What CMS Proposed for 2027 Risk Adjustment and What It Means for Payers
The Centers for Medicare & Medicaid Services (CMS) received a record 47,000 comments in response to a controversial 2027 Medicare Advantage proposal that features nearly flat payment rates and stricter risk adjustment measures.
Payers argued the proposal could lead to higher out-of-pocket costs and reduced benefits for beneficiaries.
Understanding the Full Story
In January 2026, the Advance Notice of Methodological Changes for CY 2027 for MA Capitation Rates and Part C and Part D Payment Policies was released. The 169-page document highlighted a significant step in CMS’s ongoing effort to modernize Medicare Advantage.
CMS used this proposal to outline its plan to reduce Medicare Advantage funding. The changes focus on refining quality measurement, strengthening beneficiary protections, and modernizing risk adjustment models. It also formalizes major updates to Part D.
Alongside this, CMS included a series of requests for information. These focus on risk adjustment, Quality Bonus Payments, Chronic Condition Special Needs Plans (C-SNPs), and broader well-being and nutrition policies.
Key Risk Adjustment Changes Under Review
CMS also solicited feedback on seven areas regarding risk adjustment and plans to:
- Reassess which diagnoses should count for risk adjustment
- Evaluate the appropriate timeframe for using diagnostic data
- Consider whether a diagnosis should be valid for risk adjustment only when tied to encounters with properly paid or otherwise validated claims
- Evaluate a shift toward encounter-based or inferred risk adjustment models that rely on utilization indicators. These include how, when, and how often members visit their PCP, use the emergency department, or are admitted to the hospital, rather than relying on diagnosis codes alone.
- Analyze how to design a next-generation risk adjustment model that draws on alternative inputs
- Assess how artificial intelligence could calibrate current or affect future risk adjustment models
Some opinions on the proposed changes include comments from CMS veteran Mark Newsom, whose LinkedIn post was quoted in Becker’s Hospital Review. “As a former lobbyist, I understand the desire of some special interests to port over to CMS tactics commonly used on the Hill to promote or kill legislation,” he wrote. “This is generally ineffective. Notice-and-comment rulemaking is a process best designed to assess the technical merits of a proposal. It’s not a public opinion poll. Data and legal analysis win the day.”
While other comments came from payers and patients.
- The Better Medicare Alliance (BMA) Analysis, Ally Letter, and Comment Letter
- The AHIP Comment Letter
- Other public comments
Payers believe that not only will the proposed changes force them to pay more and sacrifice margins, but their members will likely pay more out of pocket. BRG supports this projection: “If CMS’s EGR [effective growth rate] lags medical trend, the drop in total payments from what they otherwise would be would apply financial pressure to plans akin to a payment cut.” Ultimately, rising healthcare costs are eating up the government’s slim payment raises, financially crippling payers in funding members’ care.
Manage CMS Challenges with AccuReports and RAMP by FRG
Financial Recovery Group is here to help payers prepare for and handle policy changes with healthcare financial intelligence solutions.
AccuReports articulates details such as service-line charges against funding, dynamically updated status of monthly capitations, and expense-to-funding ratio calculations to help payers hold onto margin and partner with providers to address high-cost, low-value utilization, gaps in care, and other shortfalls in achieving optimal financial and member health outcomes.
FRG RAMP gives users a clear view of relevant HCC and chronic condition codes for each member. It highlights both captured codes and those that still need documentation for validation. Teams can build chase lists and run chart audits with real-time analytics. This supports payer-provider action at the member level and helps drive measurable recapture results.
For more information about AccuReports or RAMP, email info@frgsystems.com or call 888-466-1025 today.