Doctors Trade Group: Medicare Advantage Rate Proposal ‘Will Impair’ Care Capacity

Centers for Medicare and Medicaid Services officials have proposed a tiny 2027 payment increase for Medicare Advantage plans, a plan that has caught off guard stakeholders who are warning of care disruptions as well as insurance investors who had been expecting a far more substantial hike.

In an advance notice issued Jan. 26, CMS leaders put forward a plan to increase Part C and Part D payments by 0.09 percent next year. An increase of that level would add more than $700 million in payments but the America’s Physician Groups trade group said the proposal “heralds a period of greater instability” for Medicare Advantage and UnitedHealthcare CEO Tim Noel said word of the plan was disappointing and if upheld, “will mean very meaningful benefit reductions and we’ll once again need to take a hard look at our geographic footprint.”

America’s Physician Groups, which represents about 260,000 doctors and other clinicians, said an increase as small as CMS has suggested at this early stage would add to the financial strain of both patients and providers in an environment that has seen utilization rise steadily.

“The fact that average payments to MA plans are expected to increase by just 0.09 percent from 2026 to 2027 signals a far less favorable environment than many of our organizations and other stakeholders expected, given costs and recent pressures on the system,” Susan Dentzer, president and CEO of APG said in a statement. She added that, combined with CMS’ projected effective growth rate, the small payment increase “will impair the ability of many of our groups to care effectively for beneficiaries and meet their needs.”

Medicare Advantage plans have been under the microscope for several quarters. Several insurers last summer and fall said they would pull back on their offerings this year due to government reimbursement rates and higher levels of utilization from patients. But the sector had expected some relief from CMS in the form of a bump in 2027 rates of about 5 percent.

Mizuho analysts Ann Hynes and Jack Sheehan told clients that it’s likely CMS’ final rate increase will be higher than its initial notice. But the agency’s opening shot still hit insurers’ stock prices hard: The shares of Aetna parent CVS Health Corp. and Anthem owner Elevance Health Inc. both tumbled 14 percent while Humana Inc. fell 21 percent and UnitedHealth lost nearly 20 percent of its value. Combined, those drops wiped about tens of billions in shareholder value.

The question is whether the leaders of those companies would find any increase meaningful enough to pull back from action plans that would further trim coverage. United’s Noel said Jan. 27 it’s unlikely that the market’s largest players would be acting alone in that scenario.

“We don’t see this to be something that’s going to be broadly disproportionate payer by payer,” Noel said after parent company UnitedHealth Group Inc. reported its fourth-quarter results. “Seniors kind of across the sector are going to experience these implications of reduced choice, reduced access and affordability challenges.”

Indeed, investor-owned payers aren’t the only ones concerned about the impact a small rate increase would have. Ceci Connolly, president and CEO of the Alliance of Community Health Plans, said in a statement that the CMS’ proposal is “disappointing and wholly unrealistic” and that her team is hoping for “sensible policy action” that will lead to a health risk adjustment system.

“Simply, this proposed rate doesn’t cut it,” Connolly said. “Regional health plans are deeply rooted in their communities, particularly in rural and underserved regions and have remained in their communities as other insurers fled. We worry more carriers will continue to exit Medicare Advantage if such low rates are finalized.”