Medicare Advantage Insurers Win $13 Billion Pay Bump for 2027
- The Centers for Medicare & Medicaid Services (CMS) has finalized the Calendar Year (CY) 2027 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies.
- This decision follows the CY 2027 MA and Part D Advance Notice, where CMS proposed various updates to payment factors.
- When accounting for the estimated risk score trend in Medicare Advantage—which is influenced by population changes and coding practices—the total increase in payments is estimated at 4.98%.
The Centers for Medicare & Medicaid Services (CMS) has finalized the Calendar Year (CY) 2027 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies. The final policies are projected to increase payments to Medicare Advantage plans by 2.48% in 2027, which represents an increase of over $13 billion.
This decision follows the CY 2027 MA and Part D Advance Notice, where CMS proposed various updates to payment factors. After considering a wide range of comments on those proposals, the agency finalized the current rate announcement.
When accounting for the estimated risk score trend in Medicare Advantage—which is influenced by population changes and coding practices—the total increase in payments is estimated at 4.98%.
Financial Impact and Market Reaction
The finalized rates provide a significant financial boost to the private insurance industry. The 2.5% average pay bump is notably higher than what was initially proposed and comes at a time when the industry has faced rising medical costs.
Following the announcement on April 6, 2026, stock prices for the three largest Medicare Advantage insurers—UnitedHealth Group, Humana and CVS Health—each rose by more than 8% during after-hours trading. Together, these three companies cover nearly 60% of all individuals enrolled in the program.
Breakdown of Payment Components
The 2027 Rate Announcement includes several specific adjustments compared to the 2026 figures. The expected average changes to payment components include:
- Effective Growth Rate: An increase of 5.33% in the Rate Announcement, compared to 4.97% in the Advance Notice.
- Risk Model Revision and Normalization: A decrease of 1.12%, which is an improvement over the 3.32% decrease proposed in the Advance Notice.
- Sources of Diagnoses: A decrease of 1.53%.
- Rebasing/Re-pricing: A decrease of 0.17%.
- Change in Star Ratings: A decrease of 0.03%.
- MA Coding Pattern Adjustment: No change (0%).
The overall expected average change from 2026 to 2027 is 2.48%, a shift from the 0.09% change projected in the 2027 Advance Notice.
Policy Shifts and Regulatory Context
A critical component of the final decision was the Trump administration’s choice to scrap a proposal that would have integrated more updated data into the payment process. By removing this proposal, the administration ensures that Medicare Advantage insurers will retain billions of dollars that otherwise might have been reduced through updated data metrics.
The Medicare Advantage program is a taxpayer-financed system that allows private insurers to manage Medicare benefits. The industry has historically opposed many of the reforms aimed at reducing the program’s profitability.
The finalized policies are now available for review through the official CMS announcements and documents portal under the 2027 Announcement
section.