CMS boosts Medicare Advantage rates
CMS finalized higher Medicare Advantage payment rates for 2027, a surprise to markets that lifted insurer stocks and means more federal money will flow to private plans. Hospitals and labs see the same headline differently — the rule may improve payer margins but does not resolve provider complaints about reimbursement practices and coding disputes. (kff.org)
Wall Street expected a near-flat update for Medicare Advantage in 2027, and the Centers for Medicare and Medicaid Services instead delivered a richer one on April 6: a net average payment increase of 2.48%, or more than $13 billion, for private plans. (cms.gov) That 2.48% headline understates the money flow, because the agency says payments rise about 4.98% once it factors in higher risk scores from population changes and coding, and Kaiser Family Foundation estimates the total increase at roughly $26 billion for 2027. (cms.gov) (kff.org) Medicare Advantage is the private-plan version of Medicare, and it is now the main lane for many seniors: the Medicare Payment Advisory Commission said 34.9 million people were enrolled in 2025, equal to 55% of eligible beneficiaries. (medpac.gov) The surprise came from one line in the formula. In January, the advance notice pointed to an overall expected average change of 0.09%, but the final notice jumped to 2.48% after the agency dropped a proposed update to the risk adjustment model. (cms.gov) (aha.org) Risk adjustment is Medicare’s way of paying more for sicker patients and less for healthier ones, using diagnosis codes like a budget estimate before the bills arrive. Kaiser Family Foundation said the abandoned model update would have used newer data to better match current treatment patterns and costs. (kff.org) The administration said it delayed that model change to give insurers more time after a phase-in that ran from 2024 through 2026. The same final notice still kept one coding crackdown by excluding diagnoses from chart reviews that are not tied to a provider visit, with a narrow exception for people who switch plans. (cms.gov) (kff.org) That chart-review policy is not small. Kaiser Family Foundation said it still cuts average payments by about 1.5%, because insurers have used chart reviews to add diagnoses from records that providers did not otherwise submit for payment. (kff.org) Insurers had pushed hard for a softer final rule. AHIP, the industry trade group, said more than 35 million seniors and people with disabilities rely on Medicare Advantage, and its January statement warned that flat funding would hit benefits and plan choices as medical costs rose. (ahip.org 1) (ahip.org 2) Hospitals read the same decision through a different lens. The American Hospital Association told Congress in July 2025 that inappropriate prior-authorization denials and payment disputes in Medicare Advantage were already causing care delays, extra staffing costs, and provider burnout, and the April 2026 rate notice does not change those contract fights. (aha.org) Clinical laboratories have a similar complaint. The American Clinical Laboratory Association says Medicare Advantage and Medicaid managed care plans often impose aggressive prior-authorization and medical-document rules, even though lab tests inform about 70% of medical decisions and Medicare’s clinical laboratory fee schedule accounts for less than 1% of total Medicare spending. (acla.com) So the April 6 decision sends two messages at once. It gives private Medicare plans more federal money for 2027, but it leaves untouched the daily battles that hospitals, doctors, and labs say happen after a patient shows up and a claim, test, scan, or treatment has to get approved and paid. (cms.gov) (aha.org)
