By the time a 2027 Medicare Advantage plan shows up on your screen, every number on it has already been argued over. The $0 premium, the specialist copay, the dental allowance, the drug deductible: all of it was decided months ago, inside a document most people never hear about. If you have ever wondered why your copay is what it is, the answer starts in June.
Where does a Medicare Advantage plan start?
With a bid. Under federal rules, every Medicare Advantage company has to send Medicare a bid for each plan it wants to offer next year "not later than the first Monday in June" (42 CFR 422.254). So the 2027 plans you are comparing this fall were built and submitted in the spring of 2026.
The bid is the plan's estimate of what it needs to cover everything Original Medicare covers, Parts A and B, for an average member. According to MedPAC, the independent commission that advises Congress on Medicare payment, that number includes the plan's administrative costs and its profit. Before the bids are due, Medicare publishes its payment rules for the coming year. The 2027 version came out on April 6, 2026.
What is the benchmark?
It is the most Medicare will pay a plan, in a given county, to cover Parts A and B. MedPAC explains that each county's benchmark is set by formula from what traditional Medicare spends there, at 95, 100, 107.5, or 115 percent of that projected spending. That is one reason the same company's plans can look so different from one county to the next: the starting line is different.
Where do the extras and the low copays come from?
From the gap. When a plan bids below its county's benchmark, Medicare pays it a "rebate," a share of the difference. The share is 50, 65, or 70 percent, depending on the plan's star rating, so a higher-rated plan gets a bigger share of the gap to spend on its members.
Here is the part that explains your plan card. MedPAC says that rebate has to go back to members, split any way the plan chooses across five categories:
- Extra benefits that Original Medicare does not cover, like dental, vision, and hearing
- Lower costs for Part A and Part B services, like a smaller copay to see a specialist
- Lower costs for Part D drugs
- A lower Part B premium
- A lower Part D premium
A plan can offer more than its rebate pays for, but then it has to charge a premium to cover the difference.
Why can a dollar only go one place?
Because the rebate is a fixed pot. Every dollar a plan spends on a richer dental allowance is a dollar it did not spend on a lower specialist copay or a smaller drug deductible. That is the trade-off people inside the industry make every spring, plan by plan and county by county, and it is why two plans with the same $0 premium can feel completely different once you actually use them.
It is also why your plan changes from year to year. A new county benchmark, a different star rating, or a different guess about what members will use can move the gap, and the gap is what pays for the extras and the low copays. The Annual Notice of Change you got this fall is, in a sense, the result of last spring's bid.
When does the new plan go public?
October 1. Federal rules say plans "may begin marketing prospective plan year offerings on October 1 of each year" (42 CFR 422.2263). Then the Annual Enrollment Period runs October 15 to December 7, and whatever you choose starts January 1. So the timeline for a 2027 plan looks like this: payment rules in April, the bid in June, Medicare's review, marketing in October, coverage in January.
What does this mean when you compare plans?
Three things. First, a lower premium is only one of the places a plan can put its rebate, so compare the whole card, not the headline. Second, start with what you will actually use: your doctors, your hospitals, and your prescriptions, then the extras. Third, expect change. A plan that fit you perfectly in 2026 was built on a different bid.
Who is our secret guest?
This month's Fiscal Fridays secret guest. Our show page describes him as a Medicare health plan executive, someone who has spent his career inside the health insurance business. We are keeping his name a surprise until the show. On Friday, October 23, David Schaeffer gets him talking, live, in front of a small studio audience in Scottsdale. If you have ever wondered how a plan decides between dental and drugs, this is the conversation to hear. Our guest joins us as a friend of the show and speaks for himself, not for any health plan.
The show starts at 10:30 AM Arizona time, doors open at 10:00 for coffee, and there are only twenty seats. Save your seat here, or call (602) 281-3898 and we will hold one for you.
Disclaimer: This article is for educational purposes only. It is not sponsored, endorsed, or otherwise representative of Medicare or the federal Medicare program. American Retirement Advisors is not a government agency. For official Medicare information, visit medicare.gov or call 1-800-MEDICARE (1-800-633-4227).