In this conversation, Andrea Maresca, Senior Principal at 黑料不打烊 (黑料不打烊), caught up with , Director, Wakely, and , Co-Founder & Managing Partner at Health Transformation Strategies, LLC, to unpack the biggest questions emerging from the Calendar Year (CY) 2027 Medicare Advantage (MA) and Part D Advance Notice. Of particular interest was the Centers for Medicare & Medicaid Services鈥檚 (CMS鈥檚) proposed risk adjustment and diagnosis source changes, which are drawing significant attention across the industry.
Q: The headline is 鈥渇lat鈥� payments. How should the market interpret CMS鈥檚 projected rate change?
Tim Courtney: CMS a net average payment change of just +0.09 percent for CY 2027鈥攁bout $700 million (M). The effective growth rate is about 4.97 percent, but it鈥檚 largely offset by risk model and normalization changes and the proposed diagnosis source policy.
Jon Blum: Exactly. It鈥檚 important to note that CMS鈥檚 impact projections are based on the change in its average payments. Its proposed policies will have much more far-reaching distributional impacts, depending on the diagnoses of their enrolled members. At the same time CMS recently proposed changes to its Star Ratings methodologies. Over time, we could see quite significant changes to the balance of Medicare Advantage payments distributed across the country that could significantly affect benefit offerings and premium amounts.
Q: What鈥檚 most surprising in the Advance Notice for 2027?
Blum: The diagnosis source tightening is the big one. CMS proposes excluding diagnoses from 鈥渦nlinked Chart Review Records鈥� from risk score calculation starting in CY 2027. That signals a continued progression by the agency toward encounter-anchored data integrity. Assuming this policy is finalized, Medicare Advantage plans must continue to invest in systems to respond to CMS鈥檚 program integrity focus.
Courtney: And it鈥檚 not only chart review. CMS also proposes excluding diagnoses from audio-only services for Part C and similarly for Part D. Operationally, that鈥檚 a big deal. Plans need to understand where diagnoses originate, how they鈥檙e supported, and what the downstream risk adjustment factor (RAF) impact looks like by segment and provider channel.
Q: The Wakely team estimates a different 鈥渇eel鈥� than CMS鈥檚 topline. What does Wakely鈥檚 analysis add?
Courtney: helps translate CMS components into both benchmark and plan payment change.
Blum: This point is really key. Wakely鈥檚 analysis flags that rebasing/repricing impacts aren鈥檛 fully reflected yet, which means county-level outcomes can diverge materially once the final Rate Announcement is released. The rebasing could be particularly volatile this year as CMS adjusts for rural emergency hospital payments and the removal of anomalous and suspect DME claims. Both adjustments vary by geographic area.
Q: How should plans think about bid strategy and benefit pressure for 2027?
Courtney:聽The tighter risk adjustment environment could squeeze rebates and supplemental benefit richness鈥攅specially if bids聽don鈥檛聽adjust quickly. Wakely estimates risk-adjusted bid and rebate revenue is down roughly聽0.35聽percent聽under a set of simplifying assumptions, underscoring the margin sensitivity.聽
Practically this means plans should run a few scenarios: 1) RAF compression from diagnosis source changes, 2) normalization updates, and 3) Star-related shifts鈥攅ven if the Star change is estimated to be small nationally.
Blum: I鈥檇 add provider contracting and clinical program return on investment (ROI) will likely be an even greater focus for Medicare Advantage plans. When risk score lift is constrained, the value of medical cost management and quality performance becomes more important. We have seen tremendous pushback by healthcare providers over the greater use of prior authorization, with some major health systems dropping their contracts with Medicare Advantage plans altogether. Medicare Advantage plans will have to carefully balance the need to reduce medical expenditures and maintain their provider networks to attract enrollment. Establishing strong partnerships with provider systems will be more important than ever.
Q: What do plans need most right now?
Courtney: This is where integrated strategy and actuarial and policy expertise really matter. 黑料不打烊 is supporting stakeholders with payment impact modeling, scenario analysis, and advisory services tied to benchmark rebasing, risk adjustment, Star Ratings, product strategy, and Part D payment policy, so clients can translate the Notice into concrete bid and operating decisions.
From Wakely鈥檚 side, the detailed benchmarking and methodology interpretation helps clients quantify what CMS鈥檚 technical updates mean in dollar terms and across geographies.
The CY 2027 Advance Notice is also a reminder that average impacts hide portfolio impacts. The plans that model 鈥渨here the change hits鈥� (diagnosis sources, provider channels, county mix, Stars trajectory) will be best positioned heading into April鈥檚 final Rate Announcement.
Blum: And from a policy lens, plans need to connect the dots. CMS鈥檚 proposed rate notice is both an articulation of its current priorities and continued progression toward more payment accuracy, encounter-linked data, and program integrity. Medicare Advantage plans should be both prepared to operationalize these policies and to work with the agency to ensure its policies better serve Medicare beneficiaries.
Medicare Advantage plan leaders will be those organizations that operationalize these policy directions early, constructively engage in the policy process, and form far stronger partnerships with health care providers.
You can find more insights on the important proposed changes in plan payments, risk adjustment, and other financial and regulatory requirements for 2027 in Wakely鈥檚 summary analysis, .
