Heads up: this issue is from February 11, 2026. Because it covers time-sensitive coding and regulatory topics, some details may have changed since. See the latest issues for current guidance.
The Centers for Medicare and Medicaid Services (CMS) released the Contract Year 2027 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program. CMS projects that the proposed updates would result in an average net payment increase of 0.09% in 2027, or 2.54% after accounting for expected coding trends. These figures are preliminary and will likely change before the final rate notice is issued on or before April 6, 2026. Just as importantly, the impact will vary widely by plan based on geography, enrollee risk profile, and quality bonus eligibility, underscoring why stakeholders should look beyond the headline number. Comments on this proposed rule were due to CMS by January 26, 2026. But comments may be largely ignored anyway.
Medicare Part D Redesign
The Inflation Reduction Act of 2022 (IRA) introduced major changes to the Medicare Part D prescription drug benefit and gave CMS temporary authority—through 2026—to implement these changes via program instructions. Since this authority will expire, CMS is proposing to
formally codify these changes for 2027 and beyond.
The proposed regulations would:
- Eliminate the coverage gap phase.
- Lower the annual out-of-pocket threshold.
- Remove cost-sharing for enrollees in the catastrophic phase.
- Implement the Manufacturer Discount Program, which replaced the Coverage Gap Discount Program on January 1, 2025.
Additionally, the proposal would codify operational updates, including changes to True Out-of-Pocket (TrOOP) cost calculations, specialty-tier rules, reinsurance payment methods, and the implementation of the Selected Drug Subsidy.
Proposed Updates to Star Ratings
The Star Ratings system, used by Yelp, Opentable, hospitals, MA Plans, and Part D plans, helps Medicare beneficiaries compare health and drug plan quality and determines Quality Bonus Payments and rebates for MA contracts. Currently, MA-PD contracts are rated at up to 43 measures, MA-only contracts on up to 33 measures, and Part D plans on up to 12 measures across five categories: outcomes, intermediate outcomes, process, patient experience, and access.
CMS proposes two sets of major changes to the Part C and Part D Star Ratings system.
- First, CMS is proposing not to introduce the “Excellent Health Outcomes for All” reward—which is intended to recognize high measure-level scores among enrollees with certain social risk factors—in the 2027 Star Ratings. Instead, CMS plans to maintain the existing reward factor that promotes consistently strong performance across all quality measures.
- Secondly, CMS proposes to simplify and refocus the measure set for the 2027 measurement year by removing 12 measures that focus on administrative processes or areas where plan performance is uniformly high and shows little variation. The proposed rule (Table 1) lists the measures proposed to be removed from the Star Ratings. CMS proposes to add a new Part C Depression Screening and Follow-Up measure to address behavioral health gaps, starting with the 2027 measurement year reflected in the 2029 Star Ratings.
- For the Star Ratings updates, the net impact is estimated to be between $5.02 billion in 2028 and $0.95 billion in 2036, resulting in a 10-year net impact estimate of $13.18 billion, which equates to 0.15 percent of the Medicare payments to private health plans for the years 2027 through 2036.
Improving the Enrollment Experience in Current MA and Medicare Prescription Drug Benefit Program Policies
CMS is proposing changes to improve the enrollment experience for MA and Part D enrollees.
The proposal includes:
- New SEP for Provider Terminations--CMS plans to update the existing SEP ("Special Enrollment Period") that allows enrollees to switch plans when their provider leaves the network. Currently, this SEP applies only if CMS and the MA organization deem the network change “significant.” The proposed change removes that limitation, making it easier for enrollees to stay with their favorite provider by allowing them to switch plans when any provider they use leaves the network.
- Codifying SEP Approval Policy--CMS will formalize its long-standing policy that certain SEPs require prior CMS approval. This ensures transparency and consistency by making clear that changes to these SEPs can only occur through rulemaking.
Avoiding Upcoding by MA Plans
The Advance Notice proposes several adjustments to the Part C risk adjustment model, which adjusts capitated payments to reflect the varying risk of enrolled beneficiaries based on demographic characteristics and diagnosis information. Riskier patients can increase per-member-per-month rates for MA Plans.
One of the most significant proposals set forth in the Advance Notice is CMS’s plan to exclude diagnoses associated with unlinked chart review records ("CRRs") from risk score calculation. Currently, MA plans submit two types of CRRs for payment: linked and unlinked. Linked CRRs refer to CRRs with diagnoses that appeared in a previously submitted encounter data record—meaning they were coded by a provider as a diagnosis that was addressed during a specific clinical visit. Unlinked CRRs are CRRs with diagnoses that do not appear in a separate encounter data record. Thus, they are not associated with a specific service or care.
To support its proposal, CMS states that the submission of unlinked CRRs “raises data integrity concerns as some MA organizations may be continuing to submit unlinked CRRs in lieu of EDRs [encounter data records] for some service records despite the ability to submit EDRs.” CMS further reasons that items and services should be reported on an EDR, so a “CRR should not be the only record with information about a healthcare item or service provided to a plan enrollee.”
Other than the proposed exclusion of unlinked CRRs, the proposed 2027 CMS-HCC model largely maintains the same segmentation structure and uses the same demographic variables and HCCs as the 2024 CMS-HCC model, including eight model segments, condition count variables, and version 28 of the clinical classification of HCCs. The agency did propose a few technical changes to the Part C risk adjustment model for CY 2027, including:
- To update calibration data from 2018 diagnoses predicting 2019 expenditures to 2023 diagnoses predicting 2024 expenditures
- To exclude diagnoses from audio-only services to align with the Medicare Advantage (MA) diagnosis submission policy
Additionally, CMS is proposing Part D changes similar to those it is making for Part C risk adjustment. This includes updating the underlying data used in the model calibration to more recent years, specifically using diagnoses from 2023 fee-for-service (FFS) claims and MA encounter data records and gross drug costs from 2024 PDEs (In the complex world of healthcare reimbursement and oversight, few acronyms carry as much weight for Medicare Part D payers as PDE—Prescription Drug Event) and updating the denominator year from 2023 to 2024. The agency further proposes excluding diagnoses from audio-only services, as well as those submitted on unlinked CRRs.
Changes to Marketing and Communications.
CMS proposes several changes to rules governing marketing and outreach to beneficiaries, including reducing restrictions on beneficiary outreach and third-party marketing organizations (TPMOs). CMS also notes that, if finalized for the 2027 contract year, these changes would take effect on October 1, 2026, when marketing for the 2027 plan year begins.
Improvements for Special Needs Plans
- Model of Care (MOC) Off-Cycle Submission Window--All Special Needs Plans (SNPs) must implement care management through an NCQA-approved Model of Care (MOC) and related services, with each SNP type requiring its own MOC. Starting in 2027, CMS will move the initial and renewal MOC submission deadline to early June and proposes a new timeline for off-cycle updates: January–March and October–December each year. This change splits the current six-month update window to align with operational needs for CMS and NCQA reviews.
- Passive Enrollment by CMS--CMS supports passive enrollment from terminating integrated D-SNPs to comparable plans but proposes changes to reduce disruptions. The agency plans to eliminate requirements that substantially similar provider networks and benefits be available across plans, replacing them with a 120-day continuity-of-care period for active treatments, including care from out-of-network providers. Existing integration standards already ensure comparable benefits across D-SNPs within a state.
Reducing Regulatory Burden and Costs in Accordance with Executive Orders
CMS is proposing several changes to reduce administrative burden and remove requirements that are
duplicative, no longer necessary/applicable. Proposals include:
- Exempting account-based plans (such as health reimbursement arrangements (HRAs), flexible spending accounts (FSAs), and health savings accounts (HSAs)) from creditable coverage disclosure requirements.
- Rescinding the requirement for MA plans to send mid-year notices about unused supplemental benefits--meaning more $$$ for MA plans.
- Eliminating the requirement for MA quality improvement programs to include activities that reduce health disparities. Uh boy.
- Eliminating health equity requirements for MA Utilization Management (UM) Committees,including requiring a health equity expert member, conducting annual health equity analyses, and publicly posting these analyses.
- Waiving the requirement for the Limited Income Newly Eligible Transition (LI NET) program to maintain toll-free customer call centers open from 8 a.m. to 8 p.m. in all regions.
Requests for Information ("RFIs") on Future Directions in Medicare Advantage
Proving once again that there's a sucker born every minute, the MA program has grown considerably in the past two decades, now covering over half of all Medicare beneficiaries. In light of this growth, CMS is interested in exploring opportunities to "modernize and strengthen the program".
- Risk Adjustment RFI--CMS is focusing on enhancing competition within the MA program by soliciting input on risk adjustment and quality bonus payment changes. CMS recognizes that the current risk adjustment system may disadvantage smaller, newer, and less well-resourced plans and encourages plans to implement coding practices that promote consistent upcoding across Medicare Advantage plans. CMS is exploring modernization opportunities, including a next-generation risk adjustment model that could leverage artificial intelligence and alternative data sources, as well as ways to streamline the quality measurement timeline and reduce the current two-year lag between measurement and payment.
- RFI on Quality Bonus Payments and Star Ratings--CMS solicits comments from stakeholders on strategies to further simplify and modify the Star Ratings program. CMS is gathering input to shape future policies on the MA Quality Bonus Payment (QBP) structure and its effect on rebates. CMS may introduce new Star Rating measures—covering testing, validation, proposal, and implementation—and expedite the current two-year delay between the measurement period and payment adjustments for MA plans. CMS is also requesting feedback on whether to pilot a CMMI model that separates Quality Bonus Payments (QBPs) from MA bids.
- RFI on Dually Eligible Individual Enrollment Growth in C-SNPs and I-SNPs--CMS aims to address the significant growth in chronic condition special needs plans (C-SNPs) enrollment, with particular concern about dually eligible individuals enrolling in these plans rather than dual eligible special needs plans (D-SNPs) that offer integrated Medicare-Medicaid benefits. CMS is exploring potential solutions.
- Well-Being and Nutrition RFI--.This RFI is seeking comments on tools and policies that improve overall health, happiness, and satisfaction in life, which could include aspects of emotional well-being, social connection, purpose, and fulfillment (Editor note: are they freaking serious???), in addition to tools that would achieve optimal nutrition and improve preventive care in MA. If you responded, "BS", good for you.
To review these proposals, please see:
