Washington, D.C. — The federal government’s latest Medicare Advantage payment proposal is drawing fire from every corner of the insurance industry — and nursing homes have plenty of reason to pay close attention.
On January 26, the Centers for Medicare & Medicaid Services released its annual advance notice for Medicare Advantage capitation rates, proposing a net average payment increase of just 0.09% for 2027. That’s a fraction of the 4–6% analysts expected and doesn’t come close to covering the 6–8% medical cost trends that insurers say they’re actually seeing on the ground.
For nursing homes, this matters. Medicare Advantage now covers roughly 54% of all Medicare beneficiaries — more than 35 million seniors. Those enrollees are a major portion of the post-acute patient population, and when MA plans tighten their budgets, skilled nursing facilities feel the squeeze first.
What’s Actually in the Proposal
The near-flat rate increase isn’t the only concern. CMS is also proposing a series of methodological changes that insurance groups say will compound the financial pressure on plans.
The agency wants to recalibrate its risk-adjustment model using updated spending data — but that data includes an anomalous surge in skin substitute costs that ran over $10 billion in 2024. Industry groups argue this distorts the model and artificially suppresses payments for beneficiaries with chronic conditions. That’s the exact population nursing homes predominantly serve.
CMS is also moving to exclude unlinked chart reviews from risk adjustment, which health plans say creates complications for new enrollees whose prior health data can’t easily be linked to encounter records.
The Real-World Fallout
Modeling from Wakely Consulting Group, commissioned by the industry, suggests that to maintain current benefit levels under the proposed rates, monthly premiums could rise by an average of $23. Supplemental benefits — dental, vision, hearing, transportation — could see cuts of up to 50%.
That’s the part that hits nursing home operators directly. When MA plans cut supplemental benefits and tighten prior authorization to manage costs, post-acute care is one of the first places they look. Industry reports have documented that two-thirds of nursing homes already deal with daily or weekly coverage denials or delays from Medicare Advantage plans.
A near-flat rate environment gives plans even more incentive to scrutinize — and deny — skilled nursing stays. The financial pressures facing operators were already severe heading into 2026; another round of MA belt-tightening could push more facilities into the red.
The Industry Is Pushing Back
Major health plan trade groups — including AHIP, BCBSA, and ACHP — have submitted comment letters opposing the proposal. Their consistent argument: medical costs are rising at 6–8% annually, driven by hospital prices and pharmacy spending, and a 0.09% payment increase doesn’t begin to cover it.
MedPAC, the independent congressional advisory body, has been more measured, supporting some of the methodological changes around payment integrity. But even MedPAC acknowledged that coding intensity gaps between MA and traditional Medicare continue to grow — a dynamic that complicates any attempt to set fair payment rates.
CMS typically finalizes the rate notice in April. If the agency holds firm on near-flat growth, the result could be another year of benefit reductions, plan exits in certain markets, and more aggressive utilization management — all of which trickle down to nursing home residents and the facilities caring for them.
The comment period has closed. The final rule is expected within weeks.
