CMS Just Dropped the CY 2027 Medicare Advantage Advance Notice

CMS released the Contract Year 2027 Medicare Advantage and Part D Advance Notice on January 26, 2026. The headline number is a 0.09% payment increase. That translates to roughly $700 million in additional payments to plans.

The real story sits underneath that number.

What Actually Changed

Four things matter.

First, the rate increase is nearly flat. Analysts expected 4% to 6%. CMS proposed 0.09% before coding adjustments. After factoring in expected risk score trends from coding practices, CMS projects payments will increase 2.54% year over year. Last year's finalized increase was 7.16%.

Second, CMS is targeting chart review gaming. The proposal excludes diagnoses from unlinked chart review records from risk score calculations starting in 2027. Unlinked chart reviews are diagnoses added to patient records that have no connection to an actual clinical encounter. CMS estimates this change alone reduces payments by $7.2 billion.

Third, the risk adjustment model gets updated. CMS proposes using 2023 diagnosis data and 2024 expenditure data to calibrate the model. This replaces older pre-pandemic data. The model update, combined with normalization adjustments, reduces risk-adjusted payments by an estimated $15.22 billion.

Fourth, audio-only telehealth diagnoses get excluded. Diagnoses from audio-only encounters (identified by modifiers 93 and FQ) will no longer count toward risk score calculations.

The effective growth rate reflects actual cost increases in Original Medicare. The reductions come from accuracy corrections, Star Ratings shifts, and the new diagnostic source policy.

V28 Risk Adjustment Model: What Changed

CMS completed the three-year V28 phase-in in 2025. For CY 2027, additional refinements apply.

Coefficient Constraining. CMS uses a "constraining" process where related HCCs receive the same coefficient. This approach targets conditions where MA coding patterns showed the largest differential relative to Fee-for-Service.

The impact is significant for practices managing chronic disease populations:

What This Means Operationally. The coefficient changes hit practices differently depending on case mix. Practices with high concentrations of diabetes patients with complications will see lower RAF contribution per patient. The constraining process eliminates the documentation benefit of capturing higher-severity HCCs within diabetes and CHF hierarchies.

The response is not to document less. The response is to document accurately and consistently, knowing that encounter-based care now carries more weight than retrospective coding optimization.

Star Ratings: The Shift From Process to Outcomes

The November 2025 proposed rule included significant Star Ratings changes taking effect across CY 2027-2029.

Twelve Measures Removed. CMS is eliminating measures that showed consistently high performance and limited variation across contracts: seven operational/administrative performance measures, three process of care measures, and two patient experience measures.

New Measure Added: Depression Screening and Follow-Up. This Part C measure begins scoring in 2029 Star Ratings (2027 measurement year). The measure has two components: (1) Percentage of eligible members screened for clinical depression, and (2) If screened positive, percentage who received follow-up care within 30 days. CMS will average these two rates to determine the Star Rating.

Clinical Measures Gain Weight. With fewer administrative measures in the denominator, clinical measures will account for approximately 65% of the overall score (up from roughly 50% in 2025-2026). Every point gained or lost on adherence, outcomes, and clinical process measures carries more weight.

Implications for Providers. The depression screening measure requires operational preparation. Practices must establish workflows to identify at-risk members, conduct screenings, and ensure follow-up within 30 days for positive screens. This is a care delivery requirement, not just a documentation requirement.

Why This Matters for Providers

The dynamics here flow downstream.

When MA plans face payment pressure, they look for margin. Historically, that margin comes from three places: lower provider reimbursement, tighter utilization management, or benefit cuts to members.

Practices in value-based arrangements with MA plans should expect contract conversations to sharpen. Plans will push for tighter fee schedules. They will scrutinize referral patterns. They will audit documentation more aggressively.

This pressure creates two types of practices: those with operational infrastructure to demonstrate value, and those without it.

Practices that already track cost per patient, gaps closed per month, and outcomes by condition category can prove their worth in contract negotiations. Practices that rely on volume alone will struggle.

The Chart Review Policy Deserves Attention

The chart review exclusion emerged from ongoing program integrity concerns.

MedPAC research showed chart reviews drove an estimated $24 billion in MA overpayments in 2023. The HHS Office of Inspector General raised similar concerns. A Senate Judiciary Committee report released January 12, 2026 documented specific practices that maximized MA risk adjustment through chart review programs.

One in six MA enrollees underwent a chart review that increased CMS reimbursement to their plan in 2022, according to KFF analysis. Among large insurers, the rate ranged from 27% of enrollees at Kaiser to 86% at CVS Health.

The Policy. CMS proposes excluding diagnoses from chart review records that are not linked to a specific encounter record. Plans can still submit diagnoses from chart reviews, but only if those diagnoses connect to documented care. Whether this policy achieves its stated goals depends on implementation details that will emerge in the final rule.

Provider Strategy: What to Do Now

Review Your MA Contracts by April

The final rate announcement comes April 6, 2026. Contracts negotiated after that date will reflect updated payment realities. Know your baseline before conversations begin.

Audit Your Documentation Workflows

If your practice participates in MA risk adjustment programs, understand where your diagnoses come from. Diagnoses captured during actual patient visits remain valid. Diagnoses that only appear through retrospective chart mining face exclusion.

Track Your Cost Performance

MA plans will tighten. Your leverage in any negotiation depends on demonstrating value. Track total cost of care, ED utilization, hospital admissions, and gap closure rates by payer.

Build Your Chronic Care Infrastructure

The policy incentivizes documented clinical encounters. The following programs generate legitimate encounter-based diagnoses while improving patient outcomes and creating recurring revenue streams.

Prepare for Depression Screening

The new Star Ratings measure requires practices to establish screening workflows and ensure follow-up care within 30 days for positive screens. This is not optional for practices working with MA plans seeking quality bonus payments.

Timeline and Next Steps

The gap between Advance Notice and final rates often narrows after public comment. Whether that pattern holds in 2027 depends on political dynamics and the weight CMS places on program integrity versus industry feedback.

The Bigger Picture

Medicare Advantage covers 35 million beneficiaries. CMS estimates risk-adjusted payments to plans totaled $400 billion in 2024. A percentage point shift in payment methodology moves billions of dollars.

The policy direction over the past three years points toward accuracy over volume. V28 risk adjustment changes implemented in 2024. Chart review exclusions proposed for 2027. Star Ratings reforms shifting weight from administrative measures to clinical outcomes.

The American Hospital Association urged CMS to ensure risk adjustment reforms do not shift administrative burden onto providers. Both plans and providers recognize the same dynamic: when payment accuracy tightens on plans, operational pressure transfers somewhere.

The Future of Provider-Led Value-Based Care

The practices that thrive in this environment will own their workflows. They will demonstrate outcomes. They will capture encounter-based diagnoses through proactive patient engagement rather than retrospective coding.

This is what provider-led value-based care looks like: documented care, closed gaps, managed transitions, and verifiable outcomes. The technology exists to support this work. The reimbursement codes exist to fund it. What separates winners from everyone else is operational infrastructure that turns intent into consistent execution.

At Pear, we believe the future belongs to practices that can prove their value in contract negotiations with data: cost per patient, gaps closed per month, outcomes by condition category. The practices that invest in that infrastructure now will have leverage when plans tighten. The practices that wait will face take-it-or-leave-it terms.

The question for every practice owner and medical director: Does your operational infrastructure prove the value you deliver?

If yes, the policy environment favors you.

If no, the next ninety days matter. Build the workflows. Capture the data. Document the care.