CY 2027 Proposed Rule

The CY 2027 advance notice captured the headlines with the 0.09% rate shock and the $7.2 billion chart review exclusion. But CMS released the CY 2027 proposed rule two months earlier, on November 25, 2025, and it contains a separate set of policy changes that will shape the MA program independently of the rate environment. The proposed rule revises the Star Ratings system, reverses the Health Equity Index reward, solicits industry feedback on C-SNP oversight and quality bonus payment reform, signals nutritional and well-being policy aligned with the MAHA agenda, and codifies the Inflation Reduction Act’s Part D redesign provisions. This article covers what the rate and chart review articles do not.

Star Ratings Changes

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CMS proposed removing 12 measures from the Star Ratings beginning with the 2027 measurement year, which would affect the 2029 Star Ratings. The removed measures include SNP Care Management, Call Center foreign language interpreter and TTY availability for both Part C and Part D, Complaints about the Health/Drug Plan for both Parts C and D, Medicare Plan Finder Price Accuracy, Diabetes Care Eye Exam, Statin Therapy for Patients with Cardiovascular Disease, and Members Choosing to Leave the Plan for both Parts C and D.

CMS’s rationale for the removals follows a consistent pattern. Many of these measures have high and uniform performance across contracts, meaning they no longer differentiate plan quality in a meaningful way. Several have small denominators that make ratings sensitive to minor fluctuations rather than genuine quality differences. CMS frames them as better suited for monitoring compliance than for driving quality competition.

The practical effect is significant. Plans that relied on high-performing administrative measures as a ratings floor lose that buffer. Press Ganey’s analysis estimated $1.3 billion in lost Quality Bonus Payment dollars when the measure removals are applied to 2026 Star results. CMS’s own simulation found that 62% of contracts would see no overall change, 13% would gain a half star, and 25% would lose a half star. One contract would lose a full star. The net direction is downward for plans that depended on the removed measures, and the concentration of remaining weight shifts heavily toward clinical outcomes and member experience. By the 2029 Star Ratings, CAHPS and HOS measures are projected to compose nearly 40% of total Star weight.

CMS proposed adding one new measure: Depression Screening and Follow-Up, a Part C measure for the 2029 Star Ratings based on the 2027 measurement year. The addition aligns with the behavioral health emphasis running through multiple administration policy channels, including the ACCESS digital health model and MAHA ELEVATE (MCR-01.04, MCR-01.06). It signals that CMS views depression screening as a measurable quality indicator that plans and providers should be accountable for, not as a clinical recommendation left to provider discretion.

The broader trajectory is measure simplification with higher individual measure weight. Fewer measures means each remaining measure carries more influence over the composite score, which increases Star Rating volatility. A plan that underperforms on one or two high-weight measures can drop below the 4-star threshold that triggers quality bonus payments. The quality investment calculus shifts from broad compliance across many measures to concentrated performance on fewer, harder ones.

The HEI Reward Reversal

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CMS had previously finalized the Health Equity Index reward (rebranded as the Excellent Health Outcomes for All reward) for implementation in the 2027 Star Ratings. The HEI reward was designed to incentivize plans to improve outcomes for enrollees who are dually eligible, receive a low-income subsidy, or have a disability. It would have replaced the historical reward factor, which credits plans for year-over-year improvement across all measures regardless of population subgroup.

The proposed rule reverses course. CMS proposes not to implement the HEI reward and instead to continue the historical reward factor. The stated rationale is that CMS prefers to incentivize improvement across all measures for all enrollees rather than directing plans to focus on specific populations. CMS frames this as simplification and as a preference for broad-based quality incentives over population-targeted ones.

The political context is more direct. The HEI reward was a Biden-era equity initiative. The current administration has rolled back equity-focused policy across the federal government, and the HEI reversal fits that pattern. Executive Order 14192 on deregulation, issued in 2025, directed agencies to eliminate requirements perceived as redundant or low-value. CMS aligned the proposed rule with that directive, proposing to roll back several regulations described as DEI-related, including the HEI reward.

The reversal carries a cost. The HEI reward was designed to address a documented problem: MA plan performance varies by enrollee demographics, and plans serving higher proportions of low-income, disabled, or dually eligible beneficiaries face structural quality measurement disadvantages that the Star Ratings system does not adjust for. Removing the incentive does not remove the disparity. It removes the mechanism CMS had created to encourage plans to invest in closing it. SDOH screening measures and HIDE SNP behavioral health requirements remain in the Star Ratings toolkit, and the demographic disparities in MA and Medigap access continue to be documented by MedPAC and the Kaiser Family Foundation. But the gap between measuring equity and incentivizing it widens with the HEI reversal (see MCR-03.03 on Medicare equity).

CMS estimates that the combined effect of removing high-performing measures and eliminating the HEI reward while retaining the historical reward factor will approximately offset, leaving most contracts at similar overall ratings. The administrative measures pull ratings down; the historical reward factor pushes them back up. Whether that balance holds contract by contract depends on each plan’s specific measure performance profile.

The C-SNP RFI

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CMS paired the proposed rule with a Request for Information on the growth of Chronic Condition Special Needs Plans, and the RFI signals concern about where that growth is coming from.

C-SNP enrollment grew 71% in a single year. The growth rate is an outlier in an MA market that is otherwise consolidating. CMS observes that a significant and growing proportion of C-SNP enrollees are dually eligible for Medicare and Medicaid, meaning they could instead enroll in D-SNPs that offer integrated Medicare-Medicaid benefits with state Medicaid agency oversight. C-SNPs do not require a State Medicaid Agency Contract and do not carry the same integration requirements as D-SNPs. The enrollment shift raises a pointed question: are MA organizations using C-SNPs to enroll dually eligible individuals in plan structures that avoid the integration and oversight requirements Congress and CMS have been building into D-SNPs over the past decade?

The risk adjustment dynamic amplifies the concern. C-SNP populations, by definition, have chronic conditions. They generate higher risk scores than the general MA population. If the enrollment growth is driven by plan marketing strategies designed to capture beneficiaries who qualify for C-SNPs based on common chronic conditions like diabetes or cardiovascular disease, the growth may reflect coding and selection opportunity more than specialized chronic disease management. CMS is asking whether current quality measures adequately capture C-SNP population health outcomes or whether they simply reflect the selection characteristics of the enrolled population.

The RFI signals that CMS is considering new C-SNP oversight requirements, potentially including a State Medicaid Agency Contract requirement for C-SNPs and I-SNPs with high concentrations of dually eligible enrollees, mirroring the D-SNP integration framework. It is also exploring tighter C-SNP eligibility verification. This intersects with the encounter-based RA trajectory (MCR-02.04): if C-SNP diagnoses must be verified through encounter data rather than self-reported conditions or plan-directed screening, the enrollment growth dynamic may change. The RFI is not a proposal. But it is CMS publicly documenting a problem it intends to address (see MCR-09.03 on dual eligible integration).

Well-Being and Nutritional Policy RFI

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The proposed rule includes an RFI on well-being and nutrition policy changes for future years, directly connected to the Make America Healthy Again policy agenda and to the MAHA ELEVATE CMMI model (MCR-01.06).

CMS is asking plans about the role of nutrition, sleep, physical activity, and lifestyle factors in MA plan design. The RFI does not propose requirements. It asks what plans are already doing with food and nutrition benefits, what evidence supports expanding those benefits, and what regulatory framework would be needed if CMS moved from voluntary supplemental benefits to structured program requirements.

MA plans already have a vehicle for food and nutrition benefits through Special Supplemental Benefits for the Chronically Ill (SSBCI), which allows plans to offer non-primarily-health-related supplemental benefits to chronically ill enrollees. Medically tailored meals, grocery allowances, and nutritional counseling are among the most commonly offered SSBCI benefits. The evidence base for medically tailored meals in particular has grown substantially, with studies demonstrating reductions in hospitalizations and emergency department visits among food-insecure beneficiaries with diet-sensitive conditions like diabetes, heart failure, and kidney disease.

The RFI positions nutrition and well-being as areas where CMS may eventually move from optional supplemental benefit to structured program element. If that move happens, it would require plans to incorporate nutritional assessment and intervention into their care management infrastructure, creating new operational requirements and potentially new Star Ratings measures. The connection to MAHA ELEVATE, which tests lifestyle medicine interventions within Medicare payment models, is explicit: the CMMI model tests the clinical and cost framework, and the MA proposed rule RFI tests the industry appetite for broader adoption.

CMS also proposed clarifying that cannabis products illegal under applicable federal or state law cannot be offered as SSBCI, a narrow but notable regulatory boundary on supplemental benefit design.

Quality Bonus Payment RFI

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CMS is soliciting feedback on whether the Quality Bonus Payment structure should be reformed, and the RFI opens significant strategic territory.

The current QBP structure awards a 5 percentage-point benchmark bonus to plans rated 4 stars or above and a 3.5-point bonus to new and low-enrollment contracts. The QBP is applied to the county benchmark, not the plan bid, so its dollar value scales with benchmark level. In high-benchmark counties, the QBP can represent tens of millions of dollars in additional revenue for a large plan. In a 0.09% rate environment, QBP becomes a proportionally larger share of plan margin, making the 3.5/4.0 Star boundary the single most consequential quality threshold in MA economics (see MCR-04.07).

CMS is asking whether the QBP threshold, bonus percentage, or structure should change. Options under discussion include flattening the bonus, adjusting the star threshold, and possibly developing a CMMI Innovation Center model that delinks QBP from the MA bid cycle to allow bonuses to reflect more current performance. CMS noted that the current system creates a lag of up to three years between measurement and financial impact, which dulls the quality incentive signal.

If CMS restructures QBP, the financial calculus for quality investment changes for every plan operating near the 3.5/4.0 boundary. Plans that have invested heavily in quality infrastructure to maintain a 4-star rating may find the payoff altered by threshold changes. Plans below 4 stars that had concluded the quality investment required to reach the bonus was not worth the cost may recalculate if the threshold drops or the bonus structure becomes more graduated.

Part D Normalization and IRA Codification

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The proposed rule codifies the IRA’s Part D redesign provisions that CMS had been implementing through program instructions under temporary statutory authority expiring in 2026. The codification covers the elimination of the coverage gap, the reduced annual out-of-pocket threshold ($2,000 in 2025, $2,100 in 2026, proposed $2,400 in 2027), removal of catastrophic-phase cost sharing, and implementation of the Manufacturer Discount Program that replaced the Coverage Gap Discount Program. These are not new policies; they are the regulatory formalization of changes already in effect.

For Part D normalization, CMS continues the separate normalization methodology for MA-PD plans and standalone PDPs, extending it to the RxHCC model with separate model calibrations using 2023 diagnoses and 2024 drug costs. The updated model also excludes diagnoses from audio-only services and unlinked chart review records, consistent with the Part C changes. The interaction between Part D normalization and IRA drug negotiation is emerging: as Maximum Fair Prices take effect for first-cohort selected drugs, the gross drug cost data feeding the RxHCC model changes, and the normalization methodology must account for the price compression those negotiated prices create (see MCR-04.12 on IRA drug negotiation).

The proposed rule is a package. The rate notice captures attention because it has a dollar sign attached. But the Star Ratings restructuring, the HEI reversal, the C-SNP and QBP RFIs, and the well-being policy signals are where CMS is building the regulatory architecture for the next phase of MA. Plans that read only the rate notice miss the structural signals embedded in the rest of the document.

Related Reading

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MCR-04_07 Star Ratings in Transition: The Quality Bonus Payment Battlefield MCR-03_03 Medicare Equity: What the HEI Reversal Signals and What Remains MCR-09_03 Dual Eligible Integration: The FIDE/HIDE/AIP Landscape in 2025 to 2027