In this conversation, Andrea Maresca, Senior Principal at Health Management Associates (HMA), caught up with Tim Courtney, Director, Wakely, and Jonathan Blum, 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’s (CMS’s) proposed risk adjustment and diagnosis source changes, which are drawing significant attention across the industry.
Q: The headline is “flat” payments. How should the market interpret CMS’s projected rate change?
Tim Courtney: CMS projects a net average payment change of just +0.09 percent for CY 2027—about $700 million (M). The effective growth rate is about 4.97 percent, but it’s largely offset by risk model and normalization changes and the proposed diagnosis source policy.
Jon Blum: Exactly. It’s important to note that CMS’s 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’s most surprising in the Advance Notice for 2027?
Blum: The diagnosis source tightening is the big one. CMS proposes excluding diagnoses from “unlinked Chart Review Records” 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’s program integrity focus.
Courtney: And it’s not only chart review. CMS also proposes excluding diagnoses from audio-only services for Part C and similarly for Part D. Operationally, that’s a big deal. Plans need to understand where diagnoses originate, how they’re supported, and what the downstream risk adjustment factor (RAF) impact looks like by segment and provider channel.
Q: The Wakely team estimates a different “feel” than CMS’s topline. What does Wakely’s analysis add?
Courtney: Wakely’s summary helps translate CMS components into both benchmark and plan payment change.
Blum: This point is really key. Wakely’s analysis flags that rebasing/repricing impacts aren’t 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: The tighter risk adjustment environment could squeeze rebates and supplemental benefit richness—especially if bids don’t adjust quickly. Wakely estimates risk-adjusted bid and rebate revenue is down roughly 0.35 percent under a set of simplifying assumptions, underscoring the margin sensitivity.
Practically this means plans should run a few scenarios: 1) RAF compression from diagnosis source changes, 2) normalization updates, and 3) Star-related shifts—even if the Star change is estimated to be small nationally.
Blum: I’d 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. HMA 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’s side, the detailed benchmarking and methodology interpretation helps clients quantify what CMS’s 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 “where the change hits” (diagnosis sources, provider channels, county mix, Stars trajectory) will be best positioned heading into April’s final Rate Announcement.
Blum: And from a policy lens, plans need to connect the dots. CMS’s 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’s summary analysis, Advance Notice of Methodological Changes for CY 2027 MA Capitation Rates and Part C and Part D Payment Policies.
