What determines Medicare Advantage payment rates in 2027

Medicare Advantage payment rates are set by the Centers for Medicare & Medicaid Services (CMS) each year based on a formula that accounts for the health status of enrolled members, regional healthcare costs, and adjustments mandated by Congress. For 2027, CMS announced the rates in early 2026, and they take effect on January 1, 2027. The rates vary by county, plan type, and the age and health conditions of the people in each plan.

The payment CMS sends to an insurance company covers all the benefits that plan must provide — hospital care, doctor visits, prescription drugs, and extras like dental or vision. The insurer keeps some of this money as profit or reserves and uses the rest to pay doctors, hospitals, and pharmacies. If a plan spends less than it receives, it can use the surplus for rebates to members or to fund additional benefits. If it spends more, the insurer absorbs the loss.

Unlike Original Medicare, where the government pays providers directly for each service, Medicare Advantage operates on a fixed monthly payment per member. This means the insurance company takes on financial risk — it must manage costs while still delivering the covered services.

Key Takeaways

  • CMS sets Medicare Advantage rates annually by county, accounting for member health status, local medical costs, and congressional adjustments.
  • The 2027 rates were announced in early 2026 and reflect changes in healthcare inflation and demographic shifts in the Medicare population.
  • Payment rates vary significantly by county and plan type, so the same plan may receive different payments in different regions.
  • Insurance companies use these fixed monthly payments to cover all member benefits, and they keep any surplus or absorb any shortfall.
  • Changes to payment rates can affect plan premiums, out-of-pocket costs, and the extra benefits plans offer members.

How the payment formula works

CMS calculates Medicare Advantage payments using a risk-adjusted capitated rate. This means the base payment is adjusted up or down depending on the health conditions of the people enrolled in that plan. A plan with older members or members with chronic illnesses receives a higher payment than a plan with younger, healthier members.

The formula starts with a benchmark rate — a target amount set for each county based on historical spending in Original Medicare plus adjustments for inflation. CMS then applies a risk score to each member based on diagnoses documented by their doctors. A member with diabetes and heart disease has a higher risk score than a member with no chronic conditions, so that member's presence in the plan increases the plan's total payment.

Congress also mandates adjustments to the base rates. These can increase or decrease the amount CMS pays, depending on legislation passed in a given year. For 2027, the adjustment reflects changes in the Medicare Advantage Quality Bonus Demonstration and updates to how CMS accounts for supplemental benefits.

Regional variation in 2027 rates

Medicare Advantage payment rates differ by county because healthcare costs, provider networks, and the age and health profile of the Medicare population vary across the country. A county in rural Montana may have a lower benchmark rate than a county in New Jersey, even if both have similar member health profiles, because the underlying cost of medical care differs.

Plans operating in multiple counties receive separate payments for each county. A national insurer like UnitedHealth or Humana may receive one rate for members in Cook County, Illinois, and a different rate for members in Los Angeles County, California. This means the same plan name can be more or less profitable depending on where the member lives.

CMS publishes the 2027 county-level rates on its website in the Medicare Advantage and Part D Rate Announcement, typically released in the spring before the plan year begins. The document lists the base rate, the benchmark, and the quality bonus adjustment for each county and plan type.

How payment changes affect plan offerings

When CMS increases payment rates, plans often respond by lowering premiums, reducing out-of-pocket costs, or adding extra benefits like dental, vision, or fitness programs. When rates decrease, plans may raise premiums, increase copayments, or scale back supplemental benefits. Some plans may exit a county entirely if the payment rate no longer supports profitable operations.

For 2027, the overall national payment rate increase was modest compared to prior years, reflecting slower growth in healthcare costs. However, some counties saw increases while others saw decreases, so the impact on individual plans and members varies by location. A plan in a county with a rate increase may expand benefits, while a plan in a county with a rate decrease may tighten them.

Members do not see the CMS payment directly — it goes to the insurance company. But the payment affects what members pay in premiums and what they receive in benefits. Reading the plan's 2027 Summary of Benefits and Coverage document shows the specific premiums, deductibles, and copayments that result from the CMS payment rate.

Quality bonus adjustments in the 2027 rates

CMS adjusts some Medicare Advantage payments upward or downward based on plan quality performance. Plans that score well on measures like member satisfaction, care coordination, and disease management may receive a bonus payment. Plans that score poorly may receive a reduced payment. These adjustments are called quality bonuses or quality withholds.

For 2027, CMS uses the Medicare Advantage Star Ratings system to determine quality bonuses. Plans are rated on a five-star scale across multiple categories: member experience, care coordination, safety, and timeliness of care. A plan with four or five stars in most categories may receive a bonus of 3 to 5 percent above the base rate. A plan with lower ratings may receive no bonus or a reduced payment.

The Star Ratings are published on Medicare.gov, and members can view them when comparing plans during open enrollment. A higher-rated plan may have higher premiums or better benefits because the quality bonus payment allows the insurer to invest more in member services.

Supplemental benefits and payment rates

Medicare Advantage plans often offer supplemental benefits — services not covered by Original Medicare, such as dental, vision, hearing aids, fitness programs, or transportation to medical appointments. The 2027 payment rates do not explicitly fund these benefits; instead, plans use part of their base CMS payment to offer them.

When CMS payment rates increase, plans have more flexibility to expand supplemental benefits or offer them to more members. When rates decrease, plans may limit supplemental benefits to members with specific chronic conditions or reduce the scope of coverage. Some plans may discontinue certain benefits entirely if the payment rate no longer supports them.

The 2027 rates reflect CMS's expectation of how much plans will spend on supplemental benefits. If plans spend more than expected, they absorb the cost. If they spend less, they may use the savings for rebates or additional benefits in future years.

How to find the 2027 rates for your area

CMS publishes the 2027 Medicare Advantage payment rates on its website in the Medicare Advantage and Part D Rate Announcement document. This document includes the base rate, benchmark, and quality adjustment for each county and plan type. You can search by state and county to see the rates that explore to your area.

The rates are technical and presented in tables with multiple columns. The key figures are the base rate (the starting payment before quality adjustment) and the benchmark (the target amount set by CMS). The difference between the two shows whether plans in that county are expected to be profitable or to operate at a loss.

Individual plan premiums and benefits for 2027 are published separately by each insurance company and are available on Medicare.gov during the annual open enrollment period, which runs from October 15 to December 7 each year. The plan's premium reflects the CMS payment rate plus the plan's own profit margin and cost assumptions.

Frequently Asked Questions

Do Medicare Advantage payment rates affect what I pay in premiums?

Yes, indirectly. When CMS payment rates increase, plans have more money to work with and may lower premiums or add benefits. When rates decrease, plans may raise premiums or reduce benefits. However, the relationship is not one-to-one — a plan's premium also depends on its own costs, profit goals, and competitive positioning in the market.

Can a Medicare Advantage plan leave my county if the 2027 payment rate is too low?

Yes. If a plan determines that the CMS payment rate in a county does not support profitable operations, it can discontinue that plan in that county. Plans must notify members by October 31 of the prior year. If your plan exits, you can switch to another plan during the annual open enrollment period or during a special enrollment period triggered by the plan's exit.

How do risk scores affect the payment my plan receives?

Risk scores are based on diagnoses your doctors document in your medical records. A higher risk score increases the payment CMS sends to your plan. However, you do not control your risk score, and it does not affect your individual premiums or out-of-pocket costs. It affects only the total payment the plan receives for all its members.

Are 2027 Medicare Advantage rates the same everywhere in the United States?

No. Rates vary by county and are set based on local healthcare costs and the health profile of Medicare beneficiaries in that area. A plan in one county may receive a significantly different payment than the same plan in another county, which is why premiums and benefits can differ by location.

Where can I see the exact 2027 payment rate for my county?

The CMS Medicare Advantage and Part D Rate Announcement document, published on the CMS website, lists the 2027 rates by state and county. You can search for your county to see the base rate and benchmark. Individual plan premiums and benefits are published on Medicare.gov during open enrollment.