Medicare Advantage (MA) covers more than half of all Medicare beneficiaries and continues to grow as a share of federal health spending, drawing increased attention from policymakers. The Calendar Year (CY) 2027 regulatory and policy cycle is the Trump administration’s first opportunity to fully articulate its MA priorities through the Advance Notice and the Part C and D Rule, the draft of which is currently at the Office of Management and Budget for review.

These policies will be proposed against the backdrop of the administration’s broader deregulatory agenda, with the Centers for Medicare & Medicaid Services (CMS) signaling that it will review Medicare regulations and policies to ensure consistency with directives to reduce the overall number of regulations. As CMS identifies regulations to roll back and develops new policies, Congress is also taking a closer look at Medicare Advantage, having recently held a hearing and is considering legislative action.

Health plans, hospitals, physician groups, pharmacies, drug manufacturers and other stakeholders should prepare for potential changes across key areas of the program that could affect beneficiaries, payment structures, and business operations. Areas of focus for the Trump administration and Congress could include:

Limiting MA plan flexibility to manage utilization: Utilization management (UM), including prior authorization (PA), is a tool that MA plans can use to determine appropriate access to services and medications, as well as manage costs. However, public scrutiny of PA is growing, and policymakers are evaluating the extent to which PA may be delaying or restricting access to medically necessary treatments. Both Democrats and Republicans in Congress have expressed support for streamlining PA protocols, and are considering legislation that would require MA plans to adopt electronic PA systems, establish decision timelines, and provide greater transparency in reporting.

Meanwhile, CMS recently conducted its first audits of how MA plans are complying with UM requirements implemented through the CY 2024 Part C and D Rule. The rule requires MA plans to: (1) follow national and local coverage determinations and apply internal coverage criteria when Medicare guidance is unavailable; (2) ensure that adverse medical necessity decisions are reviewed by qualified clinical experts; (3) make coverage criteria publicly accessible; and (4) establish committees to oversee UM policies. CMS’s audits found that most plans are actively implementing the new standards, generally adhering to coverage criteria and maintaining proper clinical oversight. However, the agency cautioned that, as the initial audit year under these rules, the findings should not be interpreted as a definitive evaluation of overall plan performance.

In addition, CMS finalized the Interoperability and Prior Authorization Final Rule in January 2024. It requires health plans to modernize PA processes by meeting faster decision timelines, providing specific denial reasons, and publicly reporting PA metrics by January 2026, with additional requirements—such as implementing Fast Healthcare Interoperability Resources-based electronic PA application programming interfaces—taking effect by January 2027.

While the Trump administration has not commented publicly on these rules finalized under the Biden administration, it is possible that it may revisit some of the requirements as it considers opportunities for deregulation. Recent actions from the Trump administration signal that balancing appropriate use of PA with efforts to reduce spending may be an area of focus. CMS has stated that MA reforms are intended to reduce prior authorization where it has become unnecessary and burdensome to patients and providers. In June 2025, CMS hosted a roundtable discussion with several MA plans that pledged to make key PA reforms. However, in parallel, CMS also launched the Wasteful and Inappropriate Service Reduction (WISeR) Model, which will implement PA for certain items and services in fee-for-service (FFS) Medicare, suggesting that CMS supports certain PA requirements to limit Medicare spending.

Given bipartisan support for reforming PA procedures, stakeholders should consider how PA can be redesigned to ensure timely access to care, improve transparency for beneficiaries and providers, and reduce administrative burdens. Further, while attention has focused on medical services, CMS could also look to revisit policies such as the use of step therapy for Part B drugs during the 2027 rulemaking cycle.

Reforming risk adjustment to limit diagnosis coding differences between MA and FFS Medicare: Risk adjustment is designed to ensure that health plan payments accurately reflect the health status and demographic characteristics of enrollees. This means that plans serving beneficiaries with more complex or costly health conditions receive higher payments to support their care needs. Currently, CMS uses the Hierarchical Condition Category (HCC) model, which bases payment calculations on data from FFS Medicare.

As enrollment in MA continues to grow, both Democratic and Republican policymakers have explored reforms to the risk adjustment system to manage rising plan payments. Recent MedPAC analysis finds that payments to MA plans are higher than those for comparable beneficiaries in FFS. Under the Biden administration, CMS noted that it worked on a new approach that would use data from MA plans themselves—known as MA encounter data—rather than relying on FFS data to calculate costs. If adopted, this new model could be implemented as early as 2027. While the Trump administration has not yet publicly indicated whether it supports this change, CMS has long considered implementing an encounter-based model and is likely to continue assessing it as an option. CMS can likely implement this without new rulemaking through the Rate Notice process. We would expect some phase-in period similar to prior substantive changes (e.g., most recently with the implementation of V28 of the HCC model).

More recently, the Center for Medicare and Medicaid Innovation (CMMI) has also expressed a longer-term interest in incorporating artificial intelligence (AI) into a risk adjustment model, potentially through an Inferred Risk Model. Originally proposed by Abe Sutton prior to his appointment as CMMI Director, an inferred risk model could leverage AI to identify beneficiary diagnoses rather than provider and plan submitted diagnoses. Meanwhile, Congress is considering legislation that would prohibit plans from using health risk assessments as the sole source of diagnosis data for determining payment.

Notably, each of the suggested reforms could limit the impact of diagnosis coding differences between MA and traditional Medicare. For example, an Avalere Health analysis found that plan payments determined by an MA encounter-based risk adjustment model are expected to decrease on average, particularly for some commonly diagnosed conditions (e.g., chronic obstructive pulmonary disease).

As the Trump administration and Congress consider significant changes to the risk adjustment model, health plans and drug manufacturers should proactively assess how these reforms could impact payment structures and patient identification strategies. In addition, health plans should evaluate current data practices, identify operational risks, and model financial impacts under various reform scenarios to prepare for potential policy shifts. Early planning will be critical to ensuring compliance and maintaining financial stability in a changing regulatory environment.

Increasing focus on health outcomes and modifying the Star Ratings Quality Bonus Program: Medicare Star Ratings measure MA plan quality and play a key role in determining plan payment. Recent methodology changes have resulted in less predictable Star Ratings and an increase in litigation challenging CMS’s methodology. Given this environment, CMS indicated at its 2025 Quality Conference in July that it would explore reforms that are aligned with the Make America Healthy Again (MAHA) agenda, including focus on reducing administrative burden, improving outcomes, incentivizing preventative care, and leveraging AI and other technology.

As CMS considers larger scale changes, it will likely move forward with measure updates and methodological enhancements outlined in the 2026 Rate Announcement and 2026 Part C and D Final Rule, including:

• Excellent Health Outcomes for All (EHO4all): Given this environment, CMS could explore reforms during the 2027 rulemaking cycle that may emphasize outcome-based measures aligned with the MAHA agenda. In April 2025, CMS renamed the Health Equity Index reward to EHO4all. When EHO4all is implemented beginning with the 2027 Star Ratings, it will include enrollees who are dually eligible, receive the low-income subsidy, or have a disability. CMS also stated that it is considering adding new factors to the EHO4all reward, such as geography, which could be proposed in upcoming rulemaking. However, CMS also noted that it was reviewing this policy as a part of its efforts to identify opportunities for deregulation, so it is possible that CMS could either decide not to pursue this policy change or to make substantial modifications.
• Potential new measures for 2027: The National Committee for Quality Assurance (NCQA) is evaluating adding measures that would assess comprehensive foot evaluations and their follow-ups, follow-up after colorectal cancer screening, an end-stage renal disease (ESRD) measure by identifying MA members with stage four chronic kidney disease or ESRD, and an RSV Immunization Indicator to the Adult Immunization Status measure. To further incentivize person-centered outcomes, NCQA is also considering developing three measures for special needs plans (SNPs) related to identifying, measuring, and tracking patients’ goals related to care needs.

While plans should continue to focus on improving quality outcomes under the current Star Rating program, it is important to consider how potential reforms could impact plan operations and payments. Given policymakers’ focus on Medicare spending, it is likely that any reforms to the Stars program would be cost-saving or budget neutral.

Expanding MA Program oversight initiatives: The Trump administration has emphasized efforts to reduce fraud, waste, and abuse (FWA) as part of its broader oversight priorities. One tool CMS uses in this effort is Risk Adjustment Data Validation (RADV) audits, through which the agency reviews medical records to verify the accuracy of diagnoses submitted by MA plans for payment. CMS recently announced plans to complete the backlog of RADV audits for prior years by early 2026 and expand the program from a sample of roughly 60 plans per year to all eligible MA contracts. CMS has not indicated that it will pursue additional rulemaking related to RADV, but it may release additional information (e.g., via a fact sheet) alongside the upcoming 2027 Part C and D Proposed Rule or the Rate Announcement. While operational details of the RADV audits remain sparse, plans could also consider how to most efficiently work with their network providers to quickly gather medical records to support an audit without increasing provider burden. In addition, CMS could include additional transparency requirements or other program integrity initiatives in upcoming rulemaking.

Regulating marketing: In August, a district court vacated policies finalized in April 2024 that implemented a standard compensation rate for agents and brokers across all plans, arguing that CMS had exceeded its authority. CMS may propose changes to its approach to regulating agent and broker compensation. In addition, the agency could consider other reforms to address transparency in marketing and promote materials to support beneficiary decision-making.

Incorporating AI into existing processes and identifying new uses for technology: As AI is increasingly applied to various health plan functions, the Trump administration is focused on increasing AI use across the federal government, as seen in recent executive orders and America’s AI Action Plan. CMS could explore options for AI implementation including automating administrative tasks, prior authorizations, risk adjustment, and RADV audits. Industry stakeholders should weigh how beneficiary care is likely to be impacted by AI and identify necessary guardrails to protect against risks such as bias in underlying data and algorithms or model hallucinations.

Conclusion

Looking ahead, stakeholders should monitor potential MA policy changes including program oversight, payment model reforms, and new technologies that are likely to surface in upcoming rulemaking cycles. In fall 2025, CMS is also expected to release the 2026 MA and Part D landscape and design data files, offering a first look at how plans are responding to the new administration and an uncertain, evolving policy environment. Key regulatory announcements are expected to include the re-release of the final CY 2026 Parts C and D rule and the CY 2027 Proposed Parts C and D rule later this fall. CMS has also signaled that it may revisit several policies that were not finalized in earlier rulemaking. These include areas such as health equity, utilization management, culturally and linguistically appropriate services, and quality improvement initiatives. Together, these ongoing reviews suggest that CMS will continue to weigh changes in beneficiary access, plan accountability, and regulatory burden under the administration’s broader deregulatory framework.

Avalere Health is tracking the latest changes in Medicare Advantage policy and leveraging our expertise in policy, payment, data, and quality to guide stakeholders. Connect with us to learn how your organization can prepare for 2026 and beyond.