The cost of healthcare in the United States has been a frequent topic of public discussion, as the federal government spent more than $1 trillion dollars on Medicare in 2024. This number is projected to nearly double by 2033, and per capita Medicare spending trends are expected to grow by almost 6% per year over that time horizon. The Centers for Medicare and Medicaid Services (CMS) projects that average payments to Medicare Advantage (MA) organizations will increase by 0.09% in 2027, essentially unchanged from 2026. But CMS expects fee-for-service (FFS) costs in the traditional Medicare benefit to rise by more than 5%, creating a gap between FFS trend and MA payments. The effective growth rate in CMS’s Advance Notice—a document that outlines proposed updates to payment rates and policies for MA and Part D plans for the upcoming year—represents the year-over-year change in MA payment benchmarks.

This white paper:

• Familiarizes readers with what is driving the FFS trends in CMS’ Advance Notice
• Covers what these assumptions imply about CMS’ current expectations for healthcare trends heading into 2027
• Discusses how to understand the gap between expected MA payment trends and projected FFS cost trends
• Notes key drivers of projected trends for Medicare Part A and Part B

This report was commissioned by UnitedHealthcare.