This week the Centers for Medicare & Medicaid Services (CMS) released the Contract Year (CY) 2027 Medicare Advantage (MA) and Part D Advance Rate Notice. The annual notice establishes payment rates for MA and Medicare Part D plans for the next year. The notice included a change to risk adjustment policy that could improve accuracy and limit overpayments. As outlined by Medicare Payment Advisory Commission (MedPAC), “[r]isk scores adjust a plan’s base rate to account for differences in expected beneficiary medical costs by increasing a plan’s payment rate for beneficiaries who are likely to have higher medical expenses and decreasing a plan’s payment rate for beneficiaries who are likely to have lower medical expenses.” MedPAC notes the intended purpose being to “accurately predict costs on average for a group of beneficiaries with similar attributes that affect health care costs, thereby reducing incentives for plans to avoid beneficiaries with certain unprofitable attributes and to attract those with profitable attributes.”
Despite the purpose of risk scores and adjustment, extensive research has shown that the reality is that many MA plans, particularly larger plans, currently exploit the risk adjustment system by inflating scores.
Sen. Chuck Grassley (R-Iowa) recently released a Senate Judiciary Committee majority staff report, “How UnitedHealth Group Puts the Risk in Medicare Advantage Risk Adjustment,” exposing how plans can game the MA risk adjustment system. The report concludes :“. . . risk adjustment in MA has become a business in itself . . . MAOs should receive payments that are commensurate to the complexity and acuity of the Medicare beneficiaries that they insure, not their knowledge of coding rules and their ability to find new ways to expand inclusion criteria for diagnoses. Taxpayers and patients deserve accurate and clear-cut risk adjustment policies and processes.”
A method plans use is to include diagnosis codes for enrollees that are determined through chart reviews and health risk assessments, even if there is no follow-up with a provider, no treatment or care provided to the enrollee for the conditions listed for the enrollee. The majority staff report expanded on this:
[a]t one end of the spectrum, MAOs may operate similarly to FFS Medicare where the totality of the ICD codes included in their risk scores come from claims submitted by unaffiliated healthcare providers to which the MAO does not incentivize or pressure to assess, diagnose, or code in any particular way. At the other end of the spectrum, there could be MAOs that exert great amounts of control over the healthcare providers that care for their enrollees, conduct large numbers of in-home HRAs and chart reviews, own and analyze great amounts of data, screen all of their asymptomatic enrollees for conditions, and urge their providers to use the broadest acceptable diagnostic criteria.
If a plan links chart review records (CRRs) to encounter data record (EDR) then risk adjustment-eligible diagnoses are linked to items or services provided to an enrollee, presumably making these diagnoses more accurate. When a diagnosis added through CRRs is unlinked, there is no information associated with the diagnosis about items or services that were provided to the enrollee. These aggressive coding methods allow plans, particularly larger more sophisticated plans, to inflate risks scores for their enrollees and thereby increase their payment.
The CMS notice released this week proposes to exclude diagnoses submitted on unlinked chart review records (CRRs) from risk score calculation starting in CY 2027. The proposal cited research from The HHS Office of the Inspector General (OIG), CMS and MedPAC that found overpayments to plans because of the score calculations.
As noted previously, stakeholders have raised concerns about CMS accepting diagnoses for risk score calculation that are not linked to the provision of a healthcare item or service. In addition to the OIG, the Medicare Payment Advisory Commission (MedPAC) found that for 2020 through 2023 about half of the differential coding they measured in MA could result from use of diagnoses from chart reviews and health risk assessments and that these two mechanisms are primary factors driving coding differences among MA plans. Based on these findings, excluding unlinked CRRs from risk adjustment may reduce differences in payment resulting from differences in differential coding across MA organizations. Given the maturity of the encounter data and the program integrity concerns at hand, CMS believes that requiring diagnoses to be linked to an actual service record for risk score consideration supports ongoing efforts to ensure more accurate payments. Therefore, CMS proposes to exclude diagnoses from unlinked CRRs from risk score calculation starting in CY 2027.
CMA has long called for CMS to remove diagnosis codes that exclusively come from chart reviews or health risk assessments that are not substantiated in other visits with medical providers. This proposal would improve accuracy and would be a key step in clamping down on the ability of plans to game the risk adjustment system by claiming their enrollees have conditions that give them a higher risk score without providing follow-up care for these conditions.
Addressing the inaccuracies and overpayments through these types of reforms would save taxpayer dollars and help make sure that resources are properly spent on beneficiaries who have conditions that need additional care and receive some additional care. CMA supports this CMS effort to clamp down on the fraudulent gaming of the system in which plans engage.
The rate notice also proposes to raise rates paid to health plans by less than a tenth of a percent (0.09%) for 2027, significantly lower than the 5.06% rate last year. CMS included a 4.97% effective growth rate for 2027 compared to the 9.04% effective growth rate for 2026. While industry groups and plans have expressed concerns about this lower-than-expected rate raise for plans, CMS notes that this rate raise will result in “$700 million in MA payments to plans.” To explain the growth rate, CMS also notes that it reflects the “current estimate of the growth in benchmarks used to determine payment for MA plans. This growth rate is largely driven by the growth in Original Medicare per capita costs, as estimated by the Office of the Actuary.” Extensive research and audits over the years have underscored that MA plans are excessively overpaid. CMA supports limiting plan overpayments, and views these proposals as important steps in the right direction, but urges additional CMS oversight of plans.
Comments on the advance notice are due on February 25, 2026. CMA plans to submit comments on the notice.
January 29, 2026 – K. Kertesz