CMS Backs Off MA Cut

The federal government just gave Medicare Advantage insurers a much bigger raise than it first signaled. The Centers for Medicare and Medicaid Services said payments to Medicare Advantage plans will rise by 5.06% in 2027, or more than $13 billion, after dropping a proposed change to risk scoring. (cms.gov, kff.org) That reversal came fast. In January, the agency’s advance notice estimated only a 2.23% average increase for 2027, but the April 7 final notice nearly doubled that after CMS decided not to finalize a plan to tighten how diagnoses from home visits and chart reviews get counted. (cms.gov, cms.gov, kff.org) Medicare Advantage is the private-plan version of Medicare, and insurers get paid more when members look sicker on paper. That payment formula is called risk adjustment, and it works like a budget that grows when diagnosis codes show more medical complexity. (kff.org, cms.gov) The fight was over one especially lucrative habit: adding diagnoses that come from chart reviews or health risk assessments even when those diagnoses are not tied to a visit, test, procedure, or treatment. Medicare’s watchdog, the Medicare Payment Advisory Commission, has said those coding differences make Medicare Advantage patients look sicker than similar people in traditional Medicare and push payments upward. (cms.gov, medpac.gov) CMS had proposed to stop counting those diagnoses unless they were backed up by a service record. The final notice dropped that idea, and KFF said the change leaves insurers with billions of dollars more than they would have received under the proposal. (cms.gov, kff.org) The companies are not exactly struggling. UnitedHealth Group, Humana, CVS Health’s Aetna unit, Elevance Health, and Centene dominate Medicare Advantage, which now covers more than half of all eligible Medicare beneficiaries. (kff.org, kff.org) At the same time, hospitals are still getting paid under traditional Medicare fee schedules that have not kept up with labor and supply costs. The American Hospital Association says Medicare hospital payment updates have trailed hospital cost growth by tens of billions of dollars over time, and imaging groups have been warning for years about cuts under the physician fee schedule. (aha.org, acr.org) That is why this decision lands so awkwardly for providers. Modern Healthcare reported that insurers kept the payment relief while hospitals and imaging providers stayed under fee-for-service pressure, which widens the gap between better-funded middlemen and the doctors and facilities delivering the scans, surgeries, and inpatient care. (modernhealthcare.com) Insurers are also not treating this as a one-off win. On March 3, major carriers told CMS that even the proposed 2027 increase was too small and warned they might cut supplemental benefits or raise member costs if payment policy got tighter. (modernhealthcare.com, ahip.org) So the immediate result is simple: private Medicare plans got a softer landing, and the crackdown on one coding practice was postponed. The unresolved part is the expensive one, because Medicare still pays more for many people in Medicare Advantage than it would have paid if those same people had stayed in traditional Medicare. (cms.gov, kff.org, medpac.gov)