The Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2027 Advance Notice and Payment Policies for the Medicare Advantage (Part C) Part D Prescription Drug Program on January 26, 2026. The Advance Notice begins CMS’s annual rate-setting cycle and describes proposed updates to Medicare Advantage (MA) growth rates, benchmark rebasing, risk adjustment, Star Ratings, and Part D payment parameters. CMS previously released a proposed rule in November 2025 that included policy changes to the Star Ratings system and enrollment policies for MA and Part D starting in contract year 2027. (Read the Health Management Associates (HMA) summary here.)
Comments on the Advance Notice are due February 25, 2026, and CMS will publish the final CY 2027 rate announcement no later than April 6, 2026.
This article provides an early look at the proposed methodological updates and draft capitation rates. Wakely, an HMA Company, will publish a detailed analysis of the Advance Notice in early February.
Payment Impact on Medicare Advantage Organizations
CMS estimates a national per capita MA growth rate of 5.10 percent from 2026 to 2027, with fee-for-service (FFS) non-end-stage renal disease (non-ESRD) growth of 5.10 percent and FFS dialysis end-stage renal disease (ESRD) growth of 6.17 percent.
The 5.10 percent growth rate reflects projected increases in per capita FFS Medicare spending for beneficiaries who are aged/have disabilities and serves as the primary driver of 2027 benchmark updates, interacting with rebasing and risk adjustment changes to determine final capitation payments. The growth rate reflects updates to how CMS pays for skin substitutes in the 2026 Medicare Physician Fee Schedule. These updates resulted in significantly lower projected costs and materially reduced the growth rate.
These preliminary estimates inform the development of MA benchmarks and may change in the final rate announcement.
Table 1. Estimated Impact of Proposed Payment Changes on Medicare Advantage Plan Payments, CY 2027
| Year-to-Year Percentage Change | |
| Impact | CY 2027 Advance Notice |
| Effective Growth Rate | 4.97% |
| Rebasing/Re-pricing | TBD |
| Change in Star Ratings | -0.03% |
| MA Coding Pattern Adjustment | 0% |
| Risk Model Revision and Normalization | -3.32% |
| Sources of Diagnoses | -1.53% |
| Expected Average Change | 0.09% |
| Source: Centers for Medicare & Medicaid Services. 2027 Medicare Advantage and Part D Advance Notice. January 26, 2026. Available at: https://www.cms.gov/newsroom/fact-sheets/2027-medicare-advantage-part-d-advance-notice. | |
Medicare Advantage Benchmarks, Rebasing, and Risk Adjustment
The Advance Notice describes CMS’s approach and changes that will affect payment to plans, including:
- Excluding from the risk adjustment process diagnoses submitted from chart reviews with unlinked claim records. In the Fact Sheet, CMS estimates this change will reduce Part C payments by 1.53 percent.
- Rebasing county FFS rates for 2027 using 2020–2024 claims data, continuing CMS’s practice of updating benchmarks annually to reflect the most current FFS experience. The Advance Notice also reiterates the statutory framework for calculating benchmarks, including applicable and specified amounts, benchmark caps, and quality bonus payments.
- Updating the CMS Hierarchical Condition Category (CMS-HCC) and Prescription Drug Hierarchical Condition Category (RxHCC) risk adjustment models and associated normalization factors for CY 2027 and continuing to apply the statutory MA coding pattern difference adjustment to account for systematic differences in diagnosis coding between MA and FFS.
Quality Bonus Payments, Star Ratings, and Part D Updates
CMS states that contracts with 4 or more Stars receive a 5 percentage-point quality bonus, while new and low-enrollment contracts receive a 3.5percentage-point bonus. The Advance Notice also includes updates related to Part C and Part D Star Ratings measures and methodological refinements.
For Part D, CMS outlines proposed updates to the defined standard benefit parameters for CY 2027, as well as changes to Part D risk adjustment, normalization, premium stabilization, reinsurance, and risk-sharing, with additional policy context provided in the Contract Year 2027 Medicare Advantage and Part D proposed rule.
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The CY 2027 Advance Notice provides early signals on benchmark growth, rebasing, and payment methodology changes that will shape MA and Part D payments in 2027. Stakeholders should begin evaluating the potential implications for bid development, benefit design, and financial performance as CMS moves toward finalizing rates in April.
HMA supports Medicare Advantage and Part D stakeholders with payment impact modeling, scenario analysis, and strategic advisory services related to benchmark rebasing, risk adjustment, Star Ratings, and Part D payment policy to help organizations prepare for the CY 2027 rate announcement.
For details about the finalized payment and policy rules, contact our featured experts, Tim Courtney and Rachel Stewart.
