Comments on the 2027 Medicare Part C and D Advance Notice

Matthew Fiedler commented on the proposed 2027 Part C and D Advance Notice published by the Centers for Medicare and Medicaid Services (CMS). His comment letter makes three main points:

• Higher Medicare Advantage (MA) coding intensity continues to inflate payments to MA plans. Preliminary estimates from the Medicare Payment Advisory Commission (MedPAC) suggest that higher MA coding intensity will inflate payments to plans by 4% in 2026, after the coding pattern adjustment. This differential has tended to grow over time absent policy changes, so it would likely be higher than 4% in 2027 under current policies. Thus, achieving the statutory goal of actuarial equivalence requires action to address coding intensity.
• Excluding unlinked chart review records (CRRs) from risk adjustment calculations might reduce MA coding intensity, but insurer efforts to recapture the lost diagnoses may limit the proposal’s effectiveness or even make it harmful on balance. In practice, insurers may often be able to link currently unlinked CRRs to encounter records or induce providers to directly report the relevant diagnoses on encounter records. Thus, this proposal may reduce MA coding intensity by much less than CMS expects, even as insurers’ recapture efforts generate new compliance costs. Whether these costs are worth bearing depends on how large they are, how much recapture occurs, and how targeted the remaining reduction in coding intensity is to the insurers with the highest coding intensity. It also depends on whether a higher coding pattern adjustment is a viable alternative, as a higher adjustment could reduce coding intensity without the same compliance costs.
• CMS’ proposed coding pattern adjustment is likely too small to fully offset higher MA coding intensity. CMS’ projections imply that, under the policies in the Advance Notice (which include maintaining the statutory minimum coding pattern adjustment), the coding differential between MA and traditional Medicare will fall by 2.4 percentage points in 2027. Because this decline is smaller than MedPAC’s estimate of the coding intensity differential in 2026, it follows that achieving actuarial equivalence in 2027 would likely require implementing a higher coding pattern adjustment. Moreover, if insurers succeed in recapturing most of the diagnoses currently reported via unlinked CRRs, then the required increase in the adjustment would be larger than these estimates imply.

Read the full comment letter here