Introduction
On November 25, 2025, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule outlining policy and technical updates for Contract Year 2027 across the Medicare Advantage (MA), Medicare Prescription Drug (Part D), and Medicare Cost Plan programs. The proposal represents more than routine regulatory maintenance. It reflects a broader strategic effort to realign incentives, modernize payment systems, refine quality measurement, and reduce unnecessary administrative complexity, while continuing to strengthen beneficiary protections and program sustainability.
At a high level, CMS is seeking to improve health outcomes and patient experience, enhance competition within MA, and preserve long-term affordability for beneficiaries and taxpayers. The proposed changes also signal that CMS is evaluating deeper structural reforms, particularly in risk adjustment, quality bonus methodology, and care integration for vulnerable populations.
Refocusing the Star Ratings Program
The MA and Part D Star Ratings system remain central to the program’s performance architecture. Star Ratings influence beneficiary plan selection and determine eligibility for Quality Bonus Payments and rebate percentages. As currently structured, MA-PD contracts are evaluated across dozens of measures spanning outcomes, intermediate outcomes, processes, access, and patient experience.
For 2027, CMS proposes two significant refinements.
First, the agency would not move forward with implementing the Excellent Health Outcomes for All reward (formerly referred to as the Health Equity Index reward) in the 2027 Star Ratings cycle. Instead, CMS would continue applying the longstanding reward factor that recognizes contracts demonstrating consistently strong performance across measures. This approach reflects CMS’s reassessment of how best to incentivize high-quality care without adding unnecessary methodological complexity.
Second, CMS proposes to streamline the measure set by removing 12 measures that primarily assess administrative processes or demonstrate limited variation among plans. In their place, CMS would introduce a new Part C Depression Screening and Follow-Up measure beginning with the 2027 measurement year, affecting 2029 Star Ratings. The addition underscores a growing emphasis on behavioral health integration and systematic identification of depression within primary and specialty care settings.
Collectively, these adjustments indicate a deliberate shift toward measures that directly reflect clinical outcomes and patient experience. By eliminating operational metrics that have achieved uniformly high performance, CMS aims to reduce reporting burden and allow plans to concentrate resources on interventions that measurably improve beneficiary health.
Streamlining the Enrollment Experience
The proposed rule also addresses beneficiary navigation and enrollment stability. CMS is seeking to make it easier for enrollees to change plans when their provider leaves a network mid-year. Under current policy, such changes must be deemed “significant” by the MA organization and CMS before a Special Enrollment Period (SEP) applies. The new proposal would remove that threshold, enabling beneficiaries affected by provider terminations to transition coverage more seamlessly in order to maintain continuity of care.
In addition, CMS proposes to formally codify its longstanding policy that certain SEPs require prior CMS approval. While this practice has been in place operationally, embedding it in regulation enhances transparency and predictability. By ensuring that SEP categories are established and modified through formal rulemaking, CMS seeks to provide greater stability for plans, beneficiaries, and other stakeholders.
Requests for Information: Risk Adjustment, SNP Growth & Well-Being
Beyond discrete regulatory updates, CMS is using the 2027 proposed rule to solicit stakeholder feedback in three key areas that could shape future policy development.
The first Request for Information (RFI) focuses on risk adjustment and quality bonus payment structures. CMS acknowledges ongoing debate regarding whether the current risk adjustment methodology may inadvertently favor certain plan types or encourage coding intensity that outpaces Traditional Medicare. The agency is exploring modernization options, including the possibility of developing a next-generation risk adjustment model that leverages artificial intelligence or alternative data sources. CMS is also examining whether the current two-year lag between measurement and payment adjustments could be shortened to improve responsiveness and accuracy.
The second RFI addresses the rapid expansion of chronic condition special needs plans (C-SNPs), particularly among individuals who are dually eligible for Medicare and Medicaid. CMS has raised concerns that some dual-eligible beneficiaries enroll in C-SNPs rather than dual eligible special needs plans (D-SNPs), which are designed to integrate Medicare and Medicaid benefits more comprehensively. Potential policy approaches under consideration include requiring certain C-SNPs or institutional SNPs (I-SNPs) with high concentrations of dual-eligible members to meet State Medicaid Agency contracting standards similar to those applied to D-SNPs. The overarching objective is to strengthen care coordination and ensure more consistent integration of benefits for high-need populations.
The third RFI centers on well-being, nutrition, and preventive care in Medicare Advantage. CMS is seeking input on how MA plans might better support beneficiaries’ overall health beyond traditional medical services. Areas of interest include policies that promote emotional well-being, social connection, life satisfaction, and improved nutrition. CMS is exploring whether additional tools or incentives could encourage plans to design benefits that address preventive care and broader determinants of health more effectively.
Codifying Part D Reforms
The proposed rule also formalizes major changes to the Part D benefit structure enacted through the Inflation Reduction Act of 2022. CMS previously implemented these reforms using temporary program instruction authority, which expires after 2026. The 2027 proposal would embed these reforms into regulation on a permanent basis.
Key provisions include eliminating the coverage gap phase, lowering the annual out-of-pocket spending threshold, removing beneficiary cost sharing in the catastrophic phase, and codifying the Manufacturer Discount Program that replaced the Coverage Gap Discount Program. Additional updates address technical elements such as True Out-Of-Pocket (TrOOP) calculations, specialty-tier parameters, reinsurance payment methodology, and implementation of the Selected Drug Subsidy.
These reforms represent the most significant redesign of the Part D benefit since its launch. The intent is twofold: to reduce out-of-pocket liability for beneficiaries with high drug costs while maintaining fiscal sustainability within the program.
Clarifying SSBCI Policies & Reducing Administrative Burden
CMS also proposes clarifying regulations governing Special Supplemental Benefits for the Chronically Ill (SSBCI). Specifically, the agency would state more explicitly that cannabis products that are illegal under federal or applicable state law cannot be offered as SSBCI benefits. This clarification aligns MA supplemental benefit policy with existing legal standards while preserving plan flexibility within permissible boundaries.
In alignment with Executive Order 14192, CMS further proposes a series of burden-reduction initiatives. These include exempting certain account-based arrangements, such as health reimbursement arrangements (HRAs), flexible spending accounts (FSAs), and health savings accounts (HSAs) from creditable coverage disclosure requirements; eliminating the requirement for mid-year notices regarding unused supplemental benefits; removing certain health equity related obligations within MA quality improvement programs and utilization management committees; and modifying call center hour requirements for the Limited Income Newly Eligible Transition (LINET) program.
Additionally, CMS has issued a standalone RFI inviting broader stakeholder input on opportunities to streamline Medicare regulations and reduce administrative complexity across the program.
Strategic Direction for 2027 & Beyond
The Contract Year 2027 proposed rule reflects a recalibration rather than a wholesale overhaul. CMS is tightening the connection between quality measurement and meaningful health outcomes, examining how payment methodologies influence plan behavior, reinforcing beneficiary protections, and embedding recent Part D reforms into permanent regulation.
Equally important, the RFIs signal that CMS is evaluating longer-term structural questions related to risk adjustment integrity, competition, integration of care for dual-eligible populations, and the role of preventive and social supports within Medicare Advantage. Stakeholder engagement during this comment period will likely influence the next generation of policy development.
For MA organizations, Part D sponsors, providers, and compliance leaders, the message is clear: operational simplification may be underway, but performance expectations are becoming more clinically focused and strategically aligned with measurable outcomes. The 2027 rule positions Medicare Advantage and Part D for continued evolution—balancing affordability, accountability, and innovation in a program that now serves a substantial share of Medicare beneficiaries.
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