September 20, 2026

CMS's 2027 Medicare Advantage Notice and the PACE Shift to Encounter Data: What Dementia Programs Should Prepare For

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On April 6, 2026, CMS released its final 2027 Medicare Advantage Rate Announcement. It raised projected Medicare Advantage payments by 2.48 percent, up from the nearly flat 0.09 percent proposed in January, and it kept moving PACE organizations from the legacy RAPS system to the encounter data system for risk adjustment. For dementia programs, the practical message is about data: which diagnoses count, which encounters they come from, and how they reach CMS.

This guide covers what CMS finalized, how the PACE transition works, and how dementia programs can prepare. It is general information and not compliance or coding advice, so involve your finance and compliance teams.

What CMS Finalized

CMS published its Advance Notice on January 26, 2026, took comments, and released the final announcement on April 6. Three points matter most.

The payment increase rose. According to CMS's fact sheet on the final announcement, the final policies are projected to raise payments to Medicare Advantage plans by 2.48 percent, or more than 13 billion dollars, and by 4.98 percent when estimated risk score trend is included. CMS had proposed 0.09 percent in the Advance Notice.

CMS kept the current risk model. It chose not to implement the updated model it proposed, and it will keep using the 2024 model, calibrated with 2018 diagnoses and 2019 expenditures. CMS says continued use of that model gives the Medicare Advantage market more time to adjust to its recently completed phase-in.

Some diagnosis sources are excluded. For 2027 risk scores, CMS finalized excluding diagnoses from audio-only encounters and from unlinked chart review records, which are diagnoses not associated with a specific beneficiary encounter. The one exception is that diagnoses from unlinked chart reviews still count for beneficiaries who switch from one Medicare Advantage organization to another. CMS estimates that the audio-only exclusion has no effect on risk scores on average, and that the unlinked chart review exclusion lowers them by 1.53 percent. Its implementation guidance says both exclusions start with the 2027 midyear model run.

The PACE Shift From RAPS to Encounter Data

Risk adjustment adjusts payment to reflect how sick or complex a group of enrollees is, and it is built from diagnoses. Medicare Advantage organizations submit diagnosis data through the encounter data system (EDS). PACE organizations have historically used an older system, the Risk Adjustment Processing System (RAPS).

CMS has been moving PACE organizations toward the same approach as everyone else. According to CMS's 2026 rate announcement fact sheet, CMS released technical instructions in January 2024 to begin transitioning PACE organizations to submitting risk adjustment data to the EDS instead of RAPS. CMS says it now expects PACE organizations to be submitting fulsome diagnosis data to the EDS, and that it has monitored submissions and provided technical assistance.

The 2027 Blend

For 2027, CMS is blending two risk models for PACE. According to CMS's final fact sheet, CMS will calculate PACE risk scores by blending 50 percent of the score from the 2024 Medicare Advantage risk adjustment model and 50 percent from the 2017 model, which CMS calls an accelerated transition to the same model Medicare Advantage uses. The Advance Notice had proposed pairing the 2017 model with a new 2027 model, and CMS did not implement that model.

According to Forvis Mazars, the two halves differ in their data sources:

The 2017 model half uses diagnoses from RAPS, encounter data and fee-for-service claims.
The 2024 model half uses only encounter data and fee-for-service claims.

So half of a PACE organization's 2027 risk score can be built only from diagnoses that reached CMS through encounter data or claims. Diagnoses submitted only through RAPS count toward one half and not the other.

The unlinked chart review exclusion does not apply to PACE organizations for 2027, according to AAPC's summary of the final announcement. That matches what Crowell & Moring reported from the Advance Notice: PACE organizations should submit diagnoses for services where they don't collect a claim through an encounter data record or an unlinked chart review. IntusCare notes that this matters for services with no claims, such as care delivered in the PACE center.

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Why This Matters for Dementia Programs

Risk scores depend on the diagnoses that reach CMS. For a PACE organization serving people with dementia, the completeness and accuracy of submitted diagnoses affects payment. That is a reason to get documentation and submission right, and it isn't a reason to code beyond what clinicians actually assess.

Audio-only care is treated differently. Diagnoses from audio-only services, identified by the modifiers 93 or FQ, are excluded from risk scores. AAPC's summary says the exclusion applies across the board, and the PACE exemption described above covers only unlinked chart reviews. Telehealth visits with real-time audio and video still meet the face-to-face requirement. Many dementia programs coordinate care by phone, so review where your diagnoses are being documented.

The change reaches beyond PACE. LeadingAge's summary of the Advance Notice describes the same theme for Medicare Advantage broadly: limiting the diagnosis sources that feed risk scores. If your program contracts with Medicare Advantage plans, those plans' payment rates shape what they can offer and pay for.

What This Does Not Change for GUIDE

GUIDE aligns patients who have Original Medicare and excludes Medicare Advantage and PACE enrollees, so the payment policies in the Rate Announcement do not set GUIDE payments. Programs that serve both GUIDE patients and PACE or Medicare Advantage patients need to track both sets of rules. Our guide to how GUIDE, PACE and Medicare Advantage compare sets out the differences.

How Dementia Programs Can Prepare

Find out what you submit and where. List which diagnoses go to the EDS, which still go through RAPS, and whether they match. Reconcile differences.
Check that diagnoses link to encounters. PACE organizations are exempt from the unlinked chart review exclusion for 2027, but Medicare Advantage plans you work with are not. Confirm that documented diagnoses tie back to a clinical encounter wherever you can.
Review your audio-only workflows. Note which assessments happen by phone, and whether a face-to-face encounter, in person or by real-time audio and video, also happens for the same diagnosis.
Train clinicians on documentation. Clinicians should record what they assessed, with enough detail to support it. Accuracy protects you in an audit.
Model the blend in your budget. Ask finance to estimate the effect of the 50/50 approach on 2027 risk scores, and to plan for further changes.
Talk to your partners. If you work with Medicare Advantage plans or PACE organizations, ask how they are preparing.
Watch for the next notice. CMS published this year's Advance Notice on January 26, so plan to review the next one when it appears.

Where Elli Cares Fits

Elli Cares isn't a coding or risk adjustment tool. It doesn't diagnose conditions or generate diagnoses, and nothing it produces should be treated as documentation of a diagnosis. What it does is help care teams understand what has happened between visits. Its clinician dashboard, AI-generated summaries, daily wellbeing check-ins and downloadable reports help clinicians arrive at an appointment informed, so they can spend more of it assessing the person in front of them. You can read more on our Value-Based Care page.

Frequently Asked Questions

What did CMS finalize for PACE in the 2027 Rate Announcement?

CMS continued the transition of PACE organizations from RAPS to the encounter data system. For 2027, it blends PACE risk scores 50/50 between the 2024 and 2017 Medicare Advantage risk adjustment models.

What is the difference between RAPS and the encounter data system?

Both are systems for submitting diagnosis data used in risk adjustment. RAPS is the legacy system PACE organizations used. CMS is moving them to the encounter data system, which Medicare Advantage organizations use.

Does the 2027 notice change GUIDE payments?

No. GUIDE aligns patients who have Original Medicare and excludes Medicare Advantage and PACE enrollees, so Medicare Advantage rate policy does not set GUIDE payments.

Are diagnoses from phone-only visits counted?

No. CMS finalized excluding diagnoses from audio-only services, identified by modifiers 93 or FQ, from risk scores. Visits with real-time audio and video still count as face-to-face. CMS estimates the effect averages zero percent.

Does the unlinked chart review exclusion apply to PACE?

Not for 2027, according to AAPC's summary of the final announcement. The exclusion applies to Medicare Advantage organizations, with an exception for beneficiaries who switch plans.

How much did Medicare Advantage payments increase for 2027?

CMS finalized a 2.48 percent increase, up from 0.09 percent proposed, and 4.98 percent when estimated risk score trend is included.

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