CMS Proposes Almost Flat Medicare Advantage Payments for 2027, Pressuring Insurers

A late-January CMS proposal would leave Medicare Advantage payments essentially unchanged for 2027, with a net average increase of 0.09%—a figure sharply smaller than the 4%–6% boost Wall Street had anticipated. That variance between expectation and proposal has immediate market consequences: investors reprice insurer outlooks when anticipated revenue growth evaporates. CMS frames the move as an effort to correct payment inaccuracies and modernize how risk is measured, part of a broader push to reduce payments driven by questionable billing maneuvers. Translating percentages into dollars, the agency estimates the proposed rates would produce slightly more than $700 million in additional payments to Medicare Advantage plans next year. Because these government-set rates underpin what private plans can charge and which benefits they can deliver, even small shifts in the index alter insurer margin calculus, premium-setting and product design. Final rulemaking is expected in early April, meaning carriers have a narrow window to adjust pricing, network strategies and benefit offerings before implementation. For plans that budgeted around a multi-percent increase, the proposal tightens projected revenues and may force cost-control steps or benefit trade-offs. From a policy perspective, regulators are signaling scrutiny of billing patterns that have expanded plan payments, an approach likely welcomed by budget hawks but resisted by insurers and some provider groups. Beneficiaries could see longer-term effects through plan benefit changes or premium adjustments, though one year of a muted rate change does not automatically translate into immediate benefit cuts. The political backdrop—administration priorities and public scrutiny of Medicare spending—heightens the stakes; the rule both restrains potential overpayments and sets a precedent for tougher oversight. Market reactions will depend on how carriers respond operationally: whether they accept slimmer margins, shift risk management practices, or pursue regulatory challenges. Analysts will watch the April final rule and subsequent CMS guidance on risk adjustment closely, since nuanced methodological changes can have outsized financial consequences. In short, the proposal recalibrates revenue expectations for Medicare Advantage firms, signals a regulatory clampdown on certain billing techniques, and creates a tight policy timeline for insurers to adapt ahead of the final rate announcement.