What CMS announced
Medicare Advantage capitation increase: 0.09% increase for 2027, far below the 5.06% change in 2026
- Effective growth rate decline: Down ~4% versus 2026
- New risk-adjustment rules: Certain diagnoses excluded, reducing plan payments
- Prescription Drug coverage (Part D) changes continue under the Inflation Reduction Act (IRA):
- Higher standard deductible and out-of-pocket maximum
- Continued impact of negotiated drug pricing
Final CMS payment terms are expected in April, with additional Part D information due in July.
Impact to employers sponsoring group Medicare Advantage and prescription drug plans
Ongoing rate pressure, following steep increases in prior years
Continued volatility from unpredictable federal policy shifts
Added strain from unfavorable Part D risk scoring changes
Depending on subsidy design, increased costs for retirees and decreasing satisfaction with benefits offered
Alternative approach to sponsoring Group Medicare Advantage and Part D Plans
Transitioning to the individual Medicare market
For plan sponsors
Drives value for retirees while reducing financial and administrative risk
For retirees
Offers broad choice, competitive pricing, and flexibility, even amid market pressure
- Choice of plan types: Medicare Supplement or Medicare Advantage
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Medicare Supplement plans provide stable benefits and broad provider access
- Insulated from federal funding uncertainty affecting Medicare Advantage and Part D
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Part D out-of-pocket costs remain significantly lower than pre-IRA levels
- Standalone Prescription Drug Plans continue to benefit from favorable risk-scoring dynamics
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Individual Medicare Advantage plans provide choice of benefit design and competitive market for millions of members
Note: For employers required to offer group health plans, consider de-coupling Medicare Advantage and Part D coverage.
How we can help
We’re here to help you navigate Medicare complexity and discuss the implications of the 2027 CMS guidance with strategies that balance cost predictability, regulatory risk, and retiree choice. Contact your consultant or contact us online to schedule a call.
