FAQ: What managed care leaders should know about Medicare Advantage payment updates for 2027

Medicare Advantage (MA) plans are heading into 2027 with higher-than-expected payment updates, but ongoing cost pressures, policy changes and attention around utilization management continue to shape the outlook. This FAQ breaks down what leaders need to know, with insights from Jeannie Fuglesten Biniek, associate director for the Program on Medicare Policy at KFF.

FAQ 1: What changed between the 2027 advance notice and the final Medicare Advantage payment update?

The final 2027 Medicare Advantage rate was significantly higher than the earlier proposal, easing immediate concerns for plans.

“The average per-enrollee payments to Medicare Advantage plans will increase by nearly 5% — about double the increase in the initial proposal,” Biniek said. “This reflects technical updates, policy changes, and continued growth in Medicare Advantage risk scores and translates to roughly $26 billion in additional payments for 2027 (about half of that increase, or $13 billion, reflects the impact of risk scores trending upward).”

The increase is largely tied to CMS delaying updates to the risk adjustment model, which would have incorporated more recent data. According to Biniek, CMS made this decision to give insurers more time to adjust to changes already phased in between 2024 and 2026.

A recent analysis reported by Managed Healthcare Executive also found the higher rate offers short-term relief but does not fully offset rising healthcare costs or broader financial pressures facing plans.

FAQ 2: How will changes to risk adjustment rules affect Medicare Advantage payments?

CMS finalized a policy to exclude diagnoses from chart reviews that are not tied to a provider encounter, a move aimed at formally tying payment-eligible diagnoses to reported encounters.

“CMS finalized a policy to exclude diagnoses identified through chart reviews that are not linked to a provider encounter,” Biniek said. “The change will reduce payments per enrollee by 1.5% on average but will likely vary substantially across insurers because there is variation in how much insurers rely on chart reviews to capture diagnoses.”

She noted the policy does not apply to diagnoses that are linked to a specific encounter, even if they do not appear in submitted records. As a result, some insurers may adjust documentation practices to maintain reimbursement levels.

FAQ 3: What could the 2027 payment update mean for premiums, benefits and plan strategy?

The impact will vary by plan, particularly depending on cost pressures and reliance on risk adjustment strategies.

“It is unlikely premiums will change for $0 products,” Biniek said. “There will likely be changes to some extra benefits, including whether some types of benefits, such as meals after hospital stays or transportation to medical appointments, are offered at all. Others may decrease in generosity.”

Some plans may reduce benefits, while others may absorb costs by adjusting margins or administrative expenses.

Even with the higher payment rate, industry experts have noted that rising medical costs and inflation continue to outpace payment growth. This could result in plans possibly still needing to make strategic trade-offs.

FAQ 4: What does CMS’s focus on payment accuracy signal about the future of Medicare Advantage policy?

CMS continues to center on more accurate payments, especially through tighter rules around diagnosis coding and data reporting.

“It is unclear right now,” Biniek said of CMS’ priority. “The decision not to implement the update to the risk score model and to narrow the change to the unlinked chart review diagnoses to not apply to enrollees new to the insurer suggests CMS is also weighing the impact of changes on Medicare Advantage insurers.”

She added this suggests a balancing act between improving program integrity and maintaining plan participation and stability.

FAQ 5: What role is prior authorization reform playing in Medicare Advantage right now?

Prior authorization remains a key area of focus for both regulators and industry leaders, especially as concerns about access and administrative burden continue.

Health plans have reported progress, with participating insurers reducing prior authorization requirements by about 11% overall and more than 15% in Medicare Advantage, according to another recent report by MHE. Many of these reductions target services with well-established clinical guidelines and consistent utilization.

In addition, CMS has moved to increase transparency. As of April 2026, Medicare Advantage plans are required to publicly report data on prior authorization use, including approval rates, denials and processing times.

However, provider groups say the burden remains significant. According to the report, physicians have claimed to complete an average of 39 prior authorization requests per week, highlighting a gap between reported improvements and real-world experience.

Together, these developments suggest that while progress is being made, prior authorization will remain a central issue in MA policy, especially as CMS pushes for greater transparency and consistency.

What this means for plans

The 2027 Medicare Advantage payment update provides short-term stability but does not resolve longer-term challenges tied to rising costs, risk adjustment and utilization management. As CMS continues to refine payment accuracy and transparency requirements, plans will need to balance financial pressures with maintaining benefits and access for enrollees.

This FAQ was reviewed for accuracy by Michael Lutz, managing director at Avalere Health.