2027 Medicare Advantage Payment Changes: What does it mean for you!
Medicare Advantage Payment Shock: What the 0.9% Proposal Really Means for Plans, Providers, and Maine Seniors
Wall Street reacted as if something broke. Stock prices for many of the major carriers fell at the end of January 2026. (Most between 10-20%)
Just before then, CMS proposed a roughly 0.9% base rate increase for Medicare Advantage plans in 2027, and insurer stocks fell sharply. Compared to prior years of stronger increases, the number looked like a freeze. For perspective, the rate increases recently were 5.06% in 2026, 3.3% in 2024, and 8.5% in 2023.
But the headline tells only part of the story.
To understand what is really happening, you have to look past the base rate and into the engine that drives Medicare Advantage revenue: risk adjustment.
(Approval for the rate change proposal should be completed by April 6th.)
How Medicare Advantage Plans Get Paid⚾
Just because most plans have a $0 premium, that’s not all they get paid. Medicare Advantage plans receive a fixed monthly payment for each enrollee. That payment is adjusted based on the health status of the member.
This is called risk adjustment. (This is the inside-baseball of Medicare Advantage plans.)
Each documented chronic condition increases a beneficiary’s risk score. A higher risk score translates into a higher monthly payment to the plan. A healthier enrollee generates a lower payment.
For example:
A 70-year-old with no chronic conditions produces far less revenue than a 70-year-old with diabetes, congestive heart failure, and COPD. Each qualifying diagnosis raises the plan’s per-member-per-month payment.
Over the past decade, plans have become highly efficient at identifying and documenting those diagnoses through:
Office visits
In-home assessments
Chart reviews
Retrospective coding audits
Risk score growth has been a major contributor to Medicare Advantage revenue expansion.
What CMS Is Changing?
CMS is now tightening how certain diagnoses count toward payment.
Under the proposal, some diagnoses identified through chart reviews would no longer increase payment unless they are tied to documented patient encounters. In other words, unsupported retrospective coding would carry less financial weight. Yes, this is actually a thing that is being allowed!
CMS estimates that removing certain chart review diagnoses could reduce payments by roughly 1.5% on average.
That may sound modest. But in a business where medical costs are rising 5–8% annually, even a 1–2% revenue adjustment can materially affect margins.
When you combine:
A modest 0.9% base rate update
Slower risk score growth
Ongoing medical cost inflation
The profitability equation tightens.
That is what investors were reacting to.
Why Providers Are Concerned?
Payment pressure rarely stays contained inside insurance companies.
When plan revenue growth slows, insurers typically respond by:
Negotiating harder with physician groups
Increasing prior authorization scrutiny
Trimming supplemental benefits
Narrowing networks in less profitable areas
Intensifying medical cost management
Physician groups operating under value-based arrangements are especially sensitive. Many receive fixed monthly payments tied to risk scores. If those risk scores grow more slowly, funding for care coordination infrastructure may shrink.
That tension can translate into more contract disputes, more administrative oversight, and potentially narrower provider access for beneficiaries.
At the same time, Medicare policy advisers argue that Medicare Advantage plans have been overpaid relative to traditional Medicare. From that perspective, tighter risk adjustment is a correction, not a cut.
The debate is structural, not temporary.
What This Could Mean for Mainers🌲
National policy shifts rarely land evenly. Rural states like Maine feel these changes differently.
Network Sensitivity
Many Maine counties already have limited provider density. If margins tighten, plans may reassess county participation or network breadth. In a rural market, the exit of a single hospital system can significantly affect access.
Travel for Specialty Care
Many Maine beneficiaries travel to Portland, Boston, or other out-of-state facilities for specialty treatment. Tighter network management or stricter utilization review could complicate those patterns.
Traditional Medicare with a supplement offers broader national flexibility. Medicare Advantage depends on evolving network contracts.
See our Guide to Medigap Plans in Maine! and What is the difference between Medicare Advantage and Medicare Supplements!
Smaller Risk Pools
Maine has a smaller Medicare Advantage enrollment base compared to large states. Smaller pools amplify volatility. Payment formula changes can influence:
Supplemental benefit design
Premium stability
County-level participation (New Hampshire lost many carriers throughout the state this year)
In larger states, adjustments may feel incremental. In Maine, they can feel visible.
The Practical Takeaway📓
This proposal does not mean Medicare Advantage is collapsing.
It does mean the environment is becoming more disciplined.
When payment growth slows and risk adjustment tightens:
Supplemental benefits may become leaner over time. (We saw many plans had a significant drop in benefits this year, Moreso than I’ve seen in many years.)
Network decisions become more strategic. (We also this in many states this year.)
Utilization management may increase. (This means more scrutiny in actually getting your care with prior authorizations and the like.)
Year-to-year plan comparisons become more important. (The days of “set it and forget it” with Medicare Advantage plans are at an end. If your advisor is not talking to you at least bi-annually, then are they really being a strategic advisor, or just helping clean up the mess after the fact.)
For Maine beneficiaries, the critical question is no longer just:
“What is the premium?”
It is:
How stable is this plan’s network in my county?
How does it manage prior authorization?
How likely is its benefit structure to shift next year?
The 0.9% headline made for drama.
The real story is about recalibration. CMS appears intent on slowing risk score inflation while medical costs continue to rise.
If that effort succeeds, Medicare Advantage plans will adapt. They always do.
The only open question is where the adjustment will be felt most clearly: in benefits, in networks, or in how care is managed.
For Maine seniors and the advisors who serve them, this is not a moment for panic. It is a moment for attention.
