CMS Issues Contract Year 2027 Final Rule and Rate Announcement for Medicare Advantage and Part D

April 15, 2026

Ready for 2027? CMS Issues Contract Year 2027 Final Rule and Announcement of Rates and Payment Policies for Medicare Advantage and Medicare Part D

Christine Clements, Joel Dankwa, Maria Malas Sheppard, Mullin, Richter & Hampton LLP + Follow Contact LinkedIn Facebook X Send Embed

In anticipation of the CY2027 bid deadline, CMS released both the CY2027 final rule for Medicare Advantage (“MA”) and Medicare Part D (the “ Final Rule ”) as well as the CY2027 MA Capitation Rates and Part C and Part D Payment Policies (the “ Rate Announcement ”). As discussed below, the Final Rule finalizes without modification much of the CY2027 proposed rule, which was summarized in a prior blog post.[1]And in a surprise move by CMS, the Final Rule finalized certain provisions of the CY2026 proposed rule that were not finalized in the CY2026 final rule.

The Rate Announcement brings welcome relief to MA organizations from the near flat rate increase CMS announced in the CY2027 Advance Notice.However, CMS did finalize the elimination of certain sources of diagnoses for risk adjustment payment purposes that will have a significant financial impact for many plans.

Provisions of the Final Rule

I. Enhancements to the Medicare Advantage and Medicare Prescription Drug Benefit Programs

Revise List of Non-Allowable Special Supplemental Benefits for the Chronically Ill (“SSBCI”)

CMS finalized changes to the non-allowable SSBCI list at 42 C.F.R. § 422.102(f)(1)(iii)(G), to make clear that the prohibition on offering cannabis products as SSBCI applies to “[c]annabis products that are illegal under applicable State or Federal law, including the Federal Food, Drug, and Cosmetic Act.” According to CMS, the change allows MA organizations to offer foods containing specific hemp seed-derived food ingredients that have been “generally recognized as safe” by the Food and Drug Administration, i.e., hulled hemp seed, hemp seed protein powder, and hemp seed oil, as SSBCI to qualifying enrollees, to the extent otherwise appropriate as SSBCI.

Any SSBCI offering that includes one of these three hemp-derived ingredients will be subject to all other applicable SSBCI requirements, including the bibliography requirements at § 422.102(f)(3) to demonstrate through relevant acceptable evidence that the item has a reasonable expectation of improving or maintaining the health or overall function of a chronically ill enrollee.

II.Strengthening Current Medicare Advantage and Medicare Prescription Drug Benefit Program Policies (Operational Changes)

Coordination of Election Mechanisms for MA and Part D

CMS finalized, without modification, its proposal to codify its existing special election period (“SEP”) policies and include additional limitations on SEPs. As previously discussed, MA enrollees may submit election requests to enroll in or disenroll from an MA plan, with limited exceptions. Enrollees may make elections on forms provided by either their respective MA organization or other CMS‑approved election mechanisms. The election request is transmitted to the plan for processing after a determination of the enrollee’s eligibility for a special election. By way of this update, CMS aims to better oversee the use of SEPs and prevent organizations from making incorrect determinations on eligibility for special elections by limiting SEP determination eligibility decisions to CMS.

The Final Rule implements the following changes:

• For elections made using specified SEPs, an enrollee must either obtain CMS approval for the SEP through a CMS‑operated election mechanism or use another CMS‑operated method.

• For specified SEPs, plans must state that elections may require CMS approval through a CMS-operated election mechanism or through the enrollee’s receipt of notice explaining eligibility for the SEP and election instructions.
  These limitations apply to SEPs for the following:

• Individuals who disenroll in connection with a CMS sanction;

• Individuals who were not adequately informed of a loss of creditable prescription drug coverage;

• Contract violations; and

• Other exceptional circumstances.
  Use and Release of Risk Adjustment Data

CMS finalized its proposed changes to the use and release of risk adjustment data and reiterated that current limits on the use and release of risk adjustment data may be unnecessary, burdensome, and overly restrictive for CMS as well as for private and public stakeholders that request such data. Furthermore, to support the goals of Executive Order 14243, “Stopping Waste, Fraud, and Abuse by Eliminating Information Silos,” CMS aims to support efficiency and waste reduction by removing limitations to the use and release of risk adjustment data by eliminating the following:

• The list of nine permitted/specified uses of risk adjustment data codified at § 422.310(f)(1);
• Protections for beneficiary confidentiality provided under § 422.310(f)(2);
• Timing requirements for the release of risk adjustment data established under § 422.310(f)(3); and
• The list of exceptions to the release of pre‑reconciled risk adjustment data under § 422.310(f)(3). CMS confirmed that it would retain existing requirements that limit disclosure of beneficiary identifying information to the minimum necessary data in compliance with applicable federal laws that govern data sharing, and prohibit the release of dollar amounts at the individual encounter level. As a result, CMS will only release aggregated dollar amounts reported for an associated encounter.

Strengthening Documentation Standards for Part D Sponsors

CMS finalized its proposal to establish detailed, standardized documentation requirements for coverage determinations and point‑of‑sale (“POS”) claim adjudications used to determine Part D coverage. To support CMS audit functions and the agency’s ability to verify accurate payment of drugs under Medicare Part D, the Final Rule modifies § 423.505 to implement the following (policies further revised since publication of the proposed rule indicated in italics):

• Authorizing CMS to (1) review original‑format documentation or information from all written, electronic, and verbal communications among pharmacists, prescribers, enrollees, and other stakeholders related to a coverage determination, or (2) allow a point-of-sale claim adjudication that determines a drug’s coverage under Part D.
• Requiring documentation of: (1) all written, electronic, and verbal communications between the pharmacist, prescriber, enrollee, or other relevant stakeholder, as well as information included on the pharmacy claim relied upon when a Part D plan sponsor makes a coverage determination or permits a POS claim adjudication that determines coverage; (2) the date and time a coverage determination request or POS claim adjudication request is received and the identity of the individual submitting the request; (3) the name and title (if applicable, and specifically when needed to complete a request) of the individual the Part D sponsor contacts to verify the request; (4) information obtained, including the questions, responses, and final decision related to the request; (5) diagnosis code for a coverage determination or point-of-sale claim adjudication supporting a medically accepted indication (the requirement for a diagnosis is only for those reviews of a medically accepted indication) ; and (6) any additional information the Part D sponsor relies on in making the final coverage determination or POS claim adjudication .
• Adding language referencing the requirement to make available the records that contain information used for coverage determinations or POS claim adjudications CMS further clarified that (1) not all requirements are expected for every determination, as some requirements are only necessary when applicable or available, and (2) not all information is required in all situations, as CMS’s aim is not to change the current process for prior authorization and coverage determination. Rather, CMS intends for plan sponsors to document the information they already collect to determine coverage under Medicare Part D when approving coverage determinations or POS edits that determine coverage.

Updating Third-Party Marketing Organizations (“TPMO”) Disclaimer Requirements

CMS finalized its proposal to amend the TPMO disclaimer requirements at § 422.2267(e)(41) and 423.2267(e)(41). CMS determined that conveyance by TPMOs of a disclaimer during the first minute of a sales call is not always the appropriate time for beneficiary notification of available plan choices. The Final Rule requires TPMOs to provide a disclaimer before any discussion of benefits begins, rather than within the first minute of a call. In addition, State Health Insurance Assistance Programs have been removed from such disclaimers as a source of information.

Even with these changes, a TPMO that sells plans on behalf of more than one MA organization or Part D sponsor remains required to electronically share the disclaimer when communicating via email, online chat, or other electronic means; to prominently display the disclaimer on TPMO websites; and to include the disclaimer in all marketing materials developed, used, or distributed by the TPMO (inclusive of print materials and television advertisements).

Removing Rules on Time and Manner of Beneficiary Outreach

The Final Rule modifies the framework on which MA organizations and Part D sponsors may market to and communicate with beneficiaries by relaxing requirements on the timing and manner of beneficiary outreach. With amendments to § 422.2264(c) and § 423.2264(c) the Final Rule:

• Permits a marketing event to follow an educational event at the same location without a 12‑hour waiting period;
• Permits a personal marketing appointment to occur at any time after the completion of a Scope of Appointment (“SOA”) form; and
• Allows plans and agents/brokers to collect SOA forms from beneficiaries at educational events. Each of these changes are described below.

Timing and Location of Marketing Events Following Educational Events

By eliminating the 12-hour waiting period, CMS will allow a marketing event to take place directly following and in the same location as an educational event, ultimately reducing the burden and cost for plans and agents/brokers in event planning. CMS underscores that removal of this time restriction also eases burdens on beneficiaries attending educational events who subsequently would like to learn more plan-specific information at a marketing event. Pursuant to the Final Rule, plans and agents/brokers are required to give a beneficiary sufficient opportunity to leave the educational event before the start of a marketing event.

Timing of Personal Marketing Appointment After SOA Form Completion

The Final Rule eliminates the required 48-hour waiting period between the completion of an SOA form and a personal marketing appointment, as well as the corresponding exceptions to the 48-hour SOA rule – namely (1) an SOA that is completed during the last four days of a valid election period for the beneficiary, and (2) unscheduled in-person meetings, such as walk-ins, initiated by the beneficiary. CMS indicated that the 48-hour SOA requirement may create an unnecessary barrier to accessing important MA and Part D information by impacted beneficiaries. Although an advance notice agreement remains a requirement, plans and agents/brokers are not required to wait 48 hours between SOA completion and a personal marketing appointment.

Furthermore, the Final Rule broadens the definition of a “personal marketing appointment” to include unrelated beneficiaries in a home, public space, or virtually, for example, to minimize the need for separate SOAs for each individual. The Final Rule leaves unchanged the requirements that plans and agents/brokers are prohibited from marketing any healthcare product that is beyond the scope of the agreed SOA, and each SOA must include, at a minimum, the type of product discussed.

SOA Forms at Educational Events

CMS will permit plans and agents/brokers holding or participating in educational events with beneficiaries to provide and receive SOA forms from beneficiaries at such events. CMS will not deem delivery of an SOA form to constitute a sales or marketing activity, but is instead an agreement regarding the scope of products to be discussed prior to a personal marketing appointment. CMS notes that by permitting plans and agents/brokers to obtain SOA forms at educational events, burdens on beneficiaries, plans, and agents/brokers may be reduced, allowing parties to schedule personal marketing appointments to discuss plan options without waiting until the end of an educational event.

Relaxing the Restrictions on Language in Advertising

The Final Rule relaxes CMS restrictions on advertising language. Explaining the change, CMS noted that current restrictions on the use of superlatives at § 422.2262(a)(l)(ii) and § 423.2262(a)(l)(ii) are unnecessary, since MA organizations and Part D sponsors are already prohibited from providing misleading, confusing or materially inaccurate marketing and communications materials to beneficiaries. CMS also eliminated the requirement to reference supporting documentation or data directly in materials.

CMS will continue to review applicable marketing and communications materials and may request data, reports, or other documentation to substantiate an MA organization’s or Part D sponsor’s claims.

Rescinding the Requirement for the Notice of Availability

CMS eliminated the requirement that plans provide a Notice of Availability of language assistance services and auxiliary aids and services, explaining that elimination of this requirement under § 422.2267(e)(31) and § 423.2267(e)(33) will help ensure consistency and clarity for covered entities already subject to the same obligations enforced by the Department of Health and Human Services Office for Civil Rights.

TPMO Oversight: Revising the Record Retention Requirements for Marketing and Sales Calls

The Final Rule implements CMS’s proposal requiring MA organizations and Part D sponsors to retain records of marketing and sales calls for six years, and further modifies its proposal allowing for complete and accurate transcripts from the last three years of retention. Under current rules, MA organizations and Part D sponsors are required to retain call recordings for ten years and to provide CMS access to such records for the duration of that period. CMS states, however, that a six-year record retention requirement for marketing and sales portions of calls is sufficient to enable CMS review of agent and broker behavior. CMS asserts that this adjustment balances the need for appropriate oversight, while minimizing the cost and burden of retaining audio call files and recordings for ten years, especially as CMS has noted that it is highly unlikely to review calls past the six-year mark.

Appeals Process for Part D Program Integrity Prescription Drug Event Record Review Audits

CMS finalized amendments to the Recovery Audit Contractor (“RAC”) Part D appeals process to include any Part D program integrity prescription drug event (“PDE”) record review audit. This change establishes an appeals process for Part D plan sponsors to appeal CMS findings for Part D program integrity audits of the appropriateness of PDE records, and also establishes review timeframes for different review entities at each level of appeal. Currently, there is no process for Part D plan sponsors to further appeal determinations regarding the appropriateness of a record. Rather, Part D Plan sponsors have an opportunity to submit documentation that demonstrates that a PDE record is appropriate for coverage under the Part D program. As part of the new RAC appeals process for Part D program integrity PDE record review, Part D sponsors would receive an audit “close-out letter,” rather than a “demand letter,” that includes:

• An explanation of the drug, item, or service under audit;
• A high-level overview of improper and proper PDE record counts;
• An attached PDE level record file denoting improper and proper PDE records;
• Requirements for the submission of deletion records or adjustment records for the PDEs determined to be improper; and
• Instructions on how the Part D plan sponsor may appeal the findings. This regulatory update would include any Part D program integrity audit that reviews PDE records for appropriateness, and not just RACs, and also implements three levels of appeal:

1. Request for reconsideration;
2. Hearing official review; and
3. Review by the CMS Administrator. CMS asserts that the three levels of appeal and the inclusion of review timeframes enable sufficient opportunity for Part D plan sponsors to appeal determinations and ensure that determinations are consistent with Part D program rules and regulations.

Prescription Drug Event Submission Timeliness Requirements

The Final Rule modifies general PDE submission timeliness requirements and clarifies CMS’s proposed policy as being specifically applicable to the resolution of rejected PDE records. Currently, a Part D sponsor must submit adjustment or deletion PDE records within 90 calendar days of discovery or notification of an issue to previously submitted PDE records. A Part D sponsor must also resolve rejected PDE records within 90 calendar days of a rejection. The Final Rule requires Part D sponsors to submit a PDE record within 90 calendar days from receipt of the rejection and to continue to submit a PDE record at least once every 90 calendar days thereafter until a revised PDE record is accepted or deemed an erroneous submission. Consistent 90-day submissions enable CMS to know whether a rejected record remains an active claim that a sponsor otherwise believes is valid and is working to resolve.

Eligibility for SSBCI and Technical Changes to Definition of Chronically Ill Enrollee

For contract year 2026, CMS proposed but did not finalize several changes to its regulations on SSBCI.CMS has now finalized these proposed changes with slight modification.First, CMS amended the definition of a chronically ill individual to mean an individual enrolled in the MA plan who meets all of the following:

• Has one or more comorbid and medically complex chronic conditions that is life threatening or significantly limits the overall health or function of the enrollee;
• Has a high risk of hospitalization or other adverse health outcomes; and
• Requires intensive care coordination. Second, CMS makes clear that an enrollee who has one or more comorbidities and medically complex chronic conditions alone is not sufficient to demonstrate that an enrollee meets all three of the above criteria.MA plans must, through health risk assessments, review of claims data, or other similar means, demonstrate that enrollees meet all three criteria.

Finally, regarding objective criteria for SSBCI, MA plans must:

• Have and apply written policies based on objective criteria for determining a chronically ill enrollee’s eligibility to receive a particular SSBCI;
• Document the above written policies and the objective criteria on which the written policies are based; and
• For each SSBCI, list on their public-facing websites all the written policies and objective criteria on which the policies are based. CMS believes these updates will provide greater transparency and consistency to the eligibility

determination process for potential enrollees and will enhance enrollees’ ability to understand what benefits would likely be available to them and thus their ability to make informed decisions about their enrollment. Included in the Final Rule is a reminder from CMS that MA organizations are required to maintain their evidentiary standards or objective criteria for enrollee eligibility for the entire coverage year.

Administration of Supplemental Benefits Coverage Through Debit Cards

Also, for 2026, CMS proposed but did not finalize regulations related to the use of debit cards to administer plan-covered benefits. The Final Rule promulgates the requirements for MA organizations that administer reductions in cost sharing or provide coverage of 100 percent of the cost of a mandatory supplemental benefit through use of a debit card.Specifically, MA organizations must do all of the following:

• Provide debit cards that are electronically linked to plan covered items and services through a real-time identification mechanism to verify eligibility of plan covered benefits at the point of sale;
• Provide instructions for debit card use and customer service support to enrollees;
• Have an alternative process that allows for reimbursement of eligible expenses for plan covered benefits in circumstances where the debit card is unusable at the point of sale, including but not limited to debit card malfunction or when a beneficiary is entitled to obtain covered benefits out-of-network; and
• Ensure debit cards are limited to the specific plan year. CMS also finalized requirements that MA plans must disclose all supplemental benefits, including applicable conditions and limitations, eligible over-the-counter items, and benefits accessible through debit cards.

III. Medicare Advantage/Part C and Part D Prescription Drug Quality Rating System (Star Ratings)

CMS had proposed to remove the following Star Rating measures beginning with the Star Ratings year shown in the table for each measure.

| Part C or D | Measure Name | Star Ratings Year Proposed for Removal |
| C | Plan Makes Timely Decisions about Appeals | 2029 Star Ratings |
| C | Reviewing Appeal Decisions | 2029 Star Ratings |
| C | Special Needs Plan (SNP) Care Management | 2029 Star Ratings |
| C | Call Center – Foreign Language Interpreter and TTY Availability | 2028 Star Ratings |
| D | Call Center – Foreign Language Interpreter and TTY Availability | 2028 Star Ratings |
| C and D | Complaints about the Health Plan | 2029 Star Ratings |
| D | Medicare Plan Finder Price Accuracy | 2029 Star Ratings |
| C | Diabetes Care – Eye Exam | 2029 Star Ratings |
| C | Statin Therapy for Patients with Cardiovascular Disease | 2028 Star Ratings |
| C and D | Members Choosing to Leave the Plan | 2029 Star Ratings |
| C | Customer Service | 2029 Star Ratings |
| C | Rating of Health Care Quality | 2029 Star Ratings |
CMS finalized the removal of the above measures with the exception of the Part C measureDiabetes Care – Eye Exam.Regarding that measure, CMS agreed with commenters that, not only is routine retinal screening a critical component of comprehensive diabetes care, but that retinal examinations can identify broader health concerns and that preventing vision loss may help avoid costly late-stage treatment, functional decline, caregiver burden, and long-term services and supports. According to CMS, continued inclusion of the measure will help maintain plan accountability, support access to preventive screening, and encourage care coordination and innovation in screening approaches, particularly for high-risk and underserved populations.

The Final Rule finalized other Star Rating changes:

• Adding the Depression Screening and Follow-Up Part C measure to the Star Ratings beginning with the 2029 Star Ratings; and
• Not implementing the Health Equity Index (also called Excellent Health Outcomes for All) reward and continuing to include the historical reward factor in the Star Ratings methodology. IV.Improvements to Special Needs Plans

Continuity in Enrollment for Full-Benefit Dually Eligible Individuals in a D-SNP and Medicaid Fee-for-Service

CMS finalized significant amendments to the “one D-SNP requirement” at § 422.514(h), which was promulgated as part of the CY2025 MA final rule.

Under the policy finalized in CY2025:

• Beginning CY2027, where an MA organization offers a D-SNP and the MA organization or another entity under the same parent organization also contracts with a State as a Medicaid managed care organization (“MCO”) that enrolls full-benefit dual eligible individuals in the same service areas (even if there is only partial overlap of the service areas), the MA organization:
  • may only offer, or have another entity under the same parent organization that offers, one D-SNP for full-benefit dual eligible individuals, and
  • must limit new enrollment in the D-SNP to individuals enrolled in, or in the process of enrolling in, the Medicaid MCO; and

• Beginning in CY2030, such D-SNPs may only enroll (or continue to cover) individuals enrolled in (or in the process of enrolling in) the Medicaid MCO.
  The CY2025 policy included two exceptions to the one D-SNP requirement:

• Where the State Medicaid agency contract (“SMAC”) with the MA organization differentiates enrollment into D-SNPs by age group or to align enrollment in the D-SNP with the eligibility or benefit design used in the State’s Medicaid managed care program; or

• The MA organization or another entity under the same parent organization offers both HMO D-SNPs and PPO D-SNPs.
  CMS acknowledged in the Final Rule the unintended impact of § 422.514(h) for D-SNPs with Medicaid managed care contracts (i.e., MCOs) in states that do not mandate Medicaid managed care.Specifically, CMS indicated that § 422.514(h) could create an incentive for MA organizations to terminate their HIDE SNP and transition dually eligible enrollees to the coordination-only D–SNP, which could continue to enroll full-benefit dually eligible individuals regardless of whether an enrollee receives their Medicaid coverage through Medicaid FFS or an unaligned Medicaid managed care plan, allowing such a plan to maintain maximum enrollment. According to CMS, the application of § 422.514(h) to the MA organizations with unaligned HIDE SNPs and coordination-only D–SNPs puts them at a disadvantage in comparison to those MA organizations with only coordination-only D–SNPs, since full-benefit dually eligible individuals are able to, and do, remain in Medicaid FFS in States without mandatory Medicaid managed care. This unintended consequence of § 422.514(h) was inconsistent with CMS’s goals to promote integrated care. And while CMS’s goal is to have full-benefit dually eligible individuals enrolled in integrated D–SNPs, the agency does not want to prevent integrated D–SNPs from continuing to enroll full-benefit dually eligible individuals who are enrolled in Medicaid FFS.

To address the above concern, the Final Rule added a new exception to § 422.514(h) to allow coordination only D-SNPs and HIDE SNPs with MCO contracts operating in states that do not have mandatory managed care enrollment to offer additional D-SNPs for full-benefit dual eligible beneficiaries enrolled in Medicaid FFS.CMS did not finalize the proposed requirement that only HIDE SNPs with a majority of its members enrolled in Medicaid FFS could qualify for the new exception. In addition, CMS did not finalize its proposal to require D-SNPs qualifying for the new exception to comply with the care coordination responsibilities at § 422.562(a)(5), noting that the requirement would be redundant since all D-SNPs are subject to those care coordination requirements.

Finally, to eliminate the possibility of coordination-only D–SNPs enrolling full-benefit dually eligible individuals in an unaligned Medicaid managed care plan, CMS amended the SMAC requirements at § 422.107(d)(1) to limit such coordination-only D-SNPs to enrolling Medicaid FFS enrollees.

Model of Care (MOC) Off-cycle Submission Window

CMS finalized a technical change to create two MOC submission windows for SNPs to submit off-cycle MOC changes to CMS. The change is intended to avoid overlap of the off-cycle MOC submission window (currently between June 1 st and November 30 th) with the new deadline for initial and renewal MOC submissions for CY2027 (the Friday before the first Monday of June). Beginning CY2027, institutional special needs plans (“I-SNPs”) and D-SNPs may submit off-cycle MOC changes to CMS in either of the following windows: (1) from January 1 to March 31, and (2) from October 1 to December 31.

Passive Enrollment by CMS

CMS finalized without modification several changes to its passive enrollment regulations, which are intended to reduce disruptions in coverage for dually eligible individuals who are enrolled in integrated D-SNPs. Beginning with CY2027, the changes to 42 C.F.R. § 422.60(g):

• Remove the requirement that the receiving integrated D-SNP have substantially similar networks to the relinquishing integrated D-SNP, and instead require the receiving integrated D-SNP to provide continuity of care for all incoming enrollees for a minimum of 120 days;
• Require that a receiving integrated D-SNP must have the care coordinator staffing capacity to receive dually eligible enrollees through passive enrollment.CMS did not define a minimum staffing capacity threshold in order to give integrated D-SNPs flexibility in implementing this change; and
• Revise the description of an MA plan that can receive passive enrollment from “a fully integrated dual eligible special needs plan or highly integrated dual eligible special needs plan,” to plans that operate as an applicable integrated plan (“AIP”) as described at § 422.561. CMS reiterated that it intends to limit passive enrollments to plans that have demonstrated commitment to quality and are able to provide longer continuity of care to minimize service disruption for receiving dually eligible enrollees who have complex and unique care needs.

Contract Modifications for D–SNPs Following SMAC Termination

CMS finalized its proposals to:

• Codify that the loss of a SMAC constitutes a valid basis for H contract termination, noting that when an MA organization has multiple plans under one contract, CMS may sever the D-SNP from the rest of the contract and renew only the portion of the contract that does not include the D-SNP with the terminated SMAC;
• Codify the process of immediate termination of contract by CMS when the D-SNP does not have a SMAC; and
• Amend § 422.510(c)(2)(iv) to expressly include termination of a SMAC as an exception to the opportunity for plans to develop and implement a corrective action plan prior to contract termination by CMS. Limitation on D–SNP-Only Contracts Submitting Materials Under the Multi-Contract Entity (“MCE”) and Multi-Plan Process

CMS finalized its proposal to clarify that MA organizations offering D-SNP-only contracts must submit all materials for the contract in HPMS under the MA organization’s contract number and may not submit materials for the contract under the organization’s MCE number, with a technical clarification that MA organizations may not submit materials for the contract under the organization’s MCE number and third-party marketing organizations may not submit materials under the Multi-Plan number.

V. Reducing Regulatory Burden and Costs in Accordance With Executive Order (E.O.) 14192

Finally, CMS finalized many of the proposed changes to existing regulations in furtherance of E.O. 14192 “Unleashing Prosperity Through Deregulation.” These changes include:

• Excluding account-based medical plans (e.g., HRAs, FSAs, and HSAs) from the entities required to make disclosures of creditable coverage.
• Restoring the “culturally competent” services requirement of 42 CFR 422.112(a)(8) to its pre-CY2024 final rule form: “Cultural considerations. Ensure that services are provided in a culturally competent manner to all enrollees, including those with limited English proficiency or reading skills, and diverse cultural and ethnic backgrounds.”
• Rescinding the mid-year supplemental benefits notices promulgated as part of the CY2024 final rule.
• Rescinding the Annual Health Equity Analysis of Utilization Management Policies and Procedures.
• Rescinding the Quality Improvement Program Health Disparities Requirement. Rate Announcement and Update to Medicare Advantage Risk Adjustment Model

On the same day it published the Final Rule, CMS published the Rate Announcement.[2] In the Rate Announcement, CMS finalized the previously announced modifications to the methodologies it applies to both MA capitation rates and risk adjustment under Medicare Parts C and D. Although CMS had projected a nearly flat rate increase (0.09% or over $700 million in MA payments to health plans), the announced year-to-year percentage change in MA payments for CY 2027 is now projected to be 2.48% (or over $13 billion in payments to MA plans in CY 2027), as shown below in Table 1.

Year-to-Year Percentage Change:

| Impact | CY 2027

Advance Notice | CY 2027

Rate Announcement |
| Effective Growth Rate | 4.97% | 5.33% |
| Rebasing/Re-pricing | TBD | -0.17% |
| Change in Star Ratings | -0.03% | -0.03% |
| MA Coding Pattern Adjustment | 0% | 0% |
| Risk Model Revision and Normalization | -3.32% | -1.12% |
| Sources of Diagnosis | -1.53% | -1.53% |
| Expected Average Change | 0.09% | 2.48% |
Table 1. *Projected Impact of Proposed Changes to Medicare Advantage Payment Components Announced in the CY 2027 Rate Announcement*

Effective Growth Rate

The change in the growth rates from the 2027 Advance Notice to this CY 2027 Rate Announcement is attributed to the most current estimates of per capita Medicare program costs based on recent historical program experience and projected trend assumptions. In the Rate Announcement, CMS incorporated additional data based on program experience and incurred dates through Q4 of 2025.

Rebasing/Re-pricing

The rebasing/re-pricing rate captures year-to-year change arising from the use of updated, area-specific FFS cost data, as well as repricing adjustments that reflect changes in FFS payment rules. The rate incorporates the most recent five years of FFS data. CMS notes that at the time of the CY 2027 Advance Notice, the average geographic adjustment (AGA) index (based on a five-year rolling average of historical claims experience) used to determine the rebasing/re-pricing impact on the MA rate change was not yet available. The Rate Announcement reflects the impact of this index, as well as additional factors.

Risk Model Revision and Normalization

The projected value is a combination of the applied CMS-Hierarchical Condition Category (“CMS-HCC”) risk adjustment model and the normalization factor. In the Rate Announcement, CMS confirmed that it will continue to use the 2024 CMS-HCC risk adjustment model, implemented in 2026, to calculate risk scores, rather than adopt the updated risk adjustment model proposed in the CY 2027 Advanced Notice. CMS is delaying adoption of the CY 2027 CMS-HCC model to allow the MA market more time to adjust to the phase in of the 2024 CMS-HCC risk adjustment model.[3] The Rate Announcement confirms that the impact of Risk Model Revision and Normalization to the Expected Average Change to MA rates is entirely due to updates to the normalization factor, since CMS is not implementing an updated risk adjustment model for CY 2027.

Sources of Diagnoses for Risk Scores

CMS finalized its proposal to exclude diagnoses from unlinked chart review records (CRRs), with an exception for beneficiaries who switch from one MA organization to another (e.g., moved from one MA organization in CY 2026 to another MA organization in CY 2027).In addition, CMS finalized its proposal to exclude diagnoses identified as resulting from audio-only services.

FOOTNOTES

[1] Not included in this post is a discussion of the provisions in the Final Rule that implement certain portions of the Inflation Reduction Act of 2022 and the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act of 2018.

[2] The rate Announcement followed the CY 2027 Advance Notice summarized here.

[3] For PACE Organizations, CMS will use a 50/50 blend of the 2024 CMS-HCC and 2017 CMS-HCC risk adjustment models to calculate risk scores.

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