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The Centers for Medicare and Medicaid Services (CMS) released a proposal on March 3 to hold federal payments to Medicare Advantage insurers nearly flat for 2027. The proposed increase of just 0.09% has drawn sharp criticism from major insurers like UnitedHealth and Humana. They argue that the low rate will lead to reduced benefits and higher premiums for seniors.
This move is part of a multi-year effort by the administration to rein in government spending on private Medicare plans. Government audits have suggested that some insurers have been overpaid for years due to "upcoding," where patient illnesses are made to look more severe than they are. The new proposal aims to tighten these risk-adjustment programs.
Insurers claim that the combination of flat rates and rising medical costs will force them to exit certain markets. This could leave seniors in rural areas with fewer choices for their 2027 coverage. Advocacy groups for seniors are split, with some supporting the cost-cutting and others fearing the loss of popular extra benefits like dental and vision.
The draft regulation is now open for a 60-day comment period before being finalized. Wall Street reacted poorly to the news, with health insurance stocks seeing a notable dip following the announcement. Analysts suggest this is a sign of a "new era" of fiscal austerity for the Medicare Advantage program.
CMS proposed a minimal 0.09% rate increase for Medicare Advantage in 2027.
Insurers warn the flat funding will lead to higher costs for seniors.
The plan aims to cut government "overpayments" and curb upcoding.
Risk-adjustment rules are being tightened to save federal funds.
A 60-day public comment period will precede the final decision.
HISTORY
Medicare Advantage has grown to cover more than half of all Medicare beneficiaries as of 2025. However, this growth has come under intense scrutiny from both the GAO and the OIG regarding the accuracy of billing.
2023: CMS finalized a rule to recover billions in overpayments through intensified audits.
2024: The "Great Healthcare Plan" framework emphasized slashing "wasteful spending" in Medicare.
2025: Medicare Advantage enrollment hit an all-time high of 33 million people.
Late 2025: The administration signaled a shift toward "site-neutral" payments to lower costs.
Feb 2026: The initial 2027 rate proposal was leaked, causing industry-wide alarm.