The Centers for Medicare & Medicaid Services locked in a 2.48 percent average payment increase for Medicare Advantage plans heading into 2027, a final number nearly 28 times larger than the 0.09 percent update the agency had proposed in January. The reversal followed a record 47,000 public comments and a monthslong industry campaign that included funded research, advertising and a coordinated signature drive. Once insurers factor in projected changes to member risk scores, the agency says the increase effectively reaches 4.98 percent. The figure sets the entire budget Medicare Advantage insurers will have to work with while building 2027 benefit packages for the roughly 35 million older Americans enrolled in the program.
Why the Final Number Dwarfed the January Estimate
The gap between the two figures traces back to a single decision. CMS had proposed recalibrating the Medicare Advantage risk-adjustment model using more recent Original Medicare data, updating from 2018 diagnoses and 2019 expenditures to 2023 diagnoses and 2024 expenditures. Because newer cost data tends to shrink the risk scores insurers use to justify higher reimbursement, that update was projected to hold plan payments almost flat. CMS abandoned the recalibration in the final rule, and a net average increase of 2.48 percent, or more than $13 billion, in payments to MA plans in CY 2027 replaced the near-freeze from January.
A second, smaller factor moved in the same direction. CMS’s own growth-rate table shows the effective growth rate, which tracks per-capita spending in original Medicare and drives most of the MA benchmark, rose from 4.97 percent in the January advance notice to 5.33 percent in the final announcement, a shift the agency attributed to newly incorporated Medicare program data through the fourth quarter of 2025.
CMS did keep one piece of its original plan. For 2027, the agency is excluding diagnoses recorded through unlinked chart reviews, meaning diagnosis codes not tied to an actual patient encounter, from risk-score calculations, with a carve-out for beneficiaries who switch between MA plans. But that change was layered onto the older, more generous 2024 risk-adjustment model rather than the newer one CMS had proposed, and CMS did not adopt in full its proposed changes to the risk adjustment model, which explains a significant portion of the increase in net plan payments from the advance notice to the final rate announcement.
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A Record Lobbying Push Sank the Overpayment Fix
The scale of the reversal followed an unusually aggressive response from the insurance industry to the January proposal. Insurers and the trade group Better Medicare Alliance funded economic research, ran advertising campaigns, gathered signatures from beneficiaries and organizations, and helped drive the record 47,000 comments CMS received on the advance notice, warning that inadequate rates would force benefit cuts and additional plan exits for 2027. Medicare Director Chris Klomp rejected the idea that the outcome amounted to a handout, telling reporters on a call that plans had lobbied for a rate even higher than 2.48 percent and that CMS was not discarding its risk-adjustment framework.
Wall Street read the announcement differently. Shares of major Medicare Advantage insurers, including UnitedHealthcare and Humana, rose in aftermarket trading after the rate was released, and Jefferies analyst David Windley described the relief for the industry as hard to overstate. Better Medicare Alliance called the final rate a direct response to the volume of beneficiaries and organizations who had urged CMS to fund the program fully.
Analysts at TD Cowen offered a more pointed reading, writing that CMS’s decision not to implement the risk-model recalibration signaled the industry’s ability to shape the agency’s decisions. Klomp acknowledged that plan exits factored into the calculus, saying CMS had paid attention to prior disruptions when beneficiaries were forced to change plans mid-cycle, a concern that carried added weight with the November midterm elections approaching.
Enrollees Still Face a Bump Insurers Call Inadequate
Despite winning a far larger increase than regulators initially proposed, insurer groups did not describe the outcome as sufficient. The nonprofit coalition Alliance of Community Health Plans and the provider association America’s Physician Groups both said afterward that the final 2.48% update still doesn’t keep pace with actual cost pressures facing insurers or the physicians they contract with. That gap matters directly to enrollees, since Medicare Advantage plans typically respond to thin margins by trimming supplemental extras such as dental, vision or gym benefits, raising cost-sharing, or withdrawing from counties where enrollment does not justify the risk.
The pattern is not new. Most major Medicare Advantage insurers had already trimmed enrollment heading into 2026, choosing to protect profit margins over growth after years of higher-than-expected medical spending. Whether the 2027 rate translates into stable benefits or another round of scaled-back plans will depend heavily on factors CMS does not control, including how much medical utilization keeps rising and how insurers’ first-quarter earnings calls, which begin later this year, characterize their margin recovery.
What the April announcement actually settled, then, is narrower than the raw percentage suggests. It fixed how much new money flows into the Medicare Advantage system for 2027 and confirmed that the risk-adjustment overhaul CMS said was needed to improve payment accuracy will not take effect for at least another year. Whether that money is enough to keep 2027 plan offerings intact for the beneficiaries who depend on them is a question insurers themselves left open, and one that will play out county by county as plans finalize their bids later this year.
This article was researched and drafted with the assistance of artificial intelligence.
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