CMS’ Proposed Risk Adjustment Changes: An Overview

On Monday, the Centers for Medicare & Medicaid Services released the Calendar Year (CY) 2027 Advance Notice for the Medicare Advantage (MA) and Part D programs. At more than 160 pages, the document pairs a modest projected payment increase with some of the most consequential refinements to MA risk adjustment in recent years.

At first glance, the Advance Notice appears to present routine and technical updates intended to improve payment accuracy, promote program stability, and preserve beneficiary choice. But embedded within those updates are changes that materially challenge how plans generate risk scores, how sustainable certain RAF strategies truly are, and how confidently historical performance can be carried forward.

CMS leadership has been explicit about the intent behind these proposals, framing them as part of a broader effort to modernize risk adjustment, ensure payments better reflect actual health needs, and reduce incentives that reward coding activity without corresponding care delivery. That framing matters, because it explains why these proposals extend well beyond technical calibration and into strategy, operations, and long-term financial planning.

Payment Impact Sets The Backdrop But Not The Full Story

If finalized, CMS projects that payments to Medicare Advantage plans would increase 0.09 percent from 2026 to 2027, representing more than $700 million in additional revenue across the program. That net payment impact reflects several offsetting factors, including growth in underlying Medicare costs, the effect of 2026 Star Ratings on 2027 quality bonus payments, and proposed updates to the risk adjustment model.

CMS projects overall Medicare cost growth of 4.97 percent for 2027, driven largely by increases in original Medicare per-capita costs as estimated by the Office of the Actuary. At the same time, CMS estimates that average MA risk scores will increase by 2.45 percent, reflecting expected risk score trend under the proposed methodology. The 2.45 percent is not reflected in the 0.09 percent expected average change.

These topline figures, however, mask meaningful redistribution beneath the surface. The more consequential question for plans is not whether aggregate payments rise modestly, but which plans benefit, which plans face pressure, and how changes to risk adjustment sourcing reshape revenue outcomes across the market.

CMS’ Risk Adjustment Priorities Are Becoming More Explicit

During CMS’ stakeholder call, the agency framed the proposed risk adjustment changes around three core goals: greater simplicity, by reducing administrative complexity that disproportionately benefits well-resourced organizations; robust and fair competition, ensuring plans compete based on value delivered to enrollees rather than coding leverage; and payment accuracy, so risk scores better reflect beneficiaries’ actual health needs and support a more affordable, sustainable Medicare program.

These objectives are evident in the proposed model updates. CMS plans to refresh the data underlying the CMS-HCC model by incorporating more recent diagnosis and expenditure years, moving away from older, pre-pandemic datasets that no longer reflect current utilization and cost relationships.

More significantly, CMS is redefining which diagnoses it considers appropriate drivers of payment. Under the proposal, diagnoses identified through chart reviews would only count for risk score calculation if they are linked to a qualifying provider encounter. Chart review diagnoses submitted without encounter linkage could still be sent to CMS, but they would no longer influence payment. Similarly, diagnoses derived solely from audio-only encounters would be excluded in circumstances where they represent the only evidence supporting a condition.

CMS has been clear about the rationale: to reduce incentives for plans to maximize risk adjustment payments without delivering corresponding care.

What Is Not Changing And Why That Matters

Several foundational elements of the risk adjustment program remain unchanged. Medicare Advantage organizations are still required to submit encounter data, and CMS will continue to calculate payment risk scores using risk-adjustment-eligible diagnoses from encounter data and applicable fee-for-service claims.

CMS is not eliminating telehealth or retrospective review as activities. Plans may continue to submit telehealth diagnoses and chart review records. What has changed is the payment value CMS assigns to certain diagnosis sources when they are not clearly anchored to care delivery.

CMS also confirmed that it will continue to apply the statutory minimum 5.9 percent coding pattern adjustment to account for diagnostic coding differences between Medicare Advantage and Original Medicare, and that after accounting for other proposed risk adjustment updates it does not believe any additional adjustment above that level is necessary for CY 2027.

This distinction is critical. The Advance Notice is not about restricting what plans can submit; it is about tightening what CMS considers appropriate for payment.

Risk Adjustment Considerations For PACE Organizations

CMS also addressed risk adjustment for Programs of All-Inclusive Care for the Elderly (PACE). While the Advance Notice does not fundamentally alter the direction of PACE risk adjustment, it continues CMS’s multi-year transition away from the legacy RAPS-based framework and toward alignment with encounter-based models.

For CY 2027, CMS proposes calculating PACE risk scores using a 50/50 blended methodology. Under this approach, 50 percent of the risk score would be calculated using the proposed 2027 Part C risk adjustment model, while the remaining 50 percent would be calculated using the 2017 Part C risk adjustment model, which is being phased out. This blended approach is intended to support a gradual transition while maintaining payment stability for PACE organizations.

Although PACE operates differently from Medicare Advantage, the broader CMS signal is consistent: diagnoses must be clearly documented, assessed, and tied to qualifying care encounters to  support payment.

Why This Matters For Medicare Advantage

Taken together, the proposed risk adjustment changes introduce policy risk directly into revenue strategy. Historically, plans have assumed that past RAF performance,a djusted for trend and model updates, was a reasonable predictor of future results. CMS is now signaling that the composition of RAF is changing, even if overall program payments increase slightly. For plans with material reliance on unlinked chart reviews or audio-only diagnoses, historical RAF may overstate what will be achievable under a finalized policy.

What Plans Should Be Doing Now

The most important work for plans begins well before the Final Rule, and it starts with visibility. Organizations need to move beyond general awareness that unlinked chart reviews and audio-only encounters may be at risk and develop a precise understanding of how much those mechanisms contribute to current RAF performance.

Plans should actively measure the portion of their risk scores attributable to diagnoses captured through unlinked chart reviews and diagnoses sourced exclusively from audio-only services. That analysis must be granular enough to identify which HCCs, providers, vendors, and programs are driving exposure, rather than treating RAF as a single blended outcome.

This assessment cannot be a one-time exercise. Plans should establish ongoing monitoring to track how RAF shifts as reliance on these diagnosis sources changes over time. This includes understanding how much RAF lift is coming from retrospective mechanisms today, how that lift has trended historically, and how quickly it can realistically be replaced by encounter-based, point-of-care capture.

Operational decisions should follow directly from these insights. Chart review programs that exist primarily to generate unlinked diagnoses should be reevaluated, while programs that support encounter validation, documentation improvement, and prospective capture should be prioritized. Audio-only interactions should be repositioned as engagement tools that trigger follow-up assessments, not as endpoints for chronic condition documentation.

From a financial perspective, this monitoring must feed directly into forecasting and planning. Plans should stress-test RAF assumptions by modeling scenarios in which diagnoses from unlinked chart reviews and audio-only encounters no longer contribute to payment, treating the resulting deltas as real policy risk rather than averaging them away.

How Rebellis Can Help

• Quantify true RAF exposure by assessing how much current risk score performance relies on unlinked chart reviews and audio-only diagnoses, and where that exposure is concentrated.

• Support revenue strategy and forecasting by using exposure baseline to stress-test RAF assumptions under multiple policy scenarios, identify where normalization may be masking risk, and align revenue planning with achievable performance.

• Establish ongoing RAF monitoring and governance by implementing source-level RAF tracking and trend monitoring so leadership can see how risk scores are being generated in real time and distinguish operational gaps from structural policy risk.

• Strengthen provider education and point-of-care capture by translating CMS policy changes into practical, visit-based guidance that reinforces accurate documentation at the point of care, reduces reliance on retrospective fixes, and improves audit defensibility.

• Realign risk adjustment programs and vendor models to refocus chart review strategies, audio-only workflows, and vendor oversight on encounter linkage, documentation quality, and sustainable performance aligned with CMS’s direction.\

• Align the bid to address the expected headwinds to margin through benefit review and cost containment strategy

The Bottom Line

The CY 2027 Advance Notice pairs a modest projected payment increase with a clear shift in how CMS expects risk adjustment to function. The agency is reinforcing a simple but consequential principle: payment should be grounded in diagnoses that are documented, assessed, and submitted through real care encounters.

These proposals are more than technical refinements. Plans that recognize the strategic implications and act early to align operations with CMS’s direction will be better positioned as risk adjustment continues to evolve.

CMS is accepting public comments on the CY 2027 Advance Notice through February 25, 2026, at 11:59 PM Eastern Time. For plans with material exposure to the proposed changes, this comment period represents an important opportunity to raise operational and financial considerations before policies are finalized.

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