Benefit Design 2026-2027
What Plans Will (and Won't) Offer
The rate environment dictates the benefit environment. What CMS proposed in January 2026 determines what plans can afford to offer in January 2027. The CY 2027 benefit packages that plans submit in their June bids will be the first designed entirely within the post-chart-review-exclusion, post-V28, 0.09% rate world. This article maps the supplemental benefit contraction already underway in 2026, the Part D changes reshaping drug coverage, and the gap between what beneficiaries believe their plans cover and what the economics actually support.
The Supplemental Benefit Pullback#
The contraction is visible in the 2026 benefit data and will accelerate for 2027. KFF’s analysis of 2026 plan benefit packages found that while core supplemental benefits remain nearly universal, with 99% of plans offering vision, 98% dental, and 98% hearing, the share of plans offering non-core supplemental benefits declined meaningfully from the prior year. HealthScape’s survey of over 35 MA plan leaders, conducted largely before the January 26 advance notice, found that nearly 70% expected 2027 benefits to be less rich than 2026. Not one leader surveyed expected richer benefits. The degradation for 2027 will be sharpest in the non-core supplemental category.
Dental remains nearly universally available, but the scope of coverage is tightening. Plans are reducing annual dollar caps on dental benefits, narrowing dental provider networks, and pulling back coverage for major services. A plan that offered $2,000 in annual dental coverage for 2025 may offer $1,500 for 2026 and $1,000 for 2027. Preventive dental, cleanings and exams, is the least expensive component and the last to be cut. Restorative work, crowns, root canals, dentures, is the most expensive and the first to contract. The gap between what the dental benefit covers and what dental work actually costs widens for beneficiaries who need more than cleanings, which is a large proportion of the over-65 population. A beneficiary who chose an MA plan partly because it offered dental coverage may discover that the coverage does not extend to the procedure they actually need.
Vision benefits are following a similar pattern. Routine eye exams remain widely available, but eyewear allowances are declining. A plan offering a $200 annual eyewear allowance in 2025 may drop to $150 or $100 for 2027. For a beneficiary who needs progressive lenses, the allowance may not cover the cost of a single pair of glasses, making the “vision benefit” functionally symbolic. Contact lens coverage, specialty lens coverage, and frequency of covered exams beyond the annual are the components being reduced.
Hearing aid coverage, once a significant differentiator for MA plans, is narrowing. The over-the-counter hearing aid rule finalized by the FDA in 2022 expanded access to lower-cost devices outside of insurance coverage, which reduced the perceived need for plans to offer generous hearing aid benefits. Plans that previously covered premium hearing devices with low copays are increasing cost-sharing, reducing the number of covered devices per benefit period, and narrowing the range of covered manufacturers and models.
OTC allowances dropped from 73% of plans in 2025 to 66% in 2026. The OTC card, which allows beneficiaries to purchase health and wellness products at participating retailers, is one of the most visible and marketed MA benefits. Quarterly allowance amounts have been declining, from $100 or more per quarter at some plans to $25 to $50. The administrative cost of the OTC benefit is significant: vendor contracting, card fulfillment, product catalog management, and utilization tracking. For plans seeking to reduce benefit costs quickly, the OTC allowance is an easy target because its elimination is operationally simple compared to restructuring a dental or vision network.
Transportation benefits are among the most operationally complex supplemental benefits to administer. Plans contract with ride-hailing services, medical transportation providers, or dedicated non-emergency medical transportation vendors. Utilization management is difficult because the benefit must accommodate unpredictable scheduling, geographic variation in driver availability, and the clinical needs of frail or mobility-limited beneficiaries. Plans are reducing the number of covered one-way trips per month or per year, tightening eligibility to medical appointments only (excluding social or community trips), and imposing advance scheduling requirements that reduce the flexibility beneficiaries experienced when the benefit was less restricted.
Meal delivery and food benefits declined from 61% of plans offering meal benefits in 2025 to 57% in 2026. The evidence base for medically tailored meals is strong, particularly for food-insecure beneficiaries with diet-sensitive conditions. But the cost per beneficiary is high, the utilization management infrastructure is complex, and the benefit sits at the edge of what the rebate math can support under rate compression. Plans are reducing the number of covered meals per month, tightening eligibility criteria to require specific chronic conditions rather than offering meals broadly, and in some cases eliminating the benefit entirely.
The SSBCI trajectory adds uncertainty. Special Supplemental Benefits for the Chronically Ill expanded substantially under the VBID demonstration that ended in December 2024. SSBCI allowed plans to offer non-primarily-health-related benefits like food assistance, pest control, and structural home modifications to chronically ill enrollees. With VBID terminated and no replacement model in place, SSBCI benefits survive only to the extent the rebate math supports them. Plans that invested in SSBCI infrastructure, including vendor relationships, eligibility verification systems, and beneficiary outreach programs, face the question of whether those investments can be sustained at current rates. For plans with high Star Ratings and healthy rebates, targeted SSBCI offerings focused on the highest-cost chronic conditions may remain viable. For plans already operating at thin margins, SSBCI is an early casualty of rate compression.
The bid-to-benefit math explains why. Plans bid below their county benchmark and receive a rebate of 50% to 70% of the difference. That rebate funds supplemental benefits, premium buydowns, and margin. When benchmarks grow by 0.09% and chart review exclusion reduces risk-adjusted revenue, the rebate shrinks. The benefits that go first are those with the highest ratio of plan cost to beneficiary perceived value. An OTC allowance that costs the plan $200 per quarter to administer and fund is cut before a dental preventive benefit that costs less and generates higher member satisfaction. Transportation benefits requiring complex vendor infrastructure are cut before hearing exam coverage that runs through existing provider networks. The logic is actuarial, but the effect is personal: the benefits most visible to beneficiaries, the ones that made MA feel different from Traditional Medicare, are the ones most vulnerable.
Part D Redesign Impact#
The IRA’s Part D redesign produces the most significant drug benefit change since Part D was created in 2006, and it interacts with the MA benefit design environment in ways that both help and hurt plans.
The $2,000 annual out-of-pocket cap, fully effective in 2026, eliminates catastrophic drug cost exposure for beneficiaries. Patients who previously faced thousands of dollars in annual drug spending, particularly cancer patients on oral chemotherapy, autoimmune patients on specialty biologics, and beneficiaries managing multiple brand-name medications, now have a hard ceiling. The cap changes the MA-PD value proposition relative to standalone Part D: beneficiaries no longer need rich drug coverage through MA to manage catastrophic cost risk because the IRA provides that protection directly. For plans, this means one less differentiator in the benefit design toolkit. For beneficiaries, it means the Part D component of an MA-PD plan matters less in plan selection because the downside risk is capped by statute regardless of plan choice.
The plan liability shift under the redesigned benefit is material. The elimination of the coverage gap and the restructured manufacturer discount program change how costs are allocated among beneficiaries, plans, and manufacturers across the benefit phases. Plans absorb a larger share of post-deductible drug costs in the initial coverage phase. The reinsurance subsidy structure changes how much CMS reimburses plans in the catastrophic phase. CMS implemented a Part D premium stabilization demonstration for 2025 and 2026 to cushion the premium impact, but the demonstration’s terms became less generous in 2026, and the CY 2027 advance notice did not address whether the demonstration would continue. The net effect increases plan liability for high-cost drug beneficiaries, which flows directly into premiums and Part D bid calculations. The Part D standard deductible is proposed at $700 for 2027, up from $615 in 2026. The OOP cap is proposed at $2,400, up from $2,100.
The BALANCE GLP-1 bridge creates a new and large cost variable. The Part D bridge begins in July 2026, with the full CMMI model launching in January 2027 (MCR-01.05). Plans will be required to include GLP-1 medications for weight management on their formularies under BALANCE terms, subject to coverage criteria and documentation requirements. GLP-1s, including semaglutide and tirzepatide, are among the most expensive drug classes in the pharmacy benefit, with list prices exceeding $1,000 per month before rebates. The utilization trajectory is steep: demand for weight management pharmacotherapy far exceeds what plans have historically covered, and the BALANCE model’s formulary inclusion requirements will channel that demand through Part D rather than leaving it outside the benefit. How plans price GLP-1 coverage into their 2027 bids is one of the most consequential actuarial decisions of the cycle. Plans that underestimate GLP-1 uptake will face the same MLR pressure that underestimating supplemental benefit utilization created in prior years. Plans that overestimate it will price themselves out of competitive benefit packages.
The Medicare Prescription Payment Plan (MPPP) adds operational complexity. MPPP allows beneficiaries to spread their annual drug costs across monthly payments rather than paying large amounts at the pharmacy counter when they fill high-cost prescriptions early in the year. The beneficiary’s total annual cost does not change, but the timing of payment shifts from front-loaded to distributed. Plan implementation requires billing system modifications to calculate and manage monthly payment amounts, beneficiary communication infrastructure to explain the option, enrollment tracking, and reconciliation processes at year-end. Early adoption data from 2025 suggests modest uptake, but the combination of the $2,000 OOP cap and MPPP’s monthly spreading may increase beneficiary awareness and enrollment as the Part D redesign matures.
The Benefit Transparency Gap#
The gap between what beneficiaries believe their MA plan covers and what the plan actually delivers is a persistent problem that worsens during benefit contraction. The gap operates at three levels: marketing versus reality, network adequacy versus access, and broker information quality.
Marketing versus reality. Plans market benefits aggressively during the Annual Election Period in October and November. Television advertisements emphasize $0 premiums, dental coverage, OTC cards, and gym memberships. By the time benefits take effect in January, the beneficiary is enrolled. If the plan reduces dental caps, narrows OTC allowances, or tightens transportation eligibility between plan years, the beneficiary discovers the change when they attempt to use the benefit, not when they chose the plan. The Annual Notice of Change, mailed in September, provides the disclosure CMS requires. But research on beneficiary decision-making consistently shows that many enrollees do not read the ANOC, do not understand the changes described in it, or cannot evaluate the practical impact of a change like “annual dental maximum reduced from $1,500 to $1,000” without knowing what dental work they will need in the coming year. The ANOC is a legal disclosure, not a decision-support tool.
Network adequacy versus provider access. A plan may list a provider in its directory who is not accepting new patients, has a months-long wait for appointments, has moved practice locations, or has terminated their contract with the plan since the directory was last updated. CMS has strengthened network adequacy requirements, but enforcement lags the marketing cycle. The distance between a directory listing and an available appointment is the phantom network problem, and it is most acute for specialist access in MA HMO plans where beneficiaries must obtain referrals and stay in-network. A beneficiary who enrolled in an MA plan because the directory listed their cardiologist may discover at their first appointment that the cardiologist no longer participates. By then, the beneficiary is locked into the plan until the next enrollment period, unless the provider termination triggers a qualifying Special Enrollment Period.
Broker information quality. Agents selling MA plans during AEP often emphasize headline benefits without fully explaining the limitations, caps, network restrictions, and prior authorization requirements that determine whether the benefit delivers meaningful value (MCR-04.05). A $1,000 dental cap sounds generous until the beneficiary needs a root canal and crown that costs $2,500. An OTC allowance of $25 per quarter provides a modest convenience, not a meaningful health benefit. A transportation benefit of 12 one-way trips per year helps a beneficiary who needs occasional rides to appointments but does not serve a beneficiary who requires regular dialysis transportation three times per week. The distance between what is marketed and what is experienced is where beneficiary dissatisfaction originates.
What SHIP counselors see. State Health Insurance Assistance Program counselors are the front-line observers of the benefit transparency gap. They report that the most common beneficiary decision error is choosing a plan based on premium rather than total cost of care. A $0-premium plan with high specialist copays, a narrow formulary, and restrictive prior authorization may cost more in practice than a plan with a $30 monthly premium and lower cost-sharing. Counselors describe the MA-to-TM transition as the hardest conversation they have: a beneficiary who wants to leave MA after discovering benefit inadequacy faces the Medigap underwriting barrier that makes returning to Traditional Medicare financially risky or impossible in most states (MCR-00.03). The counselor must explain that the choice the beneficiary made three or five years ago, which seemed advantageous at the time, has created a path dependency that limits their options now. This is not a consumer information problem in the conventional sense. It is a structural design feature of the Medicare market that traps beneficiaries in coverage they no longer want.
The benefit design question is a consumer protection question. Beneficiaries enrolled in MA for the supplemental benefits. If those benefits contract to the point where they no longer differentiate MA from Traditional Medicare, the enrollment decision that made sense in 2023 may not make sense in 2027. Whether beneficiaries have the information and the options to respond is the story Series 7 tells (MCR-07.01, MCR-07.06).
Related Reading#
MCR-00_02 Original Medicare as Policy Choice MCR-07_01 Your Medicare Plan Is Changing: What to Expect in 2026 and 2027 MCR-08_04 Medicare Dental Coverage: The ‘Inextricably Linked’ Doctrine, ESRD Expansion, and the MA Supplemental Benefit Retreat