Medicare Proposal Seeks to Limit Insurer Tactic, Extra Payments

The Trump administration’s proposed update to its Medicare payment policies could affect larger Medicare Advantage companies more than smaller firms, health policy watchers say.

The 2027 Medicare Advantage and Part D Advance Notice, released this week by the Centers for Medicare & Medicaid Services, would introduce changes to how the agency calculates extra money Medicare Advantage insurers receive for caring for sicker enrollees.

These “risk scores” are adjusted based on insurers’ evaluation of patient medical histories, with higher payments made for patients with more documented illness or disease severity.

Under the proposal, diagnoses from medical chart reviews would no longer be counted unless they’re linked to a specific patient visit—a move that could slash payments to companies accustomed to mining patient chart data for diagnoses.

The risk scores are crucial for large Medicare Advantage insurers like Humana Inc., UnitedHealth Group Inc., and CVS Health Corp., but how they are calculated has come under withering criticism from federal officials and lawmakers.

Medicare Advantage plans cover more than half of all individuals eligible for Medicare—almost 34 million people, according to the Medicare Payment Advisory Commission.

However, covering people through Medicare Advantage costs the government 20% more, or $84 billion in 2025, than it would have under traditional Medicare, estimates the group, which advises Congress on Medicare policy.

Part of the reason behind the spending difference has to do with insurers’ ability to leverage higher risk scores to draw down more Medicare payments, said Kata M. Kertesz, managing policy attorney at the Center for Medicare Advocacy.

She pointed to a March 2025 report by Medpac, which projected that $40 billion of the $84 billion in higher total payments to MA plans in 2025 were due to their higher risk scores than traditional Medicare.

“There are a few tools that MA plans are known to use that enable them to maximize the risk scores that they’re capturing, and chart reviews are one of them,” said David Meyers, professor and health economist at Brown University.

“By addressing this unlinked chart review problem, it’s a way to start to address the fact that some plans are being paid a lot more money than they maybe should on the basis of how sick their beneficiaries truly are,” he said.

The CMS estimated that restricting insurers’ ability to leverage diagnoses made from chart reviews unlinked to patient visits could lead to $7.12 billion in net savings to the Medicare trust funds for 2027, according to Lynn Nonnemaker, former senior director of Medicare policy for Cigna and currently a health-care consultant at McDermott+.

The policy change will likely have varying impacts across insurance companies, with smaller insurers probably seeing a payment increase from the proposal, Meyers said.

“CMS is still boosting payments. In the advanced notice, there’s the growth rate, which is the 5% increase in payments that’s calculated off of fee-for-service spending— that’s still going up,” Meyers said. “The reason why CMS gets to that top line number of only a 0.9% increase is because CMS thinks that the overall pay increase will be mitigated by the risk code changes.”

“Not every insurer does a lot of upcoding, and when they do upcoding, not every insurer does it through chart reviews. United uses them quite a bit; Cigna and Humana use a lot of chart reviews. Most of the smaller insurers hardly use the chart reviews at all,” Meyers said.

The Better Medicare Alliance, a trade group representing the interests of Medicare Advantage plans, said in a statement that it “will continue to review the Advance Notice and work with CMS and Congress to push for the changes necessary to protect affordable coverage.”

“It is critical that payment policies fully and accurately account for the care Medicare Advantage beneficiaries receive,” CEO Mary Beth Donahue said.