize reimbursement.
- How will the 2027 Medicare Part D updates impact drug costs and patient out-of-pocket expenses?
The 2027 Medicare Part D updates integrate Inflation Reduction Act reforms, adjust risk scoring, and raise the out-of-pocket cap to $2,400. These changes aim to improve cost predictability and affordability for seniors while ensuring plan sustainability.
- What is the chart review diagnosis exclusion CMS proposal and why does it matter for Medicare Advantage plans?
The CMS chart review diagnosis exclusion rule means diagnoses not linked to actual patient encounters will no longer count toward risk adjustment. This reduces risk-score inflation and ensures that Medicare Advantage payments reflect actual patient care rather than retrospective coding practices.
- How can medical billing teams prepare for CMS 2027 Medicare Advantage and Part D changes?
Billing teams should review coding workflows, ensure documentation is tied to actual clinical encounters, and align claims processes with updated CMS rules. Partnering with an experienced medical billing service can help optimize reimbursement and maintain compliance under 2027 Medicare Advantage policies.