Insights^

On April 9 and 10, 2026, the Medicaid and CHIP Payment and Access Commission (MACPAC) met for their April meeting. The Commissioners held sessions on implementing community engagement requirements in Medicaid and on Medicaid program integrity. Commissioners also voted in favor of 2 recommendations related to Medicaid managed care to be included in the June 2026 report to Congress.

IMPLEMENTING COMMUNITY ENGAGEMENT REQUIREMENTS IN MEDICAID

MACPAC staff began the session by providing an overview of the previous research completed on the community engagement requirements, including expert panel and stakeholder interviews that were conducted in the summer of 2025. Staff then presented the draft recommendation that will be voted on during the May 2026 meeting, for inclusion in the June 2026 report to Congress. The draft recommendation reads: “The Secretary of the US Department of Health and Human Services should direct the Centers for Medicare & Medicaid Services (CMS) to develop a transparent plan for monitoring and evaluating community engagement requirements in Medicaid that provides insight into how such policies affect eligibility and enrollment, health status, employment, state and federal administrative spending, and the attainment of other identified policy goals. CMS should identify new metrics for state reporting, as needed, and build upon existing data collection activities to minimize administrative burden. Additionally, CMS should ensure timely publication of monitoring and evaluation results to inform policy and operational decision making.”

Commissioners appreciated the content and tone of the draft chapter, noting that the topic requires considerable detail. In general, the Commissioners indicated support for the draft recommendation but had some concerns about implementation. For example, Commissioners raised concerns about the additional administrative burden that could be placed on states due to monitoring and evaluation requirements. Commissioners commented that state Medicaid agencies lack the ability to track health insurance enrollment and health status once a beneficiary leaves the program. Commissioners did note that it is easier to track the health and insurance status of beneficiaries who continually enter and exit the program because data such as their use of preventive care, emergency department care, and health insurance coverage is often available from the time they were not enrolled in Medicaid. Overall, Commissioners felt it was important for the recommendation to be realistic about what data can be captured and not recommend beyond what is possible.

Many Commissioners also felt it would be important to evaluate the cost-effectiveness of community engagement requirement implementation, specifically understanding how much states are spending versus saving. Commissioners highlighted costs associated with the accelerated implementation timeline and the likely increase in uncompensated care, especially in rural communities that serve a higher percentage of Medicaid beneficiaries.

Commissioners also discussed a few other topics. One Commissioner highlighted the need to track the reason an individual becomes disenrolled after the work requirements are implemented, especially to understand if it is an administrative error and the individual is still eligible. Another Commissioner questioned whether there were platforms that could evaluate participation in nontraditional employment, such as gig work, as Equifax, one of the highlighted platforms, does not have that capability. MACPAC staff shared that beneficiaries could use an income verification service but that they are not currently aware of additional platforms to recommend. Commissioners and MACPAC staff agreed that new platforms may have become available since data was collected, and so additional research would be beneficial. Lastly, a Commissioner requested that staff include more literature on the effects of increased administrative burden on patients, specifically how it leads to higher rates of health insurance disenrollment. MACPAC staff agreed that including literature about the topic could be beneficial and said they would review possible inclusions.

INTRODUCTION TO MEDICAID PROGRAM INTEGRITY

This session began with MACPAC staff providing an overview of program integrity and fraud, waste, and abuse within Medicaid. Staff then discussed the roles and responsibility of federal and state departments in program integrity and outlined the current issues in Medicaid program integrity. Key takeaways from the presentation included:

• Known fraud, waste, and abuse accounts for a small portion of program spending and its scale and impact are difficult to measure.

• Federal government, states, and health plans have a significant number of statutory and regulatory program integrity responsibilities.

• Key issues in program integrity include federal-state collaboration and program integrity in managed care.

Staff requested that the Commissioners provide feedback on the policy scan findings and further areas for exploration during stakeholder interviews.

Commissioners widely praised the material presented and appreciated the clear definitions and examples of fraud, waste, and abuse. Multiple Commissioners expressed the view that often the terms are inaccurately used, pointing out that disagreeing with a policy or statute does not constitute fraudulent or wasteful spending.

Commissioners had a wide variety of topics of interest for further exploration. A few Commissioners were interested in understanding how CMS and states decide where to invest money and time to best prevent program integrity issues and recover improper payments. One Commissioner specifically requested a return on investment analysis to understand where to invest to produce the best results. There was also widespread interest in understanding best practices for preventing fraud, recovering payments, and working with state Medicaid agencies.

Some other areas of interest included measuring the quality of State Medicaid Fraud Control Units, understanding how prior authorization is useful for program integrity, the impact of delays in convictions during fraud investigations for states, and ways to improve collaboration between CMS and states.

VOTE ON RECOMMENDATIONS FOR JUNE REPORT TO CONGRESS

Commissioners voted on 2 recommendations related to ensuring accountability of Medicaid managed care plans for inclusion in the June 2026 report to Congress.

The first recommendation reads, “The Secretary of the US Department of Health and Human Services should direct the Centers for Medicare and Medicaid Services to provide guidance on the types of accountability actions, such as liquidated damages, informal interventions, and other accountability actions, taken in response to plan noncompliance, in the sanctions section of the Managed Care Program Annual Report pursuant to 42 CFR 438.66(e)(2)(viii).” This recommendation passed by a vote of 17 to 0.

The second recommendation reads, “The Secretary of the US Department of Health and Human Services should direct the Centers for Medicare and Medicaid Services to develop a publicly available database on managed care plan performance that links federally mandated reported data together to facilitate analysis. CMS should also issue guidance and toolkits to help states effectively use these data to assess past performance, improve beneficiary experience, and oversee managed care plans.” This recommendation passed by a vote of 17 to 0.

There was no discussion about either of the recommendations.

On April 10, 2026, the Centers for Medicare and Medicaid Services (CMS) released the Fiscal Year 2027 Medicare Hospital Inpatient Prospective Payment System (IPPS) Proposed Rule. A fact sheet from CMS is available here. Complete text of the proposal is available here. Comments on the rule are due June 9, 2026.

UPDATES TO IPPS PAYMENT RATES

As part of the proposed rule, CMS would increase payment rates by 2.4% for general acute care hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful users of electronic health records (EHRs) under the Medicare Promoting Interoperability Program. This proposed update reflects a projected FY 2027 hospital market basket increase of 3.2%, reduced by a 0.8% productivity adjustment. Overall, CMS estimates that the proposed changes in IPPS payment rates, together with other policy changes, would increase hospital payments by approximately $1.4 billion in FY 2027.

CMS also proposes setting the FY 2027 outlier fixed-loss threshold at $51,704, which would target outlier payments at approximately 5.14% of total operating DRG payments and capital payments, after incorporating an estimate of outlier reconciliation. In its impact analysis, CMS estimates that overall IPPS payments would increase by 1.2% relative to FY 2026, reflecting the combined effects of the proposed update, outlier policies, uncompensated care payments, and wage index changes.

MEDICARE-DEPENDENT HOSPITALS (MDHS) AND LOW-VOLUME HOSPITALS

The MDH program provides enhanced payments to small rural hospitals (≤100 beds, not Sole Community Hospitals) where at least 60% of inpatient days or discharges are attributable to Medicare patients, using a blended rate that includes 75% of the federal rate plus 25% of the hospital-specific rate based on historical costs. The low-volume hospital adjustment offers percentage add-ons to IPPS payments for rural hospitals with low annual discharges to offset higher per-case costs, currently on a sliding scale up to 25% for facilities with fewer than 3,800 discharges and more than 15 road miles from another subsection (d) hospital.

In the FY 2027 proposed rule, CMS does not propose substantive policy changes to either the MDH program or the low-volume hospital adjustment. Rather, the agency proposes conforming regulatory changes to reflect current law, under which both policies have been extended through December 31, 2026. As a result, absent further congressional action, the MDH program would expire, and the temporary low-volume hospital policy would revert to permanent law beginning January 1, 2027.

Accordingly, the central issue is less the substance of CMS’s proposal than the current appropriations and extender status of these programs. Congress first provided a short-term extension in the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026, and subsequently extended both policies through December 31, 2026, in the Consolidated Appropriations Act, 2026. CMS states that it will revise the regulatory language in the final rule if Congress again extends the programs before the rule is finalized. In practical terms, unless lawmakers enact another extender later this year, both policies will lapse beginning January 1, 2027.

CMS estimates that, if Congress were to extend the MDH and low-volume hospital policies through the end of FY 2027, affected hospitals would receive approximately $0.4 billion in additional payments. Conversely, under current law, CMS estimates that expiration of the MDH status would reduce payments by approximately $110 million for roughly 80 affected hospitals, while expiration of the temporary low-volume policy would reduce aggregate payments by approximately $258 million in FY 2027, with approximately 589 hospitals expected to lose qualification under the stricter post-January 1 criteria.

DISCONTINUATION OF THE LOW-WAGE INDEX HOSPITAL POLICY

The low-wage index hospital policy was established in the FY2020 IPPS final rule as a temporary, budget-neutral initiative to address wage index disparities, benefiting rural hospitals by raising their wage indices to mitigate the impacts of lower payments. This policy adjusted the wage index for hospitals in the bottom quartile, setting a floor at the 25th percentile value, which was offset by a corresponding reduction for higher-wage hospitals. However, in July 2024, the U.S. Court of Appeals for the D.C. Circuit in Bridgeport Hosp. v. Becerra ruled that CMS lacked the statutory authority under sections 1886(d)(3)(E) or 1886(d)(5)(I) of the Social Security Act (SSA) to implement this policy, vacating both the policy and its budget neutrality adjustment.

In the FY 2026 final rule, CMS formally discontinued the low-wage index hospital policy and its associated budget-neutrality adjustment for FY 2026 and subsequent fiscal years. At the same time, CMS finalized a narrow, budget-neutral transitional payment exception for FY 2026 for certain hospitals experiencing significant decreases in their wage index resulting from the policy’s discontinuation. Under that transition, eligible hospitals could receive additional FY 2026 payments if their wage index otherwise would have fallen by more than 9.75% from their FY 2024 wage index, with payments calculated as if the hospital’s FY 2026 wage index were equal to 90.25% of its FY 2024 wage index.

For FY 2027, CMS does not propose to reinstate the low-wage index hospital policy. Instead, it proposes continuing the same transition approach for hospitals that are still significantly affected by the policy’s discontinuation. Specifically, CMS proposes a narrow transitional payment exception for hospitals whose FY 2027 wage index would be more than 14.2625% below their FY 2024 wage index, with those hospitals receiving FY 2027 payments as if their wage index were equal to 85.7375% of their FY 2024 wage index. CMS proposes implementing this transition in a budget-neutral manner after applying the 5% cap on wage index decreases.

HOSPITAL INPATIENT QUALITY REPORTING (IQR) PROGRAM

In the FY 2027 proposed rule, CMS proposes a fairly broad set of updates to the Hospital IQR Program. Most notably, CMS would adopt three new measures: the Excess Days in Acute Care After Hospitalization for Diabetes measure beginning with the FY 2029 payment determination, and the Hospital Harm–Postoperative Venous Thromboembolism eCQM and Advance Care Planning eCQM beginning with the FY 2030 payment determination. CMS also proposes to adopt modified versions of five mortality measures beginning with the FY 2028 payment determination – acute myocardial infarction, heart failure, pneumonia, COPD, and CABG mortality – by adding Medicare Advantage patients and shortening the applicable performance period from three years to two years. In addition, CMS proposes similar modifications to three Excess Days in Acute Care measures (for AMI, heart failure, and pneumonia), also beginning with the FY 2028 payment determination.

CMS also proposes to remove three eCQMs beginning with the FY 2030 payment determination: VTE-1, VTE-2, and STK-02. On reporting requirements, CMS proposes to make reporting of the Malnutrition Care Score eCQM mandatory beginning with the FY 2030 payment determination and to establish a policy under which Hospital Harm eCQMs would become mandatory after two years of self-selected reporting. CMS also proposes to update the Maternal Morbidity Structural Measure, beginning with the FY 2028 payment determination, so that hospitals identify which perinatal quality collaborative program they participate in. The proposed rule explains that these reporting changes are intended to continue CMS’s move toward a more digital measure set and to standardize hospital quality reporting in several areas.

MEDICARE PROMOTING INTEROPERABILITY PROGRAM

In the FY 2027 proposed rule, CMS proposes a series of changes to the Medicare Promoting Interoperability Program, largely focused on streamlining the program’s certification and attestation requirements and shifting hospitals toward newer interoperability functions.

• Most notably, CMS would update the definition of certified electronic health record technology (CEHRT) to align with changes proposed by Office of the National Coordinator for Health Information Technology (ONC), including removing references to several certification criteria from the program’s CEHRT definition.

• CMS also proposes to remove the ONC Direct Review and ONC-Authorized Certification Body surveillance attestations beginning with the CY 2026 EHR reporting period, which the agency describes as a burden-reduction step.

• In addition, CMS proposes to remove the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures beginning with the CY 2028 EHR reporting period, on the view that newer network-based exchange measures better reflect meaningful health information exchange

CMS also proposes several more targeted policy updates.

• The agency would modify the Electronic Prior Authorization measure, including revising the measure language to require that prior authorization be requested electronically using CEHRT and changing the reference from “discharge” to “encounter.”

• CMS further proposes to make that measure optional and worth 10 bonus points for CY 2027, before requiring hospitals to attest “Yes” beginning with the CY 2028 EHR reporting period. CMS indicates the measure would remain unscored in CY 2028 and subsequent years for purposes of point allocation.

• Separately, CMS proposes to add a new Unique Device Identifiers for Implantable Medical Devices measure under the Public Health and Clinical Data Exchange objective beginning with the CY 2027 EHR reporting period.

• Finally, in alignment with the Hospital IQR Program, CMS proposes to adopt two new eCQMs (the Hospital Harm-Postoperative Venous Thromboembolism eCQM and the Advance Care Planning eCQM) beginning with the FY 2030 payment determination, and to remove three eCQMs (VTE-1, VTE-2, and STK-02), also beginning with the FY 2030 payment determination.

HOSPITAL READMISSIONS REDUCTION PROGRAM

In the FY 2027 proposed rule, CMS proposes one substantive change to the Hospital Readmissions Reduction Program (HRRP): adoption of the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure. CMS would provide hospitals with an early look at performance for the FY 2028 program year and then begin using the measure for payment adjustment purposes in FY 2029. CMS states that it proposes moving the measure directly into HRRP, rather than phasing it in first through a reporting-only program, because sepsis readmissions are associated with significant morbidity. Under the proposal, the FY 2028 early look would be based on an applicable period of July 1, 2024, through June 30, 2026. The measure would first be used for FY 2029 payment adjustments.

HOSPITAL VALUE-BASED PURCHASING (VBP) PROGRAM

In the FY 2027 proposed rule, CMS does not propose changes to the current Hospital Value-Based Purchasing (VBP) measure set for the FY 2027 program year. CMS instead proposes substantive updates to five existing mortality measures in the Clinical Outcomes domain, beginning with the FY 2032 program year: the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization, Heart Failure Hospitalization, Pneumonia Hospitalization, Chronic Obstructive Pulmonary Disease (COPD) Hospitalization, and Coronary Artery Bypass Graft (CABG) Surgery measures.

For these five measures, CMS proposes adding MA beneficiaries to the measure population and shortening the performance period from three years to two years. The proposed rule also includes a related technical update to the risk adjustment methodology for these measures, replacing the current use of hierarchical condition categories with individual ICD-10 codes. CMS states that these VBP changes would be contingent on first adopting the same refined measures in the Hospital Inpatient Quality Reporting (IQR) Program, consistent with the statutory requirement that measures be publicly reported before being used in the VBP Program.

REQUESTS FOR INFORMATION (RFIS)

CMS includes several RFIs aimed at shaping potential future quality program and model design decisions.

• Measuring Emergency Care Access and Timeliness in the Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing Programs: CMS seeks feedback on whether and how the Emergency Care Access & Timeliness eCQM could be used in the inpatient quality programs, including barriers to improving bed availability and ED boarding, whether the outpatient-developed measure specifications fit the inpatient setting, and whether any numerator, denominator, exclusion, or accountability changes would be needed before future adoption.

• Potential Future Use of the Adult Community-Onset Sepsis Standardized Mortality Ratio Measure in the Hospital Inpatient Quality Reporting Program: CMS seeks comment on the possible future use of this sepsis mortality measure in IQR, including operational feasibility, workflow and data challenges, how claims and EHR/FHIR data would be reconciled, and what implementation issues hospitals (particularly rural hospitals) might face.

• Birthing-Friendly Hospital Designation Modification to Expand Designation Criteria: CMS seeks feedback on expanding the Birthing-Friendly Hospital designation to incorporate the Cesarean Birth eCQM and Severe Obstetric Complications eCQM, as well as on a revised scoring methodology, peer grouping, tiered designation icons, and how the designation should be displayed for consumers.

• Ambulatory Surgical Center (ASC) Episode Request for Information: In the TEAM section, CMS seeks comment on whether and how ASCs could be incorporated into the model in future years, including questions about model structure, participant roles, financial accountability, episode design, target pricing, quality measurement, and whether adding ASCs would require a separate model test.

• Hospital with Physician Ownership Request for Information: Also in the TEAM section, CMS seeks feedback on whether physician-owned hospitals should be allowed to opt into TEAM voluntarily in future years, and, if so, what eligibility criteria, guardrails, and participation requirements should apply to protect model integrity and Medicare savings.

On April 6, 2026, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2027 Medicare Advantage (MA) and Part D Rate Announcement. The text of the regulation can be found here. A CMS fact sheet is available here. A CMS press release is available here. The regulation is effective June 1, 2026, and will apply to MA and Part D coverage beginning January 1, 2027.

MA: PAYMENT UPDATES

CMS stated that the final policies are projected to increase MA payments by 2.48%, or more than $13 billion, in CY 2027. When CMS’s estimated MA risk score trend, attributable to factors such as population changes and coding practices, is included, CMS stated that the increase is 4.98%. This marks a substantial change from the CY 2027 Advance Notice, in which CMS projected a 0.09% increase, or more than $700 million, and a 2.54% increase when the estimated MA risk score trend was included.

In the Advance Notice, the effective growth rate was 4.97%. In the final Rate Announcement, CMS increased that figure to 5.33%. Rebasing and re-pricing, which had been listed as “TBD” in the Advance Notice because the average geographic adjustment index had not yet been finalized, is reflected as -0.17%. The estimated impact of changes in Star Ratings remained -0.03% in both the proposed and final rules, and the estimated impact of diagnosis source changes likewise remained -1.53%. By contrast, the “risk model revision and normalization” line changed from -3.32% in the Advance Notice to -1.12% in the final announcement, reflecting CMS’s decision not to move forward with the proposed updated MA risk model for CY 2027 (discussed below).

CMS stated that the increase in the effective growth rate was primarily due to additional data and updated assumptions. CMS explained that the update reflected additional Original Medicare program experience and incurred dates through the fourth quarter of 2025. The Rate Announcement further explains that the final non-ESRD fee-for-service United States per capita costs for both Part A and Part B reflect experience and incurred dates through the fourth quarter of 2025. In contrast, the Advance Notice relied on experience through the second quarter of 2025 for Part A and the third quarter of 2025 for Part B.

CMS also finalized the statutory minimum MA coding pattern difference adjustment of 5.90% for CY 2027. This was proposed in the Advance Notice and finalized without change. Because CMS used the same 5.90% factor for CY 2026, there is technically no year-over-year payment impact associated with that item.

MA: RISK ADJUSTMENT

The most significant difference between the Advance Notice and the final Rate Announcement is CMS’s decision not to implement the proposed updated 2027 CMS-HCC risk adjustment model for non-PACE MA organizations.

In the Advance Notice, CMS had proposed a new CMS-HCC model calibrated on 2023 diagnoses and 2024 expenditures. In the final Rate Announcement, however, CMS stated that it will continue to use the 2024 CMS-HCC risk adjustment model for CY 2027. CMS explained that it continues to believe it is important to update the MA risk adjustment model regularly, but that it is retaining the 2024 model for CY 2027 to provide the MA market with additional time to adjust to the completed phase-in of the 2024 CMS-HCC model.

That decision also altered the normalization approach reflected in the final announcement. In the Advance Notice, CMS proposed normalization factors for the proposed 2027 CMS-HCC model using a multiple linear regression methodology and average historical fee-for-service risk scores from 2021 through 2025. Under that proposal, CMS stated that the proposed 2027 CMS-HCC model normalization factor would be 1.058 and that the 2017 CMS-HCC model normalization factor used for PACE would be 1.207.

In the final Rate Announcement, CMS instead stated that, for all CMS-HCC risk adjustment models, it calculated normalization factors using a four-year simple linear regression methodology and average historical fee-for-service risk scores from 2022 through 2025. CMS listed the final normalization factors as 1.079 for the 2024 CMS-HCC model, 1.202 for the 2017 CMS-HCC model, 1.072 for the 2023 ESRD Dialysis model, 1.145 for the 2019 ESRD Dialysis model, 1.119 for the 2023 ESRD Functioning Graft model, and 1.209 for the 2019 ESRD Functioning Graft model.

In the final Rate Announcement, CMS finalized the exclusion of diagnoses from audio-only encounters and from unlinked chart review records but added an exception for beneficiaries who switch from one MA organization to another from one year to the next. CMS stated that, under the 2024 MA model, the impact of excluding diagnoses from unlinked chart review records, except switchers, is -1.53%. CMS also stated that, without the switcher exception, the impact would have been -1.78%. In addition, CMS stated that the isolated average impact of excluding diagnoses from audio-only services is 0.00%. CMS separately stated that the exclusion of diagnoses from unlinked chart review records does not apply to PACE organizations for CY 2027. For PACE, CMS said it will continue the transition to encounter-data-based payment but will do so through blended models and without applying the unlinked chart review record exclusion to the portion of payment that still depends on pooled RAPS, encounter, and fee-for- service diagnoses.

MA: MISCELLANEOUS

• PACE: The Advance Notice proposed that CY 2027 PACE risk scores would be calculated using a 50/50 blend of the 2017 CMS-HCC model and the proposed 2027 CMS-HCC model. In the final Rate Announcement, CMS instead stated that CY 2027 PACE risk scores will be calculated using a 50/50 blend of the 2017 and 2024 CMS-HCC models. CMS similarly finalized PACE frailty scores using a 50/50 blend of frailty factors associated with the 2017 and 2024 CMS-HCC models, rather than the 2017 and proposed 2027 models described in the Advance Notice.
• SNPs: For CY 2027, CMS will continue to use the frailty factors associated with the 2024 CMS-HCC risk adjustment model to calculate frailty scores for FIDE SNPs. In the Advance Notice, CMS had proposed updating the frailty factors to align with the proposed 2027 CMS-HCC model, but CMS did not finalize that model in the Rate Announcement.
• ESRD: For ESRD, CMS stated that it will continue to use the 2023 ESRD CMS-HCC models for non-PACE organizations in CY 2027. For PACE organizations, CMS stated that it will calculate ESRD risk scores as a 50/50 blend of the 2023 and 2019 ESRD CMS-HCC models. CMS also stated that it will continue to set MA ESRD rates on a state basis.
• Puerto Rico: CMS finalized its Puerto Rico rate-setting policies for CY 2027, including the continued use of rates based on the relatively higher costs of Original Medicare beneficiaries with both Parts A and B, as well as a zero-claims adjustment. Using updated 2020–2024 data, CMS found that 13.9% of Puerto Rico fee-for-service beneficiaries with both Part A and Part B had no Medicare claim reimbursements in a given year, compared with 6.1% nationwide outside the territories, and applied a 4.4% adjustment to the pre-standardized Puerto Rico fee-for-service rates for the CY 2027 ratebook. This is more definitive than the Advance Notice, which stated only that CMS was considering whether to continue the adjustment while the updated study was being completed.

PART D: BENEFIT PARAMETERS

CMS finalized the CY 2027 Part D defined standard benefit parameters as described in the Advance Notice. The final Rate Announcement states that the deductible and annual out-of-pocket threshold are updated by applying the CY 2027 annual percentage increase to the CY 2026 values and rounding as required by statute. CMS’s final tables show an annual percentage increase of 13.65% and a September CPI increase of 3.00%.

CMS finalized a standard deductible of $700 for CY 2027, up from $615 in CY 2026, and a standard annual out-of-pocket threshold of $2,400, up from $2,100 in CY 2026. CMS also reiterated that the CY 2027 standard Part D benefit continues to operate as a three-phase benefit consisting of the deductible, initial coverage, and catastrophic coverage phases, because the coverage gap phase was eliminated beginning in CY 2025.

PART D: PREMIUM STABILIZATION

In the Advance Notice, CMS discussed the statutory IRA premium stabilization framework and stated that the CY 2027 base beneficiary premium could not exceed the CY 2026 base beneficiary premium of $38.99, increased by 6%, or $41.33. CMS also noted, however, that individual plan premiums may increase by more than 6%. CMS further stated that direct subsidy amounts would continue to reflect the effect of premium stabilization on the base beneficiary premium and on basic Part D beneficiary premiums.

In the final Rate Announcement, CMS did not pre-announce additional voluntary premium stabilization support for CY 2027 participating PDPs. Instead, CMS stated that it cannot determine whether additional premium stabilization may be necessary until CY 2027 bids are received and analyzed. CMS further stated that, if any additional premium stabilization is provided for CY 2027 participating PDPs, it will announce that support no later than the annual summer 2026 release of the national average monthly bid amount, the Part D base beneficiary premium, and related Part D bid information.

PART D: RISK ADJUSTMENT

CMS finalized the updated RxHCC model for non-PACE Part D sponsors largely as proposed. CMS stated that the final model reflects IRA-related changes to the Part D benefit that will take effect in CY 2027, including an increased manufacturer discount for specified small manufacturers, phased in over time. CMS also stated that the model is calibrated to more recent data, specifically 2023 diagnoses and 2024 costs.

In the final Rate Announcement, CMS also stated that it will continue to adjust gross drug costs to account for maximum fair prices for selected drugs for which a maximum fair price is in effect for the initial price-applicability year, 2026. CMS further stated that the final model distinguishes the MA-PD and PDP populations through separate continuing-enrollee segments, which CMS said improves predictive accuracy.

CMS also finalized the Part D source-of-diagnosis policies and normalization policies substantially as proposed. For non-PACE organizations, CMS stated that CY 2027 Part D risk scores will be calculated using diagnoses from encounter data and fee-for-service claims, excluding diagnoses from audio-only services and unlinked chart review records, with an exception for beneficiaries who switch between MA organizations from one year to the next. CMS also finalized separate normalization factors for MA-PD plans and PDPs, calculated using the multiple linear regression methodology, and listed the final values as 1.109 for MA-PD plans and 1.005 for PDPs. CMS stated that it is finalizing separate normalization factors for PDPs and MA-PD plans as proposed, without an adjustment for demographic or other differences between the sectors.

MA & PART D: STAR RATINGS

CMS stated that the CY 2027 Rate Announcement includes the list of eligible disasters for adjustment, non-substantive measure specification updates, and the list of measures included in the Part C and D improvement measures and the Categorical Adjustment Index for the 2027 Star Ratings.

The final Rate Announcement also includes detailed content on 2027 Star Ratings. CMS stated that four new or updated measures are being added beginning with the 2027 Star Ratings: Colorectal Cancer Screening; Care for Older Adults – Functional Status Assessment; Concurrent Use of Opioids and Benzodiazepines; and Polypharmacy: Use of Multiple Anticholinergic Medications in Older Adults.

CMS also stated that three measures are being removed beginning with the 2027 Star Ratings: Care for Older Adults – Pain Assessment; Medication Reconciliation Post-Discharge; and Medication Therapy Management Program Completion Rate for Comprehensive Medication Review. CMS further stated that the respecified Colorectal Cancer Screening measure is being treated as a new measure and that Care for Older Adults – Functional Status Assessment is returning to the Star Ratings after a substantive specification change and is likewise being treated as a new measure.

In addition, CMS stated that the updated Statin Therapy for Patients with Cardiovascular Disease measure will be removed from the Star Ratings and remain on the display page. CMS also stated that the Medication Therapy Management Program Completion Rate for Comprehensive Medication Review measure will remain on the display page for measurement years 2025 and 2026 before returning to the Star Ratings as a new measure beginning with the 2029 Star Ratings.

CMS further stated that, beginning with the 2027 Star Ratings, it will use data from Part C reporting requirements to confirm the completeness of the Independent Review Entity data used in the two appeals measures and will apply scaled reductions if data integrity issues are identified. CMS also stated that, beginning with the 2027 Star Ratings, it will change the method for calculating the Categorical Adjustment Index when there is a contract consolidation. Finally, CMS stated that Table VI-1 no longer includes measures that had been considered for the Excellent Health Outcomes for All reward because CMS will not implement that reward and will instead retain the historical reward factor.