Medicare to Pay Insurers $13 Billion More for Advantage Plans in 2027 - Will Your Coverage Actually Improve?

In 2027, the federal government plans to offer around $13 billion more in payments to private insurance companies that offer Medicare Advantage plans.

On the surface, this sounds like great news if you are a senior hoping for lower Medicare costs that allow you to keep more of your money.

However, the savings seniors wish for may not materialize from this change.

The payment increase to Medicare Advantage plans

In April, the Centers for Medicare & Medicaid Services (CMS) announced an average payment rate increase of about 2.48% to providers of Medicare Advantage plans for 2027.

That amounts to more than $13 billion in additional payments to private insurers. It is far higher than the 0.09% increase that regulators had suggested earlier in the year, which would have amounted to about $700 million in increased payments.

At the time of the CMS announcement, CMS Administrator Dr. Mehmet Oz said the higher payments are intended to "keep coverage affordable and ensure patients get real value from their plans."

Should seniors hope for lower Medicare costs?

However, the government's decision to increase funding to Medicare Advantage plans won't necessarily benefit seniors.

It's important to remember that this money goes directly to insurance companies. That means there is no certainty that insurers are going to pass on their savings to Medicare Advantage plan members in the form of lower costs or enhanced benefits.

As medical costs have increased and margins have gotten smaller, many insurers have signaled that they are going to move away from growing their customer base and instead focus on boosting profits.

That goal may dampen the incentive to improve benefits or lower costs in an attempt to both keep existing enrollees and woo new customers.

What this means for seniors and insurers

There is debate about what these increased payments mean for seniors enrolled in Medicare Advantage plans and the companies that offer such coverage.

Critics have long claimed that insurance companies that offer Medicare Advantage plans lobby the government for higher rates and engage in practices such as "upcoding" patients to make them appear to be more ill than they really are.

Because of such practices, Medicare Advantage ends up being costlier to the government than traditional Medicare, the critics say.

On the other hand, supporters of rate increases say they help keep coverage affordable and deliver value to seniors.

Ways to cut the cost of Medicare Advantage

Seniors enrolled in Medicare cannot control how Medicare Advantage funding works. So, it's important to simply focus on your own coverage and find ways to cut costs whenever possible.

The annual Medicare open enrollment period runs from Oct. 1 to Dec. 15. For most seniors, this is the one time during the year they are allowed to make significant changes to their coverage. These changes take effect on Jan. 1, 2027.

Here are some ways to ensure you get the right coverage next year at the best price.

Compare plans carefully

Medicare Advantage is built on the notion that increased choice is good for consumers. In theory, this should result in better benefits at a lower cost for seniors.

Many critics say the reality of Medicare Advantage has not lived up to its promise. Whether or not you agree, it is still true that you now have more choices than you did in the past.

So, compare Medicare Advantage plans against one another to try to find the right coverage at the lowest price. And don't forget to consider switching to Original Medicare if that seems like a better option.

Scrutinize changes to premiums, benefits, and drug coverage

In September, Medicare beneficiaries enrolled in Medicare Advantage or the Medicare Part D drug plan receive an Annual Notice of Change (ANOC) letter.

The letter explains any upcoming changes for 2027 that impact costs, coverage, and other aspects of your coverage.

Don't ignore this letter. Instead, read it carefully and decide whether the plan you currently have is still your best choice for 2027.

In particular, make sure your doctors remain in-network in your plan and that premium costs have not soared. If you are enrolled in Medicare Part D, look to see if your drugs are still in your plan's formulary.

Do not assume your plan is going to be better

Even if your Medicare Advantage plan enjoys increased funding, that doesn't necessarily mean the plan is going to offer better benefits at a lower cost.

Navigating Medicare is complex and frustrating for many enrollees. But it is still up to you to review options, weigh them against your needs, and choose the plan that is best for you.

Bottom line

The federal government plans to funnel more cash to Medicare Advantage plans than was previously expected. However, that doesn't guarantee an increase in benefits or a decrease in costs for seniors.

If you want to save money on bills while also maintaining the best-possible coverage, now is the time to prepare for Medicare open enrollment. Doing so boosts your odds of making educated choices about your policy this fall.

You May Also Like

23 Ways To Get Money Without Getting A Second Job

By FinanceBuzz Editors

How To Save Money on Car Insurance: 12 Ways to Lower Rates

By Elyssa Kirkham

10 Things Seniors Born Between 1941-1969 Could Take Advantage Of

By FinanceBuzz Editors

19 Dumbest Things Smart People Waste Money On

By Team FBZ

7 Moves If You Want to Stop Living Paycheck to Paycheck

By FinanceBuzz Editors

7 Clever Ways to Crush Your Debt

By FinanceBuzz Editors

Save Money and Get Huge Discounts on Everyday Purchases

AARP Benefits

• Huge discounts on travel, groceries, prescriptions and more
• Access to financial planning resources and health tools
• Join AARP and get 25% off with automatic renewal

Become a member now!

---

Subscribe Today

Learn how to make an extra $200

Get vetted side hustles and proven ways to earn extra cash sent to your inbox.

or

Subscribe Now →

By submitting this form you agree to receive emails from FinanceBuzz and to the privacy policy and terms