Medicare Advantage rates went up. Your reimbursement didn't.

This week we're tracking who got a raise and who didn't.

Medicare Advantage plans pocketed another $13B while your fee schedule keeps shrinking, CMS wants drug PA on FHIR by 2027, and AAD dropped its first-ever pediatric atopic dermatitis guidelines.

Let's dive in.

CMS just handed MA plans another $13 billion. The physician conversion factor, meanwhile, has lost 10% of its value since 2020. These two numbers tell the story of modern Medicare, and they're heading in opposite directions.

On April 6, CMS finalized the CY2027 Medicare Advantage rate: a 2.48% increase in capitated payments to MA plans, worth more than $13 billion. That's up from an advance notice of just 0.09%, a gap that Healthcare Dive characterized as a "gift" to insurers after aggressive lobbying. With risk score trends factored in, the effective increase reaches 4.98%.

This follows a pattern. CY2026 brought a 5.06% increase ($25 billion), CY2025 added 3.70% ($16 billion), and CY2024 delivered 3.32% ($13.8 billion). Over four years, CMS has funneled roughly $68 billion in additional payments to MA plans.

Now look at what happened to physician payments over the same period. The conversion factor dropped from $36.09 in 2020 to $33.40 in 2026, a 7.4% nominal decline. That 2026 number includes a temporary 2.5% patch from the One Big Beautiful Bill Act. Without it, the conversion factor would be roughly $32.58, lower than 2025. The AMA calculates a 29% cumulative decline since 2001 when adjusted for inflation, and physicians remain the only Medicare provider type without automatic inflation updates. Hospitals get annual market basket adjustments. MA plans get multi-billion dollar increases. Physicians get one-year patches that expire and a new fight every January.

The disconnect between MA plan rate increases and physician reimbursement is structural, built into how capitated payments work.

CMS pays MA plans a capitated per-member-per-month (PMPM) amount based on county benchmarks, enrollee risk scores, and Star Ratings. Plans then negotiate their own rates with providers. There is no mechanism, no rule, no regulation that requires plans to pass CMS rate increases through to the physicians who actually see patients. Plans can pocket the increase as margin, invest it in supplemental benefits like dental and vision that drive enrollment, or use it for administrative infrastructure. What they don't have to do is raise provider payment rates.

MA plans typically reimburse 70-80% of traditional Medicare fee-for-service rates for physician services. MedPAC has noted that CMS payments to MA plans reached 100% of FFS equivalence, but that measures what CMS pays plans, not what plans pay you. The spread between those two numbers is where plan margins live.

This creates a double squeeze for practices. On one side, the fee-for-service conversion factor keeps eroding, so traditional Medicare pays less each year. On the other side, MA plans use FFS rates as a ceiling, not a floor, and often pay well below them. For practices trying to build revenue under these conditions, the math gets worse as volume shifts toward the lower-paying side: 54% of Medicare beneficiaries are now enrolled in MA (35 million as of February 2026), up from 19% in 2007. CBO projects 64% by 2034. For most practices, opting out of MA networks means walking away from the majority of your Medicare patients.

The prior authorization burden compounds the financial pressure. MA plans processed 52.8 million prior auth determinations in 2024, denying 7.7% of them. An OIG report found 13% of those PA denials were for services that met Medicare coverage rules and would have been approved under traditional Medicare. When providers do appeal, 80.7% of denials are overturned. But only 11.5% of denied requests are ever appealed, which means the vast majority of inappropriate denials stand because the administrative cost of fighting them isn't worth it at MA reimbursement rates. The pressure on payers to reform PA has been building, but the financial incentive to deny first and approve on appeal remains intact.

Dermatology societies recognize where the real fight is. The AAD made Medicare payment reform its sole legislative priority for 2025-2026. More than 200 dermatologists attended the 2025 Legislative Conference focused exclusively on this issue. The specialty faces 6-7% payment decreases under recent fee schedules, and the AAD has joined a coalition of 74+ specialty societies pushing for permanent annual updates tied to the Medicare Economic Index.

The MEI proposal would replace the current system of ad hoc Congressional patches with automatic annual adjustments that reflect actual practice cost inflation, the same way hospital payments already track market basket updates. What has blocked it is budget scoring: CBO scores MEI-linked updates as a cost increase over the current baseline, which assumes the conversion factor stays flat (or drops) each year. Every temporary fix resets the baseline, making the permanent fix look more expensive on paper. The coalition's argument is straightforward: the current system costs more in administrative churn, workforce attrition, and access erosion than the CBO score suggests, but those costs don't show up in the budget window. The One Big Beautiful Bill Act included a 2.5% patch for 2026, but the permanent MEI linkage was not included in the final text.

Also worth noting: the CMS-0062-P drug prior auth comment period opened April 10 and closes June 15, 2026 if you want to file.

Clarity RCM manages revenue cycle for 200+ dermatology practices across 42 states. It's all we do. See how we work.