Health insurers are warning that flat Medicare Advantage rates, as proposed by the Trump administration late Monday, would likely force them to take a deep look at the benefits they offer.
Chris Bond, spokesperson for AHIP, the key lobbying organization for the insurance industry, said in a statement that the organization and its members “welcome reforms to strengthen Medicare Advantage,” but rising costs will make it difficult to manage the flat rate proposal.
“Flat program funding at a time of sharply rising medical costs and high utilization of care will impact seniors’ coverage,” Bond said. “If finalized, this proposal could result in benefit cuts and higher costs for 35 million seniors and people with disabilities when they renew their Medicare Advantage coverage in October 2026.”
Ceci Connolly, CEO of the Alliance of Community Health Plans, echoed the sentiment, saying the Advance Notice is “disappointing and wholly unrealistic as medical costs and acuity continue to rise.” She expressed concern that the proposed rates could force more insurers to exit MA.
“Without sufficient payment updates, health plans and providers will continue facing challenges to invest in care coordination, supplemental benefits and innovative approaches that improve quality and outcomes for seniors,” she said.
“Simply, this proposed rate doesn’t cut it,” Connolly continued. “Regional health plans are deeply rooted in their communities, particularly in rural and underserved regions and have remained in their communities as other insurers fled.”
ACHP did praise, however, CMS’ efforts to continue to evolve the risk adjustment program. The agency has put a particular focus on curbing insurer behaviors to “upcode” beneficiaries in a bid to increase their payouts, and ACHP said it “strongly” supports this work.
ACHP has advocated for a “Medicare for Tomorrow” shift that includes a more modernized risk adjustment environment, Connolly said.
“CMS’ proposal to exclude unlinked chart reviews from risk scores is a welcome step, and we look forward to reviewing the details to ensure less-resourced and regional plans are not unintentionally disadvantaged,” Connolly said.
PUBLISHED: Jan. 26 at 4:04 p.m. ET
The Trump administration has released proposed payment rates in Medicare Advantage and Part D for the 2027 plan year, estimating an additional $700 million in payments to MA plans.
According to a fact sheet on the proposed rule, the Advance Notice includes a net payment rate increase of 0.09% for MA, essentially flat compared to the 2026 plan year. When accounting for the estimated risk score trend in MA, which is influenced by coding practices and population shifts, the average payment increase is 2.54%.
The Centers for Medicare & Medicaid Services (CMS) is also proposing a shift in the risk adjustment model used in the MA program. The current model, called version 28 or V28, was first implemented in 2024. In the proposal, the CMS intends to continue to lean on this general approach while calibrating it using more recent data from the traditional Medicare program.
Of note, the CMS has proposed to exclude diagnoses derived from unlinked chart review records—those that are not linked to a specific beneficiary encounter—from the risk score calculations beginning in 2027.
“MA organizations may continue to submit diagnoses using unlinked [chart review records], however, those diagnoses will no longer be used for calculating risk scores,” the CMS said in the fact sheet.
The CMS cited three key goals in its overall game plan for MA risk adjustment: administrative simplicity for providers, competition in creating value for beneficiaries and payments that accurately reflect members’ health risk.
In Part D, the CMS said it is proposing updates to risk adjustment that align with changes made to the program in the Inflation Reduction Act as well as to account for more recent data—diagnoses from 2023 and costs from 2024—in the calculations used for plan year 2027.
In addition, the CMS said it is seeking feedback on measure updates and new measure concepts as it weighs an effort to reshape the way its annual star ratings are calculated.
“These proposed payment policies are about making sure Medicare Advantage works better for the people it serves,” said CMS Administrator Mehmet Oz, M.D., in the press release. “By strengthening payment accuracy and modernizing risk adjustment, CMS is helping ensure beneficiaries continue to have affordable plan choices and reliable benefits, while protecting taxpayers from unnecessary spending that is not oriented towards addressing real health needs.”