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What CMS proposed
On Jan. 26, CMS released its advance notice for 2027 Medicare Advantage and Part D payments. The proposal would raise average MA payments by 0.09%, or roughly $700 million. For comparison, the agency finalized a 5.06% increase for 2026, worth about $25 billion. Analysts had been looking for something in the range of 4% to 6%.
The bigger structural change is in risk adjustment. CMS would stop counting diagnoses from chart review records that are not tied to a specific patient encounter, and it would also exclude diagnoses captured only during audio-only telehealth visits. Diagnoses found in chart reviews would still count when they are linked to an actual visit. CMS actuaries project the coding changes would save more than $7 billion in 2027. After expected coding trends are included, the agency estimates total plan payments would still rise about 2.5% year over year.
Investors reacted quickly. In after-hours trading on Jan. 26, Humana shares fell 12%, UnitedHealth and CVS fell 9%, and Elevance fell 5%. Comments are due Feb. 25, and the final rate announcement is expected by April 6.
Why this lands on hospitals
When plan revenue growth stalls, the pressure rarely stays with the plan. Hospital leaders should plan for three likely responses from MA carriers in contract year 2027:
- Harder rate negotiations. Plans facing flat revenue will resist escalators, especially in multi-year agreements being renewed this year.
- More utilization management. Prior authorization volume, inpatient-to-observation downgrades and clinical validation denials tend to rise when margins tighten.
- Benefit and network changes. Plans may trim supplemental benefits or narrow networks for 2027, which can shift volume between systems in a market.
The coding change also matters to systems that sit on the other side of the table. Providers in risk-bearing MA arrangements, or those that support plan coding through chart review vendors, should check how much of their shared savings depends on diagnoses that would no longer count.
What to do before April
Finance teams can start by sizing MA exposure: the share of gross revenue, the contracts up for renewal in 2026 and 2027, and the current denial rate by payer. Revenue cycle leaders should refresh their denial trend reporting so that any increase is visible early. Strategy teams should ask whether the system’s MA contracts include protections such as timely payment terms or limits on observation downgrades. Systems with risk contracts should model the coding change against their 2027 targets.
The final notice could move. CMS often adjusts the advance notice after comments, and plans will lobby hard. Prudent planning treats the proposal as the base case rather than the floor.
Archive entry for Feb 1, 2026, added Nov. 11, 2026.