The Centers for Medicare & Medicaid Services (CMS) released its final rule, final rate notice, and a request for applications (RFA) for the BALANCE model on April 2 and April 6, 2026. Together, these announcements set the policy and payment landscape for Medicare Advantage (MA) and Part D programs heading into contract year 2027. Health plans, provider partners, and Medicare beneficiaries must now adjust to a significantly revised framework.
Key Changes in the Final Rule
Health Equity Index Removed from Star Ratings
CMS originally proposed the Health Equity Index (HEI) to reward plans that improve outcomes for low-income and disabled enrollees. However, the agency finalized its decision to remove the HEI from the 2027 Star Ratings. Instead, CMS retains an existing reward factor that applies broadly across all plan members. Consequently, many plans that would not have qualified under the HEI will benefit from the existing reward factor. Higher average Star Ratings are likely for 2027 as a result — though not every plan will see improvement.
Star Measures Reduced
CMS also finalized the removal of 11 out of 12 proposed Star measures. Notably, the Diabetes Care – Eye Exam measure survived stakeholder pushback. These changes take effect with the 2028 and 2029 Star Ratings cycles and will generally push average ratings lower over time.
Special Enrollment Period Provision Not Finalized
CMS did not finalize its proposed expansion of Special Enrollment Periods (SEPs) tied to provider network changes. The original proposal would have allowed enrollees to switch plans whenever a provider left their network, without a significance threshold. CMS chose not to finalize this provision — yet importantly, it left the door open. The agency may revisit and finalize it within three years of the original proposal.
Supplemental Benefits and Debit Card Rules
CMS finalized provisions from the 2026 proposed rule governing debit card use for supplemental benefits. Starting in 2027, plans must ensure enrollees use debit-card funds only on allowable benefits. Plans must also offer alternative access methods if debit card access fails due to technical issues. Moreover, benefits must stay within the correct benefit year. These changes add compliance requirements but also bring clearer accountability for supplemental benefit administration.
Marketing Rules and Broker Regulations
Additionally, CMS finalized several marketing-related rules covering agents, brokers, dual-eligible special needs plans (D-SNPs), and Part D provisions stemming from the Inflation Reduction Act. These changes carry limited direct financial impact but require plans to update internal systems and compliance processes.
What the Final Rate Notice Means
Growth Rate Rises Modestly
The advance notice projected a 4.97% growth rate for Medicare costs in 2027. After incorporating data through the end of 2025, CMS raised this to 5.33% in the final rate notice. While plans had hoped for a larger increase — especially given the 50%+ jump between advance and final notices in 2026 — the upward revision is still a positive signal.
Risk Model Changes Withdrawn for 2027
The most consequential reversal in the final notice concerns risk adjustment. CMS had proposed updating the Part C risk model using 2023 and 2024 data, which many plans argued was skewed by unusually high Medicare spending on skin substitutes during those years. CMS estimated the original proposal would have cut MA risk scores by 3.32%. After significant pushback, CMS withdrew the risk model changes for 2027. However, the agency explicitly warned that these changes could return as early as 2028. Plans should use this reprieve to prepare.
Unlinked Chart Reviews No Longer Allowed
CMS finalized its proposal to exclude diagnoses from chart reviews that are not linked to an actual clinical encounter. This change reduces risk adjustment payments by an estimated 1.53% industry-wide. An exception applies for new members transferring between MA organizations. However, enrollees switching from traditional Medicare to MA plans do not qualify for this exception.
Overall Payment Impact
Taking all factors together, CMS estimates MA plan payments will increase by approximately 2.48% in 2027 — translating to roughly $13 billion more compared to 2026. This far exceeds the 0.09% increase projected in the advance notice. Nevertheless, it remains well below the 2026 increase, leaving some uncertainty about market stability for next year.
The BALANCE Model and GLP-1 Coverage
GLP-1 Medications Under Part D
CMS released an RFA for the Better Approaches to Lifestyle and Nutrition for Comprehensive hEalth (BALANCE) model, set to launch January 1, 2027. The model aims to cover GLP-1 medications for obesity and weight loss under Medicare Part D — drugs that current law prohibits Medicare from covering solely for weight loss. The Center for Medicare and Medicaid Innovation (CMMI) plans to leverage its authority to modify program rules and negotiate reduced drug prices with manufacturers.
80% Participation Threshold Required
For the model to proceed, at least 80% of Part D enrollees must be in plans that submit applications. CMS set an application deadline of April 20, 2026, with a decision expected by April 30, 2026. Given cost pressures on Part D plans and recent changes to benefit design, some analysts believe reaching 80% participation may be challenging.
What Plans and Providers Should Expect
The 2027 payment environment is better than initially feared — but it demands rapid adaptation. Plans must absorb new compliance requirements around supplemental benefits, chart reviews, and marketing rules. Furthermore, the risk model threat has not disappeared — it may simply be deferred. Provider partners in value-based and alternative payment models also need to reassess their financial forecasts in light of the revised growth rate and risk score changes.
The BALANCE model decision in late April will further shape how plans structure their 2027 Part D bids ahead of the June 1 deadline.
