On April 6, CMS released the Final Notice for Contract Year 2027 Medicare Advantage and Part D payment policies, outlining updates to rates, risk adjustment, Star Ratings, and Part D redesign.
While the final notice provides modest financial relief compared to earlier expectations, it reinforces CMS’s continued focus on payment accuracy, data integrity, and long-term program sustainability.
Here is what health plans need to know and how to prepare for what comes next.
Rates: Stabilization with Continued Pressure
CMS finalized a higher-than-expected rate update, signaling a shift from the near flat Advance Notice.
Key updates:
- Approximately 5.33% effective growth rate
- Approximately 2.48% expected average revenue change
- Improvement from the initially proposed near flat increase
What this means:
This update provides short term margin relief, but it does not eliminate underlying cost pressures. Plans should expect continued scrutiny on benefit design and medical cost management rather than expansion.
Risk Adjustment: A Clear Move Toward Data Integrity
Risk adjustment remains the most important and consequential area of change.
Key updates:
- Continued use of the current CMS HCC model
- Exclusion of diagnoses from unlinked chart reviews
- Exclusion of diagnoses from audio only visits
- Ongoing emphasis on encounter data and EDPS alignment
What this means:
CMS is reinforcing a stronger connection between coding and clinical evidence.
Plans that rely heavily on retrospective or unsupported diagnoses may experience reduced risk scores, increased audit exposure, and greater operational complexity.
At the same time, this creates an opportunity for organizations that invest in prospective risk capture; provider aligned documentation and encounter linked coding strategies.
Star Ratings: Simplification and Clinical Focus
CMS continues to evolve the Star Ratings program to reduce administrative complexity and emphasize meaningful outcomes.
Key updates:
- Removal of 11 measures, primarily administrative
- Health Equity Index will not be implemented at this time
- Addition of a depression screening measure
- Continued inclusion of diabetic retinal exams
What this means:
The direction is clear. The program is moving away from administrative lift and toward clinical impact.
Plans should expect greater alignment between quality programs and care delivery, increased importance of in-home and provider driven clinical programs, and a need to operationalize quality rather than simply report on it.
Part D Redesign: Structural Change Continues
CMS continues implementing changes driven by the Inflation Reduction Act, fundamentally reshaping Part D.
Key updates:
- Two thousand dollar out of pocket cap
- Elimination of the coverage gap
- Continued transition to a three-phase benefit structure
- Increased plan liability for drug costs
What this means:
Part D is becoming a more central driver of performance.
Plans should prepare for increased demand for formulary and pharmacy analytics, stronger integration of pharmacy and medical data, and expanded focus on RxHCC capture.
What This Means for Medicare Advantage Organizations
The 2027 Final Notice reinforces a broader shift already underway across the Medicare Advantage landscape.
Execution will drive performance
Rate increases alone will not sustain margins. Success will depend on operational excellence across risk adjustment, quality, and care management.
Clinical alignment is now critical
CMS is pushing the industry toward provider integrated and clinically supported models rather than retrospective and siloed approaches.
Data accuracy is non-negotiable
With increased scrutiny on encounter linkage and documentation, plans must prioritize audit ready coding practices, end to end data integrity, and real time performance visibility.
How Plans Should Prepare Now
To stay ahead of these changes, organizations should focus on:
- Strengthening prospective and point of care risk capture
- Enhancing provider engagement and documentation workflows
- Aligning quality programs with clinical delivery models
- Investing in analytics that connect risk, quality, and pharmacy data
Conclusion
The 2027 CMS Final Notice signals a more balanced but still disciplined path forward.
While the rate environment offers some near-term stability, the expectations around accuracy, clinical alignment, and operational execution continue to rise.
Organizations that take this moment to strengthen their foundations, improve data integrity, and align more closely with care delivery will be better positioned to compete.
Learn more about how Advantmed’s risk adjustment solutions can help your health plan adapt to the latest CMS changes.