The Biden-to-Trump handoff in White House politics hasn't spared Medicare Advantage from a regulatory shake-up. On Monday, the Centers for Medicare & Medicaid Services floated a 2027 advance notice that would all but ban one of the most controversial ways private Medicare plans boost payments: unlinked chart reviews.
In plain terms: CMS wants to stop insurers from adding diagnoses to a member’s risk score unless the diagnoses are tied to an actual medical encounter. The agency says that change, plus other tweaks to risk adjustment, would improve payment accuracy and could save Medicare billions — while the stock market reacted like this was a headline you couldn't ignore.
What CMS proposed (and why it matters)
The centerpiece of the advance notice is the exclusion of diagnoses identified during retrospective chart reviews unless they’re associated with a documented encounter such as a doctor visit. Regulators argue chart reviews—where insurers mine medical records to add diagnoses—have been a major driver of so-called “upcoding” in Medicare Advantage, inflating plans’ payments without necessarily reflecting new or treated health problems.
CMS actuaries estimated the change would shave more than $7 billion from program spending in 2027 alone. At the same time the agency proposed a nearly flat net rate update — roughly a 0.09% average bump — which translates to about $700 million more for MA plans before insurers add in diagnoses through coding activity.
CMS officials framed the move as restoring accuracy and fairness to payments, saying the goal is to have insurers compete on value rather than who can document the most diagnoses. “We want Medicare Advantage to work better for the people it serves,” the agency said in a release.
Market fallout: insurers’ shares took a hit
Investors treated the notice as far more than a policy tweak. In after-hours and next-day trading, major insurers plunged: Humana fell by more than 20%, UnitedHealth and Elevance lost double-digit percentages, and CVS and Centene also dropped sharply. Analysts had been modeling a 4–6% payment increase next year; the much smaller proposal undercut those assumptions and prompted rapid re-pricing of earnings expectations.
Traders in recent months have leaned on faster, AI-augmented market tools to parse policy signals, a change in how Wall Street digests regulatory risk that vendors and platforms are racing to serve with new features like those found on Google Finance's Gemini-powered tools. The speed of the selloff reflected how tightly margins and coding practices are tied to MA profits.
Who’s exposed — and why some firms will feel it more
Not all insurers use chart reviews to the same degree. The proposed rules would disproportionately affect carriers that rely heavily on retrospective documentation to boost risk scores. UnitedHealth, which runs the program’s largest MA business, has attracted scrutiny and a recent Senate inquiry that described a substantial coding workforce dedicated to maximizing reimbursements. Other big payers — Humana, Centene, CVS Health and Elevance — also face meaningful exposure, though the per-member impact varies.
Industry groups quickly warned the policy could force benefit cuts or higher costs for seniors, arguing chart reviews help create a fuller clinical picture. CMS counters that diagnoses not tied to encounters should not drive taxpayer-funded payments.
The technical backdrop: risk adjustment, V28 and coding mechanics
Medicare’s risk-adjustment framework is meant to pay plans more when members are sicker and less when they are healthier, disincentivizing cherry-picking. But that very system creates a motive to document more — even when the documentation reflects record-mining rather than new, treated illness.
The policy comes after earlier reforms, including the V28 risk model introduced under the previous administration to dampen upcoding. The new advance notice leans into that trend by tightening what documentation counts. Regulators also proposed excluding diagnoses from audio-only telehealth visits and using more current Medicare data in risk calculations.
Those technical choices matter: changes to models and allowable data sources shift math that, at scale, amounts to billions.
Politics, pushback and the calendar
The rule is being issued by the Trump administration’s CMS, a reminder that Republican control of the executive branch doesn't automatically mean lighter oversight of MA. Expect vociferous lobbying from the insurer lobby, which has already warned of market contractions and beneficiary pain, and counterarguments from consumer and watchdog groups pressing for an end to gaming.
Comments on the advance notice are open through late February, and CMS typically finalizes rates and rules in early April. Between now and then, expect intense public and private advocacy — and more market volatility as analysts remap earnings scenarios.
Bigger questions
Beyond the immediate winners and losers, the proposal raises a larger question about how much government should tolerate aggressive documentation practices in privatized parts of Medicare and how to measure program integrity without undermining care coordination. The dispute taps into broader debates about algorithms, data, and prediction in public policy — conversations that mirror tensions in AI and forecasting across industries, not least the debate over whether our predictive models are up to the job in high‑stakes areas like health care the conversation around AI and prediction is hardly confined to finance or tech.
For millions of Americans on Medicare Advantage, the next few months could bring smaller benefits in some markets or more plan churn as carriers adjust. For the insurers, it’s a test of whether margins can be rebuilt through pricing and operations rather than documentation. And for policymakers, it’s an experiment in whether stricter rules can curb overpayments without creating new access problems — a policy tightrope that will be watched by investors, advocates and patients alike.