Sachin Jain, President and CEO, Board Director at SCAN Health Plan, shared on LinkedIn:
“The Centers for Medicare and Medicaid Services has proposed that Medicare Advantage plan revenues will remain flat going into 2027 at a moment when underlying medical costs, labor expenses, and pharmaceuticals continue to rise materially.
What does this mean in practice?
For beneficiaries:
Over time, beneficiaries should expect less generous benefits, tighter utilization management, and narrower provider networks. Access may become more constrained-not necessarily through explicit benefit cuts, but through fewer participating provider groups and more selective contracting. The tradeoff between affordability and choice will become more acute.
For brokers and distribution partners:
Distribution costs in Medicare Advantage are largely fixed, particularly commissions and marketing infrastructure. As margins compress, plans will continue to reassess how (and how much) they pay for growth. This may include lower upfront commissions, greater reliance on retention-based compensation, or shifts toward more direct-to-consumer enrollment strategies.
For provider groups:
Provider organizations seeking rate increases will face a much tougher negotiating environment. With plan revenues constrained, upward pressure on provider rates becomes difficult to absorb. As a result, some provider groups may choose to exit Medicare Advantage entirely, while others will narrow participation to fewer plans. The result may be increased network fragmentation and heightened tension between plans and providers over risk, quality expectations, and total cost of care.
For managed care company employees:
Cost discipline will extend inward. Plans will be slower to hire, more selective about new investments, and may pursue workforce reductions. Expectations will shift toward higher productivity, flatter organizational structures, and doing more with fewer resources.
For Investor-backed Medicare Advantage plans:
The economics of growth will change. Longer payback periods, lower internal rates of return, and greater regulatory uncertainty will make Medicare Advantage investments less immediately attractive. Capital will still flow to the sector, but it will be more discriminating, favoring scale, operational excellence, and differentiated capabilities rather than growth at any cost.
For small and regional health plans:
Scale matters more than ever. Smaller plans will struggle to compete. Many may exit the market or seek partnerships, mergers, or acquisitions. Consolidation pressures are likely to intensify as fixed administrative and compliance costs consume a greater share of revenue.
Time will tell whether the rate decisions outlined in the Advance Notice hold through the Final Rule. Regardless of the ultimate number, one thing is clear. Medicare Advantage is entering a period of transition. The era of easy growth is ending, and the next phase will be defined by tradeoffs-between generosity and sustainability, growth and discipline, innovation and affordability.”
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