CMS proposes Modest Medicare Advantage Rate Increase for 2027
The Centers for Medicare & Medicaid Services (CMS) has proposed a 0.09% increase in Medicare Advantage (MA) payments for contract year 2027. This represents a notable decrease from the 5.06% rate increase finalized for 2026 . The proposed increase would translate to a $700 million year-over-year increase in Medicare Advantage payments.
Impact on Medicare Advantage Plans
CMS Administrator Dr. Mehmet oz stated that the proposed policies aim to improve the functionality of Medicare Advantage for beneficiaries. The agency emphasizes strengthening payment accuracy and modernizing risk adjustment to ensure affordable plan choices and reliable benefits while protecting taxpayers. CMS Press Release
The proposed rule considers factors such as underlying cost growth, 2026 Star Ratings for quality bonus payments, and updates to risk adjustment methodologies.
Challenges for Home Health Providers
Medicare Advantage payment rates for home health services are notably lower than traditional fee-for-service Medicare rates, creating financial strain on home health agencies. This disparity impacts their ability to serve all patients effectively.
Susan Ponder-Stansel, CEO of Alivia Care, highlighted the difficulties faced by home health providers within the Medicare Advantage system. She noted a disconnect between payment policies and the actual needs of the patient population. providers ofen accept referrals wiht low or negative margins to secure those with higher margins, a practice that isn’t sustainable for all agencies.
Smaller agencies are especially vulnerable, perhaps leading to closures as they struggle to cover costs. This can limit access to care for patients who rely on these services.
Market Reaction
Despite last year’s rate increase being positively received by Wall Street, the declaration of the 2027 proposal triggered a negative market reaction. Shares of major health insurers, including UnitedHealth Group (NYSE: UNH), CVS Health (NYSE: CVS), and Humana (NYSE: HUM), experienced declines ranging from 8% to 13% in after-hours trading. Reuters
Key Takeaways
- CMS proposes a 0.09% Medicare Advantage rate increase for 2027,a significant reduction from the 2026 increase.
- Lower Medicare Advantage rates for home health services continue to challenge providers’ financial stability.
- The proposed rule aims to improve payment accuracy and quality of care within the Medicare Advantage program.
- the market reacted negatively to the proposed rate, with shares of major insurers declining.
The final rule for 2027 Medicare Advantage payments is expected to be released later this year. Stakeholders will be closely monitoring the final decision and its potential impact on beneficiaries and healthcare providers. The ongoing debate surrounding Medicare Advantage rates underscores the need for a sustainable payment model that ensures access to quality care for all Medicare beneficiaries.
