What the 2027 CMS Advance Notice Means for Your MA Plan

On January 26, 2026, the Centers for Medicare & Medicaid Services (CMS) released a CMS Advance Notice of Methodological Changes for Calendar Year (CY) 2027. This document serves as a blueprint for how Medicare Advantage (MA) plans will be paid for 2026 dates of service (DOS).

For risk adjustment VPs, directors, and managers, the CY 2027 CMS Advance Notice signals lower MA scores, stricter diagnosis-source rules, and faster RADV audit cadence. Plans should start modeling the revenue impact now, tighten linkages between encounter/chart review records, and audit telehealth and chart-review workflows ahead of the final CY 2027 Rate Announcement expected before April 6, 2026.

What we’ll cover:

• Major changes to the CMS-HCC risk adjustment model, including a shift to 2023 diagnoses and 2024 expenditures that lowers MA risk scores by 3.32%. Learn which disease groups are most affected and the importance of modeling the impact now.
• Which types of diagnosis submissions will be considered for risk score calculation, with unlinked Chart Review Records and audio-only telehealth diagnoses excluded from 2027 onward, and what this means for chart review and telehealth strategies.
• Proposed changes to the CMS Star Ratings program, such as the removal of nearly a dozen measures, methodology updates, and elimination of the Health Equity Index.
• Highlights from the 2026 RADV memo, including the shift to quarterly audits beginning February 2026 for PY 2020–2024, reduced record limits, and the operational and legal implications for audit readiness.
• How plans can start making changes before the April 2026 Rate Announcement to protect revenue, strengthen compliance, and adapt to the evolving regulatory landscape.

Updated risk adjustment models: a recalibration with real consequences

CMS is proposing an updated risk adjustment model for 2027 that maintains the same clinical segmentation as the 2024 model but introduces critical technical recalibrations.

While the structure and ICD-code-to-HCC mappings largely follow the existing V28 framework, the underlying data has shifted significantly. CMS is now using 2023 diagnoses paired with 2024 expenditure data, a major departure from the previous baseline of 2018 diagnoses and 2019 expenditures.

Why does this matter? The relative cost factors assigned to each HCC category will change. Plans cannot assume their current HCC weights carry over. The average expected cost per capita for the fee-for-service cohort has moved from the 2020 baseline to a 2024 denominator of $12,861.67. CMS projects that transitioning to this updated model will result in a 3.32% decrease in MA risk scores compared to the 2026 model. That translates to approximately $15.22 billion in net savings to the Medicare Trust Funds.

For plan leaders, this means it’s time to re-map your entire enrolled population against the new relative factors to identify which disease cohorts will see higher or lower weighting under the updated model. Understanding your “winners and losers” now will be critical for accurate forecasting and bid development.

Additionally, for the first time, CMS is proposing separate continuing enrollee model segments for Medicare Advantage Prescription Drug (MA-PD) plans and standalone Prescription Drug Plans (PDPs). This addresses a recognized pattern in which costs were consistently overpredicted for MA-PDs and underpredicted for PDPs when both were evaluated under a single model.

Chronic kidney disease updates: removing constraints for greater precision

One of the more targeted but impactful model changes involves chronic kidney disease (CKD). CMS is proposing to remove specified constraints for HCC 328 (CKD Stage 3B) and HCC 329 (CKD Stage 3, except 3B).

Previously, constraints were applied to prevent these HCCs from producing payment factors that did not reflect clinical reality, given limited ICD-10 data. Now that sufficient ICD-10 data is available, CMS believes the model can accurately reflect the distinct relative costs of these two CKD stages independently. The result is more precise and, in some cases, higher weighting for advanced kidney disease.

Plans with high CKD prevalence in their populations should analyze how this change affects their expected revenue. Accurate and complete documentation of CKD staging will be more important than ever, as the financial differentiation between stages now carries real payment consequences.

The end of unlinked chart reviews: a major operational shift

Perhaps the most operationally disruptive change in this CMS Advance Notice is the proposed exclusion of diagnoses submitted via chart review records (CRRs) that are not linked to a previously accepted encounter data record (EDR).

In plain terms, starting in 2027, if a chart review surfaces a diagnosis but there is no corresponding record of a clinical service encounter in the EDR system, that diagnosis will not count toward risk score calculations. CMS is drawing a line in the sand between coding activity associated with a claim and what it describes as “coding intensity,” in which diagnoses appear in the data without any associated record of a patient service event.

CMS projects this change will decrease risk scores by an additional 1.53%, resulting in $7.12 billion in net savings to CMS. The financial stakes are high for plans.

From a strategic standpoint, retrospective chart review programs must transition from broad, “blind retrieval” approaches to targeted, linked retrieval. Every chart review workflow must be anchored by verifiable encounter data. Plans should be auditing their current submission pipelines now to assess how many CRRs in their existing programs would fail this new linkage requirement.

Telehealth and source restrictions: audio-only encounters are out

The pandemic-era expansion of telehealth created significant flexibility in how patients received care and how diagnoses were documented. However, the 2027 CMS Advance Notice is creating firm exclusions. The notice states diagnoses from audio-only telehealth services, identified by modifiers 93 and FQ, will be excluded from both model calibration and risk score calculation.

CMS’s position is that risk adjustment requires a “face-to-face” encounter. However, this standard now explicitly includes two-way synchronous video, also known as video calls. What it doesn’t include is a telephone call, no matter how comprehensive the clinical conversation.

In the meantime, plan leaders should start auditing their telehealth vendor partners. Any provider still meeting with patients via audio-only is, for risk-adjustment purposes, generating zero return on investment. Vendor contracts, workflows, and provider education programs may need to be updated.

Star Ratings and RADV updates: financial and operational pressures mount

Star Ratings

What is the main CMS Star Ratings update for MA plans?

The CMS Advance Notice also proposes a series of changes to the Star Ratings program. These changes include:

• Removing 12 measures
• Adding one new measure
• Eliminating the Health Equity Index (HEI)
• Updates to how Improvement Measures and Contract Adjustment Index (CAI) are calculated

MA plans should adjust strategies since each remaining measure is now more important.

Overall, the proposed changes are projected to reduce Star Ratings payments by 0.03%, resulting in less revenue from MA-PD plans.

Methodologically, CMS is also proposing to replace the current clustering approach for non-CAHPS (Consumer Assessment of Healthcare Providers and Systems) measures with percentile distribution cutoffs to assign measure stars. This simplification aims to make threshold calculations more transparent and consistent. Plans should model how this affects their current measure performance and star projections.

Several NCQA measure updates could shift measures from the performance set to display-only status, potentially affecting plan scores. Changes include updates to the Plan All-Cause Readmissions (PCR) measure, the Total Resource Cost (TRC) measure, the Diabetes Blood Sugar Controlled measure, and the Poly-ACH eligibility criteria. Plans should monitor whether these technical changes alter their measure rates meaningfully.

How often are CMS Star Ratings updated, and when do the 2027 changes take effect?

CMS updates Star Ratings every October. Ratings appear on the Medicare Plan Finder for the next year’s open enrollment. They impact bonus payments in the following payment year. The 2027 changes, including measure removals and elimination of the Health Equity Index, need to go through rulemaking. Plan leaders should assess how new cutoffs may impact their star ratings.

RADV updates

Concurrent with the CMS Advance Notice, a Risk Adjustment Data Validation (RADV) memo reinforces that audit activity is accelerating. Highlights from the CMS January 2026 RADV audit status memo included:

• Recoveries for plan year (PY) 2011-13
  CMS audits found overpayment rates between 5% and 8%, and recoveries “will begin soon.”
• Accelerated audit scope and timelines
  Audits for PY 2018-24 will be expedited, and audits are being expanded to all RADV-eligible contracts.
• Quarterly audit schedule
  Future audits will occur every three months, with PY 2020 audits beginning by February 2026.

Plans should note that CMS has reduced the maximum number of medical records allowed per audited HCC from five to two. This places significantly higher stakes on the quality and completeness of each submitted record. The good news is that CMS has responded to health plan feedback by providing a five-month medical record submission window per audit year.

On the legal front, a U.S. District Court in the Northern District of Texas vacated portions of the 2023 RADV Final Rule in September 2025. The U.S. Department of Health and Human Services (HHS) has appealed that decision. CMS has stated it will fully comply with the court’s order as long as it remains in effect while continuing to pursue audits. Plans should work closely with legal and compliance teams to navigate this evolving landscape.

What MA plan leaders should do now

The 2027 CMS Advance Notice is dense, but the call to action is clear. Plans need to move quickly on several fronts, including:

• Re-running population analytics against new HCC relative factors
• Auditing chart review programs for EDR linkage compliance
• Evaluating telehealth vendor practices
• Building out the operational infrastructure to manage a quarterly RADV audit cadence

How does the CMS Advance Notice affect RADV audits and how should plans prepare?

CMS will start quarterly RADV audits, with recoveries possible back to 2011. There is now a five-month submission window and a limit of two records per audited HCC. Plans need permanent audit-response systems. Despite a court ruling against extrapolation, financial risks continue, so legal teams must stay alert.

While uncertainty lingers until the 2027 Rate Announcement is released by April 2026, plan leaders can assess the full impact of these changes on their organization by leveraging advanced analytics and data-driven insights.

Inovalon’s Payer solutions are built for exactly this kind of rapid-response analysis. From population-level risk score impact modeling to encounter data linkage validation and RADV readiness assessment, our solutions give MA plan leaders the visibility and speed they need to respond to regulatory changes with confidence.

Contact us to learn how Inovalon’s Payer solutions can help your plan assess and act on the implications of the CY 2027 CMS Advance Notice.

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