There’s no question today. Instead, I want to focus on some news that could significantly impact 34 million Americans and 1.5 million Pennsylvanian who are on Medicare Advantage Plan HMOs and PPOs. 

The Centers for Medicare and Medicaid (CMS) recently announced much lower than expected reimbursements to Advantage Plan companies for the plan year 2027. 

For those not familiar with how companies who offer Medicare Advantage Plan HMOs and PPOs are compensated by the Federal Government, let me briefly explain. 

Medicare Advantage is an option people on Medicare can make that “privatizes their benefits.” In other words, those who choose an Advantage Plan are opting to allow a CMS approved private insurance company to insure them in place of Original Medicare. So instead of traditional Medicare paying 80% of covered Part B benefits and all but $1,736 of a Part A hospitalization, Medicare actually pays Advantage Plan companies around $14,000 per year for each person who enrolls in one of their plans. There can also be an additional reimbursement for members of Advantage Plans who have “chronic conditions,” which has allegedly been manipulated for profit. Upon payment to the Advantage Plan company, Medicare is then no longer responsible for paying any medical claims. That becomes the Advantage Plan company’s responsibility. The $14,000 or more per year, per person reimbursement from the feds to insurance companies is the reason Advantage Plan companies can offer $0 and other low premium plans. 

Below is an email I got regarding the lower reimbursements from a Medicare research analyst who I often exchange information with:

Hi Aaron,

This afternoon, CMS released a press release outlining 2027 MA (Medicare Advantage) and Part D payment policies that were below industry expectations.

 In addition, the release included a proposal to eliminate "lucrative billing practices" used by plans. 

 Below is a brief summary of the announcement as well as a link to the release:

• The administration proposed roughly flat MA rates for next year, falling well short of industry expectations.
• The proposal would raise payments by an average of just 0.09% in 2027, when many had expected a 4%–6% proposed increase for 2027, following a 5.06% increase for insurers this year.
• The lower proposal reflects actuaries’ use of a 4.97% spending growth rate tied to traditional Medicare costs, below what analysts had projected, although they may revise the growth estimate before finalizing rates in April, and underlying billing trends could add 2.45%, bringing the total 2027 increase to 2.54%, but still less than the expected 4% to 6%.
• In addition, CMS also proposed eliminating a lucrative billing practice (chronic condition adjustments I referred to) that has drawn scrutiny from government watchdogs. A Medicare official said the goal is to improve payment accuracy and ensure appropriate reimbursement by simplifying and strengthening billing accuracy and competition. This billing change targets insurers’ use of medical chart reviews to document diagnoses that increase payments under MA risk adjustment. Under the proposal, insurers would not be paid for diagnoses from chart reviews unless linked to a specific medical service, reducing projected 2027 payments by 1.53 percentage points.

If you had a hard time following what my friend Nick sent me, it means Medicare Advantage Plans aren’t going to get nearly the increase in reimbursement they were expecting. In fact, with the new scrutiny on “over diagnosing” patients, there could actually be a reduction in overall federal payments to Advantage Plan companies. If the trend of those on HMOs and PPOs receiving more care than during and prior to COVID continues, and with the cost of that care rising, insurance companies are going to make less profit. The repercussions in 2027 for those who have Advantage plans could be any combination or all of the following:

• Reduced Supplemental Benefits & Higher Premiums: Plans are expected to scale back ancillary benefits, “extras,” like vision, dental, hearing, gym memberships, etc., and a potentially increase in premiums to offset higher claims and lower federal reimbursement.
• Tighter Utilization Management: Increased use of prior authorization and stricter, more intensive reviews of medical necessity are expected to control costs. In other words, more delays or hoops to jump through to get care such as injection or infusion therapy, and possibly MRIs, CT scans, and surgeries. 
• Impact on Provider Networks: Lower payments may lead to narrower, more restrictive networks, potentially limiting access to certain doctors. We started to see this with one of largest Western Pennsylvania Advantage Plan providers in 2026 which was a disruption for many and also forced them to change companies.
• Fewer Plan Choices: There could be a reduction in the number of PPO (Preferred Provider Organization) plans offered in some markets. Again, we saw this in Western PA in 2026 and I can see a scenario where more PPOs are eliminated or premiums are dramatically increased and become much higher than their HMO counterparts. 

The bottom line is this is not good news. But as I’ve been writing about for years now, it was inevitable because the combination of super low premiums and co-pays along with the inclusion of excellent ancillary that provided as much as $3,000 to $5,000 per year in real dollar value of good and services was never sustainable. Advantage Plans are now estimated to cost taxpayer 20% more per person than Original Medicare, which is completely opposite of what the intention of Advantage Plans was when they were introduced in mass back in 2005. With Medicare facing insolvency issues as soon as 2033, cuts need to be made. Due to this news and my anticipation that 2027 could be one of the most tumultuous Annual Election Periods since I got into the business in 2008, I’m encouraging those who are relatively healthy and have Advantage Plans to consider a move back to Original Medicare and a Supplement now, during the enrollment period is running now through March 31st that allows people to make that change. If you would like to discuss that option or have any questions regarding this column, give the office a call or email me personally, Aaron@GetYourBestPlan.com.