CMS published the CY 2027 MA and Part D final rule on April 2, 2026, removing 11 Star Ratings measures and reversing the Health Equity Index reward factor. It puts the payment impact at $18.56 billion over 2027 to 2036, or 0.21% of total Medicare payments to private plans.
That is $5.4 billion above the November 2025 proposed rule's $13.2 billion estimate, and none of it comes from paying plans more per star. It comes from the scoring distribution moving.
Key Takeaways
- The 2026 average overall Star Rating is 3.66, just below the 4.0 bonus threshold, with contracts concentrated in the 3.5 to 3.99 band where removing low-variance measures has the largest marginal effect.
- A 4.0 rating buys a 5% county benchmark increase applied before the rebate percentage, so on a 100,000-member contract at a $1,000 monthly benchmark it is roughly $60 million of additional annual revenue.
- Only 20% of Humana's MA members are in 4-plus star plans for 2026, which is why scoring compression is worth more to it than to a carrier already above the line.
- The chart review exclusion runs the other way, cutting MA payments by approximately 1.53%, over $7 billion in 2027.
- CVS/Aetna posted a 94.8% MLR in Q4 2025 and Humana 93.1%, so the bonus arrives as revenue relief into a cost problem it does not touch.
Fewer Measures, Higher Scores
The mechanism is arithmetic on the scoring distribution rather than a change in what a star is worth.
CMS removed 11 measures it characterized as administrative processes or areas where high performance and minimal variation make plan quality indistinguishable to a beneficiary. Three come out for the 2028 Star Ratings, including Statin Therapy for Patients with Cardiovascular Disease as topped out, and eight for 2029, including SNP Care Management, Customer Service, Complaints about Health Plan and two appeals-process measures. Call center measures feature in both tranches, and UnitedHealthcare and Humana had each sued CMS over their application.
When measures nearly every plan scores well on are dropped, the remaining measures carry more weight and the effective scoring range compresses. Plans that merely performed adequately on the removed measures while excelling on retained clinical ones see overall scores rise, and the ones sitting just under an integer threshold cross it.
| Metric | 2025 | 2026 | Change |
|---|---|---|---|
| Average overall Star Rating | 3.65 | 3.66 | +0.01 |
| Membership in 4+ star plans | 64.1% | 63.5% | -0.6 pts |
| Plans earning 5 stars | 7 | 18 | +11 |
| Enrollment in 5-star plans | ~2% | 2.3% | +0.3 pts |
The 3.66 average sits fractionally below the 4.0 line. That is the whole basis of the estimate: a modest upward shift moves a meaningful count of contracts into bonus eligibility.
The Health Equity Index reversal supplies the rest of the increase over the proposed rule. The HEI would have rewarded high measure-level scores for enrollees with specified social risk factors, redistributing some bonus away from plans scoring well overall but poorly on subpopulation metrics. Reverting to the reward factor methodology in place since 2009 means the full bonus flows to any plan clearing 4.0, without that offset. CMS also refined its modeling of the compression effect, having underestimated how many contracts sat at the 3.5 to 3.99 margin.
What a Star Is Worth
The Star Rating is not a report card with a revenue side effect. It is the gate on the benchmark.
A plan rated 4.0 or higher receives a 5% increase to its county-level benchmark, with a separate 3.5% urban floor bonus available at 3.5 stars in qualifying counties. The 5% is applied before the plan's rebate percentage, which is why it compounds rather than substitutes.
The scale is already large. Federal spending on MA quality bonus payments totaled at least $12.7 billion in 2025 on KFF's count, averaging $372 per enrollee, with roughly 75% of MA enrollees in plans receiving some form of bonus and cumulative bonus spending above $87 billion since 2015.
At the contract level the arithmetic is direct. A 5% benchmark increase on a contract with 100,000 members at a $1,000 monthly benchmark is about $60 million a year of additional revenue before rebate sharing. For a plan running above a 90% medical loss ratio, that is the difference between a sustainable contract and one requiring benefit cuts or exit. It also stacks on the separate 2.48% average effective growth rate finalized in the same week, so a contract at 3.75 stars that crosses the line collects both.
The gain is unevenly distributed and not in the direction scale would suggest. Contracts already at 4.0 or above collect nothing incremental, because they are already receiving the 5%. Contracts below 3.5 are unlikely to jump a full star from measure removal alone. The beneficiaries are the plans clustered at 3.5 to 3.99, which is why Humana, with only 20% of its MA members in 4-plus star plans for 2026 and Q1 2026 profit declines driven directly by reduced quality bonus payments, has more to gain from this than UnitedHealthcare does per member, even though UnitedHealthcare's scale gives it more contracts near the line in absolute terms.
Revenue Relief for a Cost Problem
The complication is that the bonus is partly spent before it arrives, by rules in the same document.
| Carrier | Q4 2025 MLR/MBR | Q1 2026 MLR/MBR | Context |
|---|---|---|---|
| UnitedHealth | 88.9% | 83.9% | Q1 beat drove guidance raise to $18.25 EPS |
| Humana | 93.1% | See guidance | Star ratings headwind; $9/share adj. EPS target |
| CVS/Aetna | 94.8% | See guidance | Record high; barely break-even before admin costs |
| Industry composite | 91.8% (Q3) | Varies | Up ~300 bps from prior year Q3 |
The chart review exclusion is the direct offset. CMS finalized exclusion of diagnoses from unlinked chart review records, records not tied to a specific encounter, with an exception for members switching between MA organizations. A 2019 HHS Office of Inspector General study found MA organizations almost always used CRRs to add rather than delete diagnoses, with unlinked CRRs producing an estimated $2.7 billion of potential overpayments in 2017 alone, and nearly 58% of MA contracts submitted them in 2022.
CMS estimates the exclusion cuts MA payments by approximately 1.53%, over $7 billion in 2027, and it falls hardest on exactly the plans that leaned on retrospective review. The risk model itself was not updated: CMS retained the 2024 CMS-HCC model rather than recalibrating it.
The cost side it lands into is worse than the revenue side is good. The V28 risk adjustment model phasing through 2025 and 2026 reduced risk scores for many diagnoses, cutting per-member revenue, while medical trend has run 7% to 10% annually on pharmacy costs including GLP-1 medications, utilization rebound and outpatient mix. Quality bonus payments work on the benchmark. They do not touch a claim.
The one new measure adds its own asymmetry. Depression Screening and Follow-Up for Part C applies from the 2027 measurement year and first scores in 2029, tracking screening rate and 30-day follow-up rate separately and then averaging them. A plan screening 95% of eligible members but reaching only 60% follow-up within 30 days averages to a score that may not clear 4 or 5 stars, and the 30-day window is tight where behavioral health networks are thin. The measure that replaces eleven administrative ones is the one hardest to hit in a rural service area.
Further Reading on actuary.info
- Elevance's $115M Star Ratings Suit Against CMS - How an insurer-by-insurer inconsistent measure-removal methodology, following the Clover Health ruling, turned into a benchmark-rate integrity dispute across five Elevance contracts.
- CMS 2027 MA Final Rule: 2.48% Rate Notice Decomposition - Component walk of the effective growth rate, normalization, and coding pattern changes that produced the 239 basis point swing from advance notice to final, the rate backdrop for this star ratings analysis.
- CMS 2027 MA Rate Reversal: Risk Model Mechanics - Why CMS retained the 2024 risk adjustment model, the chart review diagnosis exclusion with switching exception, and the competitive landscape for 2027 bids.
- UnitedHealth Q1 2026: 83.9% MBR Resets the Medical Trend Debate - How the largest MA carrier's Q1 print separates pricing discipline from reserve release, context for the MLR pressure discussed in this article.
- Medicare Part D 2026: Year-One Redesign Data - First-year claims experience under the IRA's $2,000 out-of-pocket cap, with catastrophic phase utilization running above bid assumptions and implications for MA-PD margin math.
- Medicare Advantage 2026: An Actuarial Guide - V28 risk adjustment, forced disenrollments, and the market shakeup context that sets up the CY 2027 bid cycle.
- CMS Crowns Milliman for Explainable Medicare Fraud AI - The agency’s explainability-first approach to AI fraud detection and the CRUSH regulatory initiative reshaping payment integrity expectations across Medicare.
- 2.9 Million Forced Off MA Plans as Carrier Exits Surge Tenfold - How the V28 revenue compression and Star Ratings volatility analyzed here translated into the largest MA disenrollment wave in program history.
- Clinical Weight Shift to 65%: Score Forecasting and Depression Screening - Deep dive on the actuarial modeling challenge created by the clinical reweighting, including score forecasting methodology, data scarcity on the new depression screening measure, and clinical investment sequencing for bonus eligibility.
- Medigap Plan G Rates Jump 12% to 26% as MA Exits Compound Pricing Pressure - The downstream Medigap premium impact of MA plan exits and the timeline before the $18.6B Star Ratings windfall can stabilize supplemental pool composition.
- D-SNP Margins Double the MA Average as Carriers Pivot to Dual-Eligible Growth - How the quality bonus redistribution intersects with D-SNP concentration risk, with two carriers holding 54% of SNP enrollment.
- Chronic Condition SNPs Drive 83% of MA Enrollment Growth - How the 49% C-SNP enrollment surge concentrates in carriers with the Star Ratings performance to sustain quality bonus payments, and what condition-specific benefit design means for the bonus threshold calculation.
- Behavioral Health Measure Launches in 2027: Screening Cost Models and Follow-Up Capacity Analysis - Actuarial deep dive on the Depression Screening and Follow-Up measure, covering PHQ-2/PHQ-9 mechanics, expected positive rates by plan type, provider network capacity modeling, and quality bonus revenue sensitivity for contracts at the 3.5-to-4.0 threshold.
- CY2027 MA Bid Strategies After the Star Ratings Overhaul - How the $18.6B bonus redistribution shaped locked-in bid strategies, with component-level trade-offs between clinical investment, supplemental benefits, and margin reserves.
Sources
- CMS: Contract Year 2027 Medicare Advantage and Part D Final Rule Fact Sheet
- CMS: Finalizes 2027 Medicare Advantage and Part D Payment Policies
- CMS: 2027 Medicare Advantage and Part D Rate Announcement
- STAT News: Medicare Advantage Plans Win Extra $18.6 Billion as Feds Cut Star Ratings Measures
- Crowell & Moring: CMS Finalizes CY 2027 Medicare Advantage and Part D Rule
- Reed Smith: CMS Makes Structural Changes to Star Ratings System
- AHA: CMS Finalizes Medicare Advantage Rates for CY 2027
- Healthcare Dive: CMS Finalizes Medicare Advantage Star Ratings Overhaul
- Medicare Rights Center: Final 2027 Medicare Advantage and Part D Rule Analysis
- Forvis Mazars: Insights on CMS 2027 Medicare Advantage Rates
- KFF: Medicare Advantage Quality Bonus Payments Will Total at Least $12.7 Billion in 2025
- Holland & Knight: CMS Finalizes CY 2027 Medicare Advantage and Part D Rule
- Georgetown Medicare Policy Initiative: CMS Takes Aim at Upcoding via Unlinked Chart Reviews