The Gold Rush is Over, Now We Sell Shovels
Abstract
The 2027 Medicare Advantage and Part D Advance Notice, released by the Centers for Medicare & Medicaid Services (CMS) on January 26, 2026, signals a fundamental shift in the Medicare Advantage landscape. While the headline number is a modest 0.09% net payment increase, the underlying policy changes represent a significant regulatory pivot away from retrospective chart reviews and toward encounter based risk adjustment. This essay analyzes the key provisions of the Advance Notice and their impact on health tech investors and entrepreneurs. The main takeaways are:
- The exclusion of unlinked Chart Review Records (CRRs) from risk score calculation is the most significant change, creating a -1.53% payment headwind and a massive opportunity for companies that can facilitate compliant, encounter based documentation.
- The similar exclusion of diagnoses from audio only telehealth visits will accelerate the shift to video enabled and integrated virtual care platforms.
- Recalibration of the Part C and Part D risk adjustment models with more recent data will create new winners and losers among plans, and a need for sophisticated analytics to navigate the changes.
- The overall theme is a flight to quality and accuracy. The era of easy money from chart mining is ending, and the new era will reward companies that provide the tools and infrastructure for compliant, efficient, and high quality care delivery and documentation.
Table of Contents
1. Introduction: The End of the Easy Money
2. The Big Squeeze: Unlinked Chart Reviews and the End of an Era
3. The Telehealth Shakeout: Video In, Audio Out
4. Recalibrating the Compass: The New Risk Model
5. The Part D Puzzle: IRA and Population Specific Calibration
6. The Quiet Corners: PACE, Puerto Rico, and Star Ratings
7. The Investor's Playbook: Where the Smart Money is Going
8. Conclusion: A More Sustainable Future
9. References
Introduction: The End of the Easy Money
Every gold rush has its phases. First, there's the wild, chaotic scramble for nuggets lying on the ground. Then, as the easy pickings disappear, the real money is made by those who sell the picks, shovels, and Levi's. The 2027 Medicare Advantage and Part D Advance Notice is CMS's official declaration that the nugget picking phase is over [1][2]. The headline number, a paltry 0.09% net payment increase, is a masterclass in burying the lede. The real story is in the methodological changes, which collectively represent a tectonic shift in how Medicare Advantage plans are paid. For years, the MA gold rush was fueled by risk adjustment, a system designed to pay plans more for sicker patients. And for years, a cottage industry of chart reviewers and data miners sprung up to help plans find every possible diagnosis, whether it was from a face to face visit or a dusty chart found in a basement. That game is now officially ending. CMS is turning off the spigot for diagnoses that aren't tied to an actual patient encounter. This is not a subtle tweak. It's a fundamental rewiring of the MA payment system, and it creates a massive opportunity for a new generation of entrepreneurs and investors. The ones who understand that the future isn't about finding more diagnoses, but about documenting the right ones, at the right time, in a way that is inextricably linked to the care being delivered. The gold rush is over. It's time to start selling shovels.
To understand the magnitude of this shift, you need to understand the context. Medicare Advantage has been on an absolute tear for the past decade. Enrollment has grown to over 33 million beneficiaries, representing more than half of all Medicare beneficiaries [3]. This growth has been fueled by a combination of factors, including generous supplemental benefits, low or zero premiums, and yes, aggressive risk adjustment. The risk adjustment system was supposed to be a level playing field, a way to ensure that plans that took on sicker patients weren't financially penalized. But it became something else entirely. It became a game of who could find and document the most diagnoses, regardless of whether those diagnoses were actually being treated or even relevant to the patient's current health status. The result was a coding intensity arms race, with plans spending millions on retrospective chart reviews to squeeze every last dollar out of the system. CMS has been trying to rein this in for years, with limited success. The 2027 Advance Notice is the most aggressive move yet, and it's a clear signal that the agency is serious about bringing the system back into balance.
The Big Squeeze: Unlinked Chart Reviews and the End of an Era
