On January 26, 2026, CMS released its Advance Notice of Methodological Changes for Calendar Year (CY) 2027 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (Advance Notice). The Advance Notice, which CMS releases annually, includes proposals for routine and technical updates to ensure the accuracy of MA and Part D payments. Specifically, CMS proposes limiting the diagnosis information MA and Part D plans can use for their risk adjustment data, updating its risk adjustment model, modifying its capitation rate methodology, and tweaking its Star Ratings measures for MA and Part D plans. The proposed policies are expected to yield a payment increase of 0.09% or $700 million in MA payments to plans in CY 2027. CMS will accept comments on the proposals until February 25, 2026.
The Advance Notice includes proposals to address coding differentials between Medicare Advantage and Original Medicare for CY 2027. In working to improve its risk adjustment scores, CMS states that its work is informed by three guiding principles: “(1) simplicity to reduce day-to-day administrative burden for both plans and providers; (2) competition on creating value for patients where risk adjustment facilitates such competition equally for all varieties of plans irrespective of size or resources; and (3) payments that accurately reflect beneficiary health risk and facilitate the efficient use of healthcare resources, enhanced program integrity, and greater accountability.” Ultimately, CMS’s goal is to inspire confidence that it is holding down costs related to payments that do not lead to better health outcomes.
The Advance Notice includes modifications to the MA risk adjustment model to more accurately reflect costs associated with treating different diseases and conditions. A notable proposal involves excluding diagnosis information from unlinked chart reviews. Plans often conduct retrospective chart reviews to try to uncover conditions that may have been missed during the initial round of documentation. When diagnosis codes are added to a beneficiary’s record during retrospective chart reviews, but they lack an associated, date-specific service record, these added codes are referred to as “unlinked.” Without a specific date to support a diagnosis, there is no direct evidence of a patient encounter with a clinician. In such circumstances, CMS has voiced concerns about coding accuracy, documentation, and potential overpayments. For CY 2027, CMS would not consider unlinked diagnosis codes for risk adjustment. Not surprisingly, CMS expects the payment impact of this proposal to affect MA organizations that use more unlinked chart reviews in reporting risk-adjustment eligible diagnoses for their enrollee population.
The Advance Notice also proposes updating the Part D risk adjustment model. Updates include changing the Part D benefit for CY 2027 based on the Inflation Reduction Act; ensuring risk data more accurately reflect current costs; updating the sources of diagnostic data to be consistent with similar proposed policies for Medicare Advantage; and accounting for drug costs separately in MA prescription drug plans and standalone Part D plans. CMS’s stated aim with these changes is to enhance overall stability of prescription drug benefits for all Medicare beneficiaries.
A final noteworthy proposal in the Advance Notice involves updates to the MA and Part D Star Ratings standards. CMS issues its Star Ratings of MA and Part D plans annually to help beneficiaries compare and select plans and to drive quality improvements. The Advance Notice includes an updated list of the measures that CMS will use for Star Ratings for CY 2027 (e.g., breast cancer screening, diabetes care eye exams, controlling blood pressure, etc.); a list of which measures will be used to calculate improvement measures for the 2027 Star Ratings; an updated Categorical Adjustment Index; and a list of the natural disasters that make a plan eligible for adjusted ratings when 25% of its enrollees reside in the affected area of the natural disaster.
CMS will announce the MA capitation rates and final payment policies for CY 2027 no later than April 6, 2026.
A copy of the Advance Notice is available here. The CMS fact sheet on the Advance Notice is available here.
The public can submit comments or questions to the Advance Notice electronically by going to https://www.regulations.gov, entering the docket number “CMS-2026-0034” in the “Search” field, and following the instructions for “submitting a comment.” Comments are due by 11:59 p.m. ET on February 25, 2026.
