On September 29, 2025, CMS released an important HPMS memo titled “Calendar Year (CY) 2026 Risk Adjustment Implementation Information,” signed by Jennifer R. Shapiro, Director of the Medicare Plan Payment Group. This update finalizes how risk adjustment models and software will be implemented in 2026, with significant changes that all Medicare Advantage (MA), Part D, Cost, and PACE organizations must prepare for.

1. Final Phase-In of the 2024 CMS-HCC Model

Medicare Advantage (non-PACE):
Starting in CY 2026, CMS will use 100% of the 2024 CMS-HCC model (no more blending with older models).
-> This means the transition is complete — risk scores will fully reflect the Version 28 model.
RxHCC Model:
Risk scores will use 100% of the updated 2026 RxHCC model (calibrated with 2022/2023 data).
Separate normalization factors continue for MA-PDs and PDPs.
ESRD Model:
CMS will continue using the 2023 ESRD model for dialysis, transplant, and post-graft populations.

2. Special Rules for PACE Organizations

PACE organizations will still operate under a blend of models, maintaining continuity while gradually moving toward newer methodologies:

CMS-HCC: 10% 2024 CMS-HCC (encounter + FFS only) + 90% 2017 CMS-HCC (RAPS + encounter + FFS).
RxHCC: 10% 2026 RxHCC (2022/2023 calibrated) + 90% 2026 RxHCC (2018/2019 calibrated).
ESRD: 10% 2023 ESRD + 90% 2019 ESRD.

-> Translation: PACE remains on a slower glide path, heavily weighted toward legacy data sources.

3. Updates to Reports: MMR and MORs

MMR (Monthly Membership Report):
Expanded Risk Adjustment Factor Type Codes for PACE will be added in the November 2025 PCUG update. These codes will better capture dialysis, graft, institutional, and dual-eligibility variations.
MOR (Model Output Reports):
- Record Type J will be retired.
- Record Types M, L, and 6 will now also apply to PACE.
- New record type usage:
  - M = CMS-HCC V28
  - 6 = 2026 RxHCC (2022/2023 calibration)
  - 7 = 2026 RxHCC (2018/2019 calibration, for PACE only)
  - L = 2023 ESRD V24

-> Plans must update their internal MOR processing logic before initial 2026 runs.

4. Major Shift: From SAS to Python

CMS has officially announced its software transition plan:

CY 2026 Midyear/Final: SAS + Python (test version)
CY 2027 Initial & Midyear/Final: SAS + Python
CY 2028 Initial and beyond: Python only

-> This is a huge operational signal: Plans must ensure IT and actuarial teams are ready to integrate Python-based model software into workflows.

5. Timeline of Risk Score Updates

CMS clarified how risk scores will update across the year:

January 2026: Initial risk scores (using July 2024 – June 2025 data).
July 2026: Mid-year risk scores (using CY 2025 data), with retroactive adjustments back to January.
June 2027: Final risk scores (using CY 2025 data, month-by-month community/LTI and LIS status).

-> Plans should expect payment volatility at midyear and final reconciliations.

Key Takeaways for Plans

MA organizations must prepare for the full effect of the 2024 CMS-HCC model — coding accuracy and encounter data completeness are critical.
Part D sponsors should note the shift to the fully updated RxHCC model with 2022/2023 calibration.
PACE programs continue with blended methodologies, but must update systems for expanded RAF codes.
Operations teams need to adapt to MOR/ MMR changes to avoid reconciliation surprises.
IT and actuarial teams should begin preparing for the end of SAS and a future where Python is the only supported risk adjustment software.

Final Thought

The CY 2026 HPMS memo signals a new era of modernized risk adjustment — complete model transitions, expanded reporting granularity, and a software migration that will reshape how plans operate. Proactive preparation today will help plans avoid surprises in 2026 payments and stay ahead of compliance expectations.