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On April 6, the Centers for Medicare and Medicaid Services finalized a 2.48 percent average payment increase for Medicare Advantage plans in calendar year 2027, which translates to more than $13 billion in additional payments to insurers, as reported by Barron's. The announcement marked a sharp reversal from the near-flat 0.09 percent increase CMS had proposed in its January advance notice, which had rattled insurer stocks and drawn a record volume of industry comment.
Wall Street responded swiftly. Shares of UnitedHealth Group and Humana climbed significantly in premarket trading following the Monday evening announcement, with Humana gaining roughly 11%. Analysts at Mizuho characterized the increase as improved but not extraordinary, noting that margin expansion in 2027 would still depend on plans to continue trimming benefits and aligning costs with revenue. TD Cowen analysts had anticipated something more modest, in the range of 1-1.5%, making the final figure a relative upside surprise.
The gap between the advance notice and the final rate was driven in part by CMS's decision not to proceed with a proposed overhaul of its risk adjustment model. Instead, the agency will continue using the 2024 model calibrated with older data, giving plans more time to adapt. CMS did finalize the exclusion of diagnoses from unlinked chart review records, a move aimed at curbing coding practices that inflate risk scores without being tied to specific patient encounters.
Medicare Advantage now covers approximately 35 million beneficiaries, having surpassed traditional Medicare in enrollment. Industry groups such as the Better Medicare Alliance had argued that the January proposal amounted to a de facto payment cut, given medical cost trends of 7% to 9% percent annually. At the same time, bipartisan scrutiny of MA spending and coding-driven payment inflation has intensified, with both parties raising concerns about practices that allow insurers to collect higher per-beneficiary payments.
The final rate sets the stage for plan bid submissions due June 1, 2026.
