2027 CMS Advance Notice: 4 key updates

On January 26, 2026, the Centers for Medicare & Medicaid Services (CMS) released the 2027 Medicare Advantage and Part D Advance Notice. This annual publication outlines proposed payment and policy updates that will shape the landscape for Medicare Advantage (MA) and Part D plans next year.

In the latest notice, CMS offered three specific principles guiding changes to the risk adjustment model: simplifying administrative burden for both payers and providers, increasing competition to create value for patients, and driving accurate payments. For MA professionals, particularly in risk adjustment and quality, understanding these changes is crucial for optimizing plan performance, ensuring compliance, and maintaining a competitive edge. Here are four key updates to consider and recommended strategies.

Proposed rate increase of 0.09%

As the MA program continues to face scrutiny for its cost, CMS has proposed an average rate increase of just 0.09% for Medicare Advantage plans in 2027, a dramatic drop from 5.06% in the final 2026 Rate Announcement published in April 2025 (Figure 1). 

Figure 1. Percentage change in anticipated MA plan payments for 2027 (Source: CMS fact sheet).

The industry is reacting swiftly to the proposal, with AHIP specifically warning that “flat program funding at a time of sharply rising medical costs and high utilization of care will impact seniors’ coverage.” However, CMS officials have countered that the minimal rate increase is needed to ensure the program’s sustainability.

Model V28 recalibration

The small proposed payment increase is largely driven by CMS’s plan to continue using CMS-HCC Model Version 28 (V28), but reset the calibration to more recent Medicare fee-for-service data, shifting from 2018 diagnoses and 2019 expenditures to 2023 diagnoses and 2024 expenditures. The agency says this would “reflect more current costs associated with various diseases, conditions, and demographic characteristics.” CMS projects this recalibration would decrease MA plan payments by an average of 3.32%, as noted in Figure 1 above.

Exclusion of unlinked chart review records and audio-only encounters

Another of the most notable updates in the 2027 Advance Notice is CMS's proposal to exclude diagnoses from unlinked chart review records as well as audio-only encounters in the Part C risk adjustment model. Specifically, diagnoses captured solely through chart reviews that cannot be tied to a corresponding encounter in the medical record would no longer be considered for risk score calculations. The agency predicts this would decrease MA plan payments by an average of 1.53%, also noted in Figure 1 above.

This change, which follows numerous audits released by the Office of Inspector General (OIG) focused on alleged upcoding by MA plans, aims to enhance data integrity and mitigate the potential risk of unsupported diagnosis submissions. For plans, the exclusion of unlinked chart review diagnoses could result in lower risk scores and consequently, reduced payments.

Updates to the Star Ratings program

Following the proposal of significant measure retirements and the removal of the Health Equity Index/EHO4all incentive last fall, CMS is proposing further updates to existing measures, the introduction of new metrics, and refinements in how data is collected and weighted. Notably, CMS suggested that in future years, it may pivot to using percentile distribution cutoffs for determining thresholds for non-CAHPS measures instead of the current clustering methodology, giving MA plans more predictability when aiming for certain cut points.  

These adjustments will directly impact how plans are rated and by extension, their ability to attract and retain members. High Star Ratings (at least 4+) are linked to both bonus payments and marketing advantages.

Recommendations for Medicare Advantage plans

Drawing from Cotiviti’s experience with risk adjustment and quality departments at a wide array of health plans, here are three strategic recommendations for MA plans may consider:

1. Enhance encounter data accuracy and documentation: With CMS potentially excluding diagnoses from unlinked chart reviews, prioritize comprehensive coder and provider education, and invest in real-time data monitoring tools. This will ensure that all submitted diagnoses are backed by valid encounters, supporting both compliance and accurate risk scores. It will be vital for MA organizations to strengthen their documentation and coding practices, ensuring that all diagnoses used for risk adjustment can be verified through proper encounter data.

2. Focus on targeted quality improvement for Star Ratings: MA plans must stay informed about the evolving standards and proactively address performance gaps. Building a culture of continuous quality improvement and leveraging both predictive and retrospective analytics will be critical success factors under the updated Star Ratings framework. Use analytics to identify underperforming measures and member populations at risk of non-compliance, implementing tailored outreach and intervention programs.

3. Strengthen cross-functional collaboration: Foster alignment between risk adjustment, quality, engagement, and clinical teams. Establish regular cross-departmental reviews of performance data and create shared accountability for meeting both financial and quality targets.

By taking proactive steps now while awaiting publication of the final Rate Announcement, anticipated in April, Medicare Advantage plans can position themselves for success as they navigate the regulatory changes set forth in the 2027 Advance Notice. Staying informed, agile, and collaborative will be key to achieving sustainable growth and delivering high-quality care to members.

Stay on top of risk adjustment and quality essentials throughout 2026

Don’t miss Cotiviti’s deeper dive into the CMS Advance Notice from a risk adjustment perspective on Tuesday, March 3. Sign up for our Risk Adjustment Essentials webinar series as we walk through:

• Adopting early-year best practices for payers and providers
• Navigating key regulatory updates, including CMS Medicare Advantage Advance Notice and Final Rule
• Future-proofing compliance, strengthening results, and ensuring audit readiness

Looking to shore up your Star Ratings results? Sign up for our Quality Decoded webinar series, kicking off Tuesday, February 24 with a breakdown of the CMS Advance Notice from a quality improvement perspective, followed by additional key HEDIS® and Star Ratings insights throughout the year

Cotiviti’s Marge Ciancetta, Star Intelligence product manager, contributed to this article.

HEDIS^® is a registered trademark of the National Committee for Quality Assurance.