The Centers for Medicare and Medicaid Services backed away from a very low pay hike it had proposed for Medicare Advantage plan issuers for 2027.
But the final issuer subsidy increase is low enough that many issuers could cut benefits, eliminate Medicare plans or withdraw entirely from the Medicare Advantage plan market in one or more states in 2027.
CMS announced Monday that it has increased the overall expected average change in payments for the issuers to 2.48%, up from the average increase of 0.09% given in a preliminary notice posted in January.
The plan issuers and their groups reacted to the original 0.09% increase proposal with horror.
But the new, 2.48% increase for 2027 compares with a 5.06% Medicare Advantage subsidy increase provided for issuers in 2026, and estimates that the underlying cost of health care in the United States is increasing by about 5% to 10% per year.
Mary Beth Donahue, president of the Better Medicare Alliance, a group for plan issuers and Medicare Advantage program supporters, reacted to the new notice by welcoming CMS officials' willingness to listen.
"Today's final rate announcement reflects an improvement from the initial proposal," she said.
Chris Bond, a spokesman for America's Health Insurance Plans, said plans will incorporate the policies in their plan menu designs for 2027.
Plans "will continue to focus on keeping coverage and care as affordable as possible," Bond said.
What it means: Retirement advisors who had to calm clients down during the enrollment period for 2026 Medicare plan coverage may face more trouble when the 2027 plan menus appear.
The backdrop: The "Original Medicare" program exposes enrollees to many deductibles, co-payment requirements and other out-of-pocket costs.
Medicare Advantage and Medicare supplement insurance coverage helps enrollees fill in the holes.
Medicare Advantage is a federally regulated program that uses federal funding and premium revenue to provide what looks to the enrollees like an alternative to original Medicare.
Medicare Advantage plans cover 36 million of the 70 million Medicare enrollees.
Medicare supplement, or Medigap, insurance policies are also shaped by federal laws, but states handle day-to-day regulation for those plans.
About 14 million people use Medigap coverage.
Medigap coverage terms and prices are not directly affected by the new Medicare Advantage program final rate notice.
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