2027 Medicare Advantage Rate Announcement: County Benchmarks, Risk Scores, and Rebate Mechanics

CMS finalized a 2.48% average Medicare Advantage payment increase for CY 2027, adding $13 billion to program payments (CMS, April 2026). The January Advance Notice had the same year at +0.09%. Almost the entire 239 basis point swing came from two decisions that have nothing in common with each other, and both land on individual contracts at rates that bear little relation to the national figure.

Key Takeaways

+0.09% to +2.48% between the January Advance Notice and the April Rate Announcement, a 239 basis point swing driven by CMS retaining the current risk model and by stronger fourth-quarter 2025 fee-for-service data.
1.058 is the CY 2027 CMS-HCC normalization factor. A member scoring 0.90 is paid at 0.90 divided by 1.058, or 85 cents on the benchmark dollar, before the 5.9% coding intensity adjustment applies.
-1.53% is the finalized average impact of excluding unlinked chart review diagnoses, down from -1.78% proposed. Roughly half of all MA contracts have at least some affected beneficiaries.
1.5 percentage points of county benchmark separates a 3.5-Star contract from a 4-Star one. At a $1,200 county benchmark that is $18 per member per month of revenue before a bid is even built.
65% versus 50% rebate share at the 4.0-Star threshold compounds with the QBP gain, so a single Stars crossing widens both the benchmark ceiling and the share of the spread that funds benefits.

Where the 239 Basis Points Came From

The Advance Notice priced a proposed risk model update that would have carried a -3.32% normalization effect. CMS retained the current model instead, and the applicable normalization landed at -1.12%: a 220 basis point swing from that decision alone. The effective growth rate then moved from +4.97% to +5.33% on fourth-quarter 2025 FFS expenditure data that came in stronger than the January projection (Georgetown Medicare Policy Initiative).

CY 2027 MA Payment Components: Advance Notice vs. Final Rate Announcement
Component	Advance Notice (Jan 2026)	Final Announcement (Apr 2026)	Change
Effective growth rate	+4.97%	+5.33%	+36 bps
Rebasing / re-pricing	TBD	-0.17%	n/a
Star Ratings / QBP	-0.03%	-0.03%	0 bps
Normalization (with model update proposed)	-3.32%	N/A (model retained)	+220 bps
Normalization (without model update)	N/A	-1.12%	n/a
Unlinked CRR / audio-only exclusion	-1.78% (proposed)	-1.53% (finalized)	+25 bps
Net average payment change	+0.09%	+2.48%	+239 bps

The remaining movement is small by comparison. Rebasing and re-pricing came in at -0.17% as the geographic adjustment index reset to the CY 2020 through CY 2024 claims window, and the unlinked chart review exclusion softened from -1.78% proposed to -1.53% finalized.

The 5.33% growth rate is not a flat multiplier. CMS derives county benchmarks by scaling estimated national FFS per-capita cost by each county's historical spending relative to the national average. A county running at 90% of national gets fewer absolute dollars than one at 115% at the same percentage growth, so the enrollment-weighted 2.48% already sits on a wide geographic spread before any contract-specific factor applies.

Three Multipliers Between the Benchmark and the Bid

The county benchmark is a ceiling, not a payment. What a plan actually receives runs through three sequential adjustments, and each one is set nationally while the exposure to it is contract-specific.

Normalization comes first. The CY 2027 CMS-HCC normalization factor is 1.058, which holds the national average risk score at 1.00. The statutory coding pattern difference adjustment of 5.9% then reduces all MA risk scores proportionally. A cohort carrying a raw HCC average of 1.25 is paid closer to 1.12 times benchmark once both apply.

Stars sit on the benchmark itself. Contracts at 4 or more Stars receive a 5 percentage point QBP against the county benchmark, those at 3.5 receive 3.5 points, and contracts below 3.5 receive none. Crossing from 3.5 to 4 between contract years is worth 1.5 percentage points, or $18 per member per month at a $1,200 benchmark.

The rebate converts what is left. A plan bidding below its benchmark returns 70% of the spread to members at 4.5 Stars or above, 65% at 4.0, and 50% below that, applied to supplemental benefits, premium reductions or cost sharing. The arithmetic is unforgiving at the margin: $1,200 of risk-adjusted revenue PMPM against a $1,350 benchmark leaves $150 of spread and $97.50 of member-facing rebate at the 65% tier. A 2% reduction in projected risk score revenue takes the PMPM to $1,176 and narrows the rebate in step. That is the channel through which a coding rule becomes a dental allowance.

CMS projects total MA payment growth of 4.98% including risk score trend, against the 2.48% base change. The 2.45% difference is expected coding and aging trend, which a plan either earns through its documented population or does not.

The Exclusion Is Small Nationally and Concentrated by Contract

The unlinked chart review exclusion is a national average sitting on a skewed distribution. CMS put the affected beneficiary population at roughly 0.04 to 0.05% of MA enrollees, while noting the practice is not rare at the contract level, with about half of contracts having at least some beneficiaries with unlinked chart review records (CMS CY 2027 Advance Notice).

A contract that drove 8 to 10% of total diagnoses through unlinked retrospective chart review carries exposure several times the 1.53% average. A contract that anchored chart review to prospective care delivery visits, where an encounter record always exists, sits near zero. Applying the industry average to a contract whose linkage analysis shows 6% exposure understates revenue compression and overstates the margin available for medical costs.

CMS did carve out one case. Beneficiaries switching between MA organizations mid-year may still have unlinked chart review diagnoses counted, since the new plan has no way to submit a linkable encounter record for services delivered under the prior contract. Plans with high switch-driven enrollment growth get that offset; plans with stable membership and retrospective coding programs do not.

The larger constraint is that the same evidence CMS now requires for bid revenue is the evidence RADV asks for. RADV is treating encounter data adequacy as a permanent audit dimension (Veradigm, April 2026). A contract that cannot demonstrate linkage between chart review diagnoses and encounter records faces retrospective adjustment extrapolated from a sample to full membership, which is a materially larger number than the prospective bid reduction it was trying to avoid.

2027 Medicare Advantage Rate Announcement: County Benchmarks, Risk Scores, and Rebate Mechanics

Key Takeaways

Where the 239 Basis Points Came From

Three Multipliers Between the Benchmark and the Bid

The Exclusion Is Small Nationally and Concentrated by Contract

Further Reading

Sources