Medicare Advantage Is Getting $13 Billion More—So Why Are Benefits Being Cut in 2027?

AJ Health and Wealth  |  Serving Pace, Milton, Pensacola, Jay and Gulf Breeze

Part 1: More Medicare Funding Does Not Automatically Mean Better Benefits

If you have been following Medicare news recently, you may have seen two headlines that seem almost impossible to reconcile.

One headline says the federal government is increasing payments to Medicare Advantage plans by more than $13 billion in 2027.

Another says Medicare Advantage plans are reducing benefits, leaving certain markets, discontinuing plans, increasing copays, or otherwise tightening coverage.

So which one is true?

Actually, both can be true at the same time.

And understanding why matters for every Medicare beneficiary in Pace, Milton, Pensacola, Jay and Gulf Breeze as we approach Medicare’s Annual Enrollment Period, which begins October 15.

CMS Is Increasing Medicare Advantage Payments

In April 2026, the Centers for Medicare & Medicaid Services announced its final Medicare Advantage payment policies for 2027.

CMS projects that the policies will result in an average 2.48% increase in payments to Medicare Advantage plans, representing more than $13 billion in additional payments for 2027. When CMS includes its estimate of changes in member risk scores, the agency says the expected average payment increase reaches 4.98%.

At first glance, that sounds like great news.

If Medicare Advantage companies are receiving billions of dollars more, shouldn’t benefits be getting better?

Not necessarily.

The important word in that CMS announcement is average.

Medicare Advantage reimbursement is extraordinarily complicated. Payment changes can vary by geographic area, member population, risk scores, Star Ratings, coding changes, benchmarks, and other factors — which means a plan available to seniors in Escambia County may see a very different adjustment than a plan across the state line.

A national percentage increase does not mean every individual Medicare Advantage plan receives 2.48% more money that it can simply spend on dental benefits, grocery cards or lower copays.

It also doesn’t mean the cost of providing healthcare only increased 2.48%.

Healthcare Costs Keep Moving

Think about your household budget.

Suppose your income increased 3%, but your homeowners insurance increased 15%, your electricity increased 8%, and your grocery bill increased 7%.

Technically, you received a raise.

But you probably don’t feel richer.

Medicare Advantage companies face a similar equation.

Health plans must pay for hospital stays, physician services, outpatient procedures, rehabilitation, diagnostic testing, chemotherapy, specialty medications, ambulance services, emergency care and thousands of other healthcare services.

When those expenses increase faster than the money available to pay them, something eventually has to change.

Plans may respond by adjusting:

• Copayments
• Supplemental benefits
• Premiums
• Provider networks
• Drug formularies
• Service areas
• Maximum out-of-pocket limits
• The counties where a plan is offered

That doesn’t automatically mean every Medicare Advantage plan will become worse in 2027.

It does mean Santa Rosa and Escambia County beneficiaries should not assume that a plan that worked well in 2026 will look exactly the same in 2027.

Medical Utilization Matters Too

The price of healthcare isn’t the only consideration.

The amount of healthcare people use matters as well.

If more members undergo surgeries, receive expensive treatments, visit hospitals, use outpatient services or require specialty medications, the insurer’s total healthcare expenses can rise even if individual reimbursement rates don’t dramatically change.

Several Medicare Advantage insurers have publicly discussed pressure from medical utilization and healthcare cost trends while evaluating their 2027 businesses.

That pressure is contributing to decisions about where plans operate and what benefits they can sustainably offer.

For example, Humana has said its 2027 Medicare Advantage plan exits are expected to affect roughly 600,000 members nationally — its third consecutive year of trimming membership as it works to reach a sustainable profit margin. The company is targeting its lower-performing plans, primarily those rated 3.5 stars or below, rather than cutting evenly across the board.

Other insurers are also reducing their Medicare Advantage footprints in selected markets for 2027.

This does not mean Medicare Advantage is disappearing — including here in Northwest Florida.

Far from it.

It means the market is going through a significant period of adjustment.

The Era of Ever-Expanding Extra Benefits May Be Changing

For years, Medicare Advantage competition became increasingly focused on supplemental benefits.

Plans advertised things such as:

• Dental allowances
• Vision coverage
• Hearing benefits
• Over-the-counter allowances
• Transportation
• Fitness memberships
• Meal benefits
• Flexible spending cards

Those benefits became important differentiators between competing plans.

But there are signs that the rapid expansion of supplemental benefits has slowed.

KFF found that the average Medicare beneficiary had access to 32 Medicare Advantage prescription drug plans in 2026, down from 34 in 2025 and a peak of 36 in 2024. KFF also found that the share of Medicare Advantage enrollees in plans offering over-the-counter allowances dropped from 79% in 2025 to 68% in 2026, and enrollees in plans with meal benefits dropped from 70% to 65% over the same period — continuing a decline from a peak in 2023.

That doesn’t mean these benefits are disappearing entirely.

It means consumers in Pace, Milton, Pensacola, Jay and Gulf Breeze need to start looking beyond the advertising headline.

A $0 premium or attractive extra benefit may get your attention.

But your doctors, hospitals, prescriptions, copayments and maximum out-of-pocket exposure are usually much more important.

And that brings us to what beneficiaries should be watching as the 2027 Annual Enrollment Period approaches.

Part 2: What These Medicare Advantage Changes Mean for You

The biggest mistake Medicare beneficiaries can make this fall is assuming:

“My plan worked fine this year, so I’ll just keep it.”

Sometimes that turns out perfectly well.

Sometimes it doesn’t.

Medicare Advantage and Part D plans operate on one-year contracts. Benefits, networks, formularies, premiums and cost sharing can change from year to year.

That is why reviewing your coverage annually is so important — whether you’re in Pace, Milton, Pensacola, Jay, Gulf Breeze, or anywhere else in Northwest Florida.

Start With Your Annual Notice of Change

If you are enrolled in a Medicare Advantage or Part D prescription drug plan, one of the most important pieces of mail you will receive is your Annual Notice of Change.

Do not throw it away.

The Annual Notice of Change explains what is changing in your current plan for the coming year.

You should pay particular attention to:

• Monthly premium changes
• Primary-care copays
• Specialist copays
• Hospital copays
• Outpatient surgery costs
• Prescription drug coverage
• Pharmacy networks
• Dental benefits
• Vision benefits
• Hearing benefits
• Over-the-counter allowances
• Maximum out-of-pocket limits

One change by itself may not justify switching plans.

But several small changes together can make a big difference.

Don’t Choose a Medicare Plan Based on One Benefit

This is becoming increasingly important.

Imagine two Medicare Advantage plans.

Plan A offers a large supplemental allowance that immediately catches your attention.

Plan B offers a smaller allowance.

Plan A might initially appear to be the obvious winner.

But then you discover that your cardiologist isn’t in Plan A’s network, one of your medications has less favorable coverage, the specialist copay is higher and your preferred hospital isn’t participating.

Suddenly, that extra benefit doesn’t look nearly as important.

Medicare Advantage should be evaluated as an entire healthcare package.

At AJ Health and Wealth, when we review plans for clients across Pace, Milton, Pensacola, Jay and Gulf Breeze, some of the first questions are not about the grocery benefit or dental allowance.

They are:

Who are your doctors?

Which hospitals do you prefer?

What medications do you take?

Which pharmacies do you use?

Those answers can dramatically change which plan makes sense.

What If Your Medicare Advantage Plan Is Going Away?

Some beneficiaries will face an even bigger issue for 2027.

Their current Medicare Advantage plan may no longer be offered in their county.

Others may experience what is commonly referred to as a Service Area Reduction, where a carrier continues offering Medicare Advantage coverage but removes particular counties or areas from a plan’s service area.

If that happens, don’t panic.

You are not losing Medicare.

You are losing that particular Medicare Advantage plan.

But you should not ignore the notice.

You may have multiple alternatives, including another Medicare Advantage plan, returning to Original Medicare and obtaining Part D prescription coverage, and—in certain circumstances—additional rights involving Medicare Supplement coverage.

The exact options depend on your individual situation.

This is one reason I strongly recommend addressing a plan termination early rather than waiting until the end of Annual Enrollment.

Annual Enrollment Begins October 15

Medicare’s Annual Enrollment Period runs from:

October 15 through December 7.

During this period, Medicare beneficiaries can generally:

• Move from one Medicare Advantage plan to another
• Move from Original Medicare into Medicare Advantage
• Leave Medicare Advantage and return to Original Medicare
• Change Part D prescription drug plans
• Enroll in Part D if eligible

New elections generally become effective January 1.

But October 15 should not be the day you first start thinking about your coverage.

Your preparation should begin before then.

Gather your medication list.

Write down your doctors.

Know your preferred hospitals.

Find your Annual Notice of Change.

Then compare your current plan with the 2027 alternatives available where you live.

This Isn’t About Saying Insurance Companies Are Heroes—or Villains

Healthcare discussions often become overly simplistic.

One side says insurance companies are making enormous profits and are responsible for everything wrong with healthcare.

The other side blames the government.

Someone else blames hospitals.

Someone else blames pharmaceutical companies.

The reality is more complicated.

Medicare Advantage sits in the middle of an enormous healthcare ecosystem involving:

• The federal government
• Insurance companies
• Hospitals
• Physicians
• Pharmacy benefit managers
• Pharmaceutical manufacturers
• Pharmacies
• Medical-device companies
• Patients

When one part of that system becomes more expensive, the cost eventually moves somewhere else.

CMS is trying to manage Medicare spending while maintaining beneficiary access and improving payment accuracy. Insurers are trying to manage medical expenses while offering competitive plans. Providers are dealing with labor and operating costs. Drug manufacturers are developing increasingly sophisticated—and sometimes extremely expensive—medications.

Ultimately, the beneficiary feels the effects of all of it.

That is why reducing the conversation to “insurance companies are getting $13 billion more, so benefits should automatically improve” misses much of what is actually happening.

2027 Could Be One of the Most Important Review Years in Recent Memory

Medicare Advantage isn’t going away.

But the market is clearly changing.

CMS is changing payment methodology and other program rules. Insurers are reevaluating markets. Some plans are leaving counties. Supplemental benefits are being reconsidered. Medical costs continue to rise. And beneficiaries may see significant differences between their 2026 and 2027 coverage.

CMS itself describes its 2027 policies as an effort to improve payment accuracy and long-term sustainability of Medicare Advantage.

For consumers, the takeaway is much simpler:

Do not assume. Review.

The plan you have may still be an excellent choice.

But let’s make that decision based on the 2027 facts—not the 2026 brochure.

How AJ Health and Wealth Can Help

I’m Mark Garrett, a licensed independent Medicare broker serving Escambia and Santa Rosa counties — including Pace, Milton, Pensacola, Jay and Gulf Breeze.

If you live anywhere in Northwest Florida, AJ Health and Wealth can help you review your Medicare coverage before the Annual Enrollment Period rush.

Bring us:

• Your medication list
• Your doctors
• Your preferred hospitals
• Your Annual Notice of Change

We’ll help you understand what is changing and compare the options available to you — with no charge for a Medicare plan review.

Annual Enrollment begins October 15, but there is no reason to wait until October 15 to start preparing.

Sources

• Centers for Medicare & Medicaid Services — 2027 Medicare Advantage and Part D Rate Announcement
• Centers for Medicare & Medicaid Services — 2027 Medicare Advantage and Part D Payment Policies
• KFF — “Medicare Beneficiaries Have 32 Medicare Advantage Prescription Drug Plans Available, on Average, for 2026”
• KFF — “Medicare Advantage in 2026: Premiums, Out-of-Pocket Limits, Supplemental Benefits, and Prior Authorization”
• Becker’s Payer Issues — “Humana to Exit Medicare Advantage Plans Covering 600,000 Members in 2027”

AJ Health and Wealth is not connected with the Federal Medicare program. By contacting this number, you will be connected with a licensed insurance agent. We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE or your local State Health Insurance Program to get information on all of your options.