The Rate & Risk Adjustment Storm on Syam Adusumilli

The 0.09% Shock

Sun, 15 Mar 2026 00:00:00 +0000

On January 26, 2026, CMS released the Calendar Year 2027 Advance Notice of Methodological Changes for Medicare Advantage Capitation Rates and Part C and Part D Payment Policies. The headline number was 0.09%. That figure, representing the proposed net average year-over-year payment increase for MA plans, translates to roughly $700 million in additional aggregate payments across the entire MA program. Wall Street had been modeling a 4% to 6% increase. The prior year’s finalized rate had come in at 5.06%, itself a generous bump that sent insurer stocks soaring in April 2025. A 0.09% advance notice was not a rate cut in the technical sense, but it functioned as one against every plan’s cost and enrollment projections for the coming year.

Summary: The 0.09% Shock

Sun, 15 Mar 2026 00:00:00 +0000

On January 26, 2026, CMS released the CY 2027 Advance Notice proposing a net average payment increase for Medicare Advantage plans of 0.09%. That figure translates to roughly $700 million in aggregate additional payments across the entire MA program. Wall Street had modeled 4% to 6%. The prior year’s finalized rate was 5.06%, itself a generous increase that sent insurer stocks soaring in April 2025. The 0.09% was not technically a rate cut, but against every plan’s cost and enrollment projections, it functioned as one.

Unlinked Chart Reviews

Sun, 15 Mar 2026 00:00:00 +0000

The CY 2027 advance notice proposed a net payment increase of 0.09%, but the number that matters more is $7.2 billion. That is CMS’s estimate of the payment reduction that would result from excluding diagnoses found through chart review records that are not linked to a specific beneficiary encounter. It is the largest single-mechanism payment reduction CMS has proposed in the history of the Medicare Advantage program. It is also, in CMS’s own framing, not a reduction at all. It is the elimination of payments for diagnoses that were never validated by a clinician during a face-to-face visit.

Summary: Unlinked Chart Reviews

Sun, 15 Mar 2026 00:00:00 +0000

The CY 2027 advance notice proposed a net payment increase of 0.09%, but the number with the most durable policy consequence is $7.2 billion: CMS’s estimate of the payment reduction that would result from excluding diagnoses found through chart review records not linked to a specific beneficiary encounter. It is the largest single-mechanism payment reduction CMS has proposed in the history of the Medicare Advantage program. In CMS’s framing, it is not a reduction at all but the elimination of payments for diagnoses that were never validated by a clinician during a face-to-face visit.

Three Years of HCC Reform

Sun, 15 Mar 2026 00:00:00 +0000

The CMS-HCC risk adjustment model is the mechanism that converts clinical diagnoses into plan revenue. When CMS finalized the V28 model revision in the CY 2024 Rate Announcement, it restructured the classification system that determines what conditions are worth, how they are grouped, and what calibration data drives the payment weights. The three-year phase-in that followed, blending V28 with its predecessor V24 from 2024 through 2026, is now complete. CY 2026 is the first year plans experienced 100% V28 without a transition cushion.

Summary: Three Years of HCC Reform

Sun, 15 Mar 2026 00:00:00 +0000

The CMS-HCC risk adjustment model is the mechanism that converts clinical diagnoses into MA plan revenue. When CMS finalized the V28 model revision in the CY 2024 Rate Announcement, it restructured the classification system that determines what conditions are worth, how they are grouped, and what calibration data drives the payment weights. The three-year phase-in that followed, blending V28 with its predecessor V24 from 2024 through 2026, is now complete. CY 2026 is the first year plans experienced 100% V28 without a transition cushion, and CY 2027 layers the chart review exclusion and its $7.2 billion impact on top of a population that has absorbed every year of the model shift.

The Encounter-Based Risk Adjustment Future

Sun, 15 Mar 2026 00:00:00 +0000

Three articles in this series have traced a single trajectory. MCR-02.03 documented the V28 model reform that recalibrated what diagnoses are worth. MCR-02.02 examined the chart review exclusion that eliminates one mechanism for capturing those diagnoses. This article addresses the endpoint both reforms are building toward: a risk adjustment system where only provider-attested encounter data counts for payment.

CMS has not published a proposed rule for encounter-based risk adjustment. There is no implementation date. But the trajectory is unmistakable, and the agency has been explicit about the direction. The CY 2026 Advance Notice Fact Sheet stated that CMS had been working to calibrate the risk adjustment model using MA encounter data and would have the option to begin phasing in an encounter-data-based model as early as CY 2027. The CY 2027 Advance Notice did not propose that phase-in, but it did propose the chart review exclusion, which functions as a structural precursor: remove the non-encounter data sources one at a time, and what remains is encounter-based RA by subtraction.

Summary: The Encounter-Based Risk Adjustment Future

Sun, 15 Mar 2026 00:00:00 +0000

CMS has not published a proposed rule for encounter-based risk adjustment and has set no implementation date. But the trajectory is unmistakable, and the agency has been explicit about the direction. The CY 2026 Advance Notice Fact Sheet stated that CMS had been working to calibrate the risk adjustment model using MA encounter data and would have the option to begin phasing in an encounter-data-based model as early as CY 2027. The CY 2027 advance notice took the intermediate step of excluding unlinked chart review diagnoses rather than proposing the full transition, but the exclusion functions as a structural precursor: remove the non-encounter data sources one at a time, and what remains is encounter-based risk adjustment by subtraction.

CY 2027 Proposed Rule

Sun, 15 Mar 2026 00:00:00 +0000

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.

Summary: CY 2027 Proposed Rule

Sun, 15 Mar 2026 00:00:00 +0000

CMS released the CY 2027 proposed rule on November 25, 2025, two months before the advance notice captured headlines with the 0.09% rate shock. The proposed rule contains a separate and consequential set of policy changes: a significant restructuring of the Star Ratings system, a reversal of the Health Equity Index reward, requests for information on C-SNP oversight and Quality Bonus Payment reform, nutritional policy signals aligned with the MAHA agenda, and codification of the IRA’s Part D redesign provisions. Plans that read only the rate notice miss the structural signals embedded here.

State-by-State Rate Impact Analysis

Sun, 15 Mar 2026 00:00:00 +0000

MA rates are national policy applied to county-level economics. The 0.09% headline number lands differently in Miami-Dade than in rural Montana. AHIP’s Wakely analysis estimated that roughly 70% of MA enrollees live in areas that would see payment cuts under the advance notice, with the most negatively affected states including Oklahoma, Kansas, West Virginia, Alabama, and North Dakota. Rural counties face lower growth on average than urban ones. This article maps the differential impact of the CY 2027 rate environment across the 20 largest Medicare markets, identifying where exits are most likely, where chart review exposure concentrates, and where beneficiaries face the most material coverage risk.

Summary: State-by-State Rate Impact Analysis

Sun, 15 Mar 2026 00:00:00 +0000

MA rates are national policy applied to county-level economics. The 0.09% headline number lands differently in Miami-Dade than in rural Montana, and the distribution is not random. AHIP’s Wakely analysis estimated that roughly 70% of MA enrollees live in areas that would see payment cuts to plans under the advance notice, with the most negatively affected states including Oklahoma, Kansas, West Virginia, Alabama, and North Dakota. Rural counties face lower growth on average than urban ones. The geographic variation follows a structural logic: MA benchmarks derive from county-level FFS per-capita spending, and counties where FFS spending is lowest receive benchmarks that provide the least room for plans to absorb rate compression. A flat or near-flat national update compresses margins most severely where margins were already thinnest.

The MA Overpayment Ledger

Sun, 15 Mar 2026 00:00:00 +0000

This article sits at the intersection of two series. MCR-00.01 established the HI Trust Fund’s projected depletion date of 2033, possibly 2032 with the effects of the One Big Beautiful Bill Act. MCR-02.01 through MCR-02.04 explained the payment mechanics: the 0.09% rate shock, the $7.2 billion chart review exclusion, the V28 model reform, and the encounter-based risk adjustment trajectory. This article connects the two. It does the arithmetic that links MA overpayment to the trust fund depletion date and asks what the reform mechanisms CMS is pursuing would actually save.

Summary: The MA Overpayment Ledger

Sun, 15 Mar 2026 00:00:00 +0000

MedPAC estimated in January 2026 that Medicare will overpay MA plans by approximately $76 billion in 2026. The Committee for a Responsible Federal Budget, using MedPAC’s methodology as a starting point, projected $1.2 trillion in cumulative overpayments through 2035, of which $520 billion would come from the HI Trust Fund. CRFB’s conclusion was direct: absent these overpayments, the HI Trust Fund would be solvent for the next decade and beyond. Instead, it is projected to deplete in 2032. The payment mechanics in MCR-02.01 through MCR-02.04 and the trust fund arithmetic in MCR-00.01 are connected by the same ledger. This article does the arithmetic.