Medicare Advantage faces a 0.09% funding hike—far below insurer expectations for 2027
The US government has proposed a near-flat funding increase for Medicare Advantage plans in 2027. The draft rate, announced by the Centers for Medicare and Medicaid Services (CMS), would raise payments by just 0.09%—far below the 5-6% rise insurers and analysts had expected. Over 30 million seniors rely on these private insurance plans, which operate under federal contracts but face growing financial pressure.
The proposed rate has already sent shockwaves through the insurance market. Stock prices for major providers like UnitedHealth, Humana, and CVS Health dropped sharply after the announcement. UnitedHealth has already begun scaling back its Medicare Advantage offerings, though no broader data yet shows whether other insurers will follow suit or reduce plan options in certain states.
The move comes as lawmakers from both parties highlight affordability concerns ahead of the midterm elections. Meanwhile, progressives are pushing for deeper cuts to Medicare Advantage, arguing the program is overfunded. CMS projects overall Medicare spending to climb 8% in 2025 and 9% in 2026, with hospital costs rising steeply over the past two decades.
The Affordable Care Act limits insurer profit margins, requiring them to spend a set share of revenue on patient care. But the Wall Street Journal Editorial Board warned that a 0.09% hike could force companies to trim benefits or raise deductibles. The proposal also includes stricter risk adjustment rules to curb upcoding, where insurers inflate patient risk scores to boost payments.
CMS will finalise the 2027 rate after a public comment period, with a decision expected by early April 2026. The debate has reignited discussions about the role of the Medicare Payment Advisory Commission (MedPAC), which advises on policy but does not set rates.
The draft rate leaves insurers facing tough choices as medical costs continue to rise. If finalised, the 0.09% increase could lead to fewer benefits or higher out-of-pocket costs for seniors. The outcome will depend on CMS's final decision and how insurers adjust their plans in response.
