Medicare Advantage overpayments projected to exceed $1 trillion over next decade

A recent analysis from the Committee for a Responsible Federal Budget (CRFB) indicates that overpayments to Medicare Advantage (MA) plans could total more than $1 trillion over the next decade [Medicare Rights Center]. This projection is based on insights from the non-partisan Congressional Budget Office (CBO), which has been examining the rising costs associated with MA.

Rising Enrollment and Costs

Medicare Advantage enrollment is growing, with CBO estimating that it will encompass 51% of all Medicare beneficiaries in 2026, increasing to 57% by 2036. This growth means MA will constitute a larger portion of Part A and Part B spending, climbing from 54% to 61% during the same period [Medicare Rights Center].

However, the issue extends beyond enrollment numbers. CBO projects that annual spending per MA enrollee will surpass that of Traditional Medicare (OM) enrollees by approximately 7%, ranging from 5% to 10%, over the ten-year budget window. This difference translates to an additional $550 billion in costs [Medicare Rights Center].

The Role of Upcoding

A significant factor contributing to these increased costs is “upcoding,” a practice where MA plans may increase the number of diagnosis codes for a patient, making them appear sicker and thus increasing the payments received. The CRFB notes that CBO believes this practice leads to about 4% higher costs, even after accounting for coding intensity adjustments designed to mitigate the issue [Medicare Rights Center].

Further analysis by CBO suggests that if a person were to switch from Traditional Medicare to Medicare Advantage, Medicare spending on that individual would increase by roughly 15%. This increase is primarily attributed to “coding intensity and favorable selection.” The CRFB concludes that this factor alone points to $1 trillion in MA overpayments, potentially leading to $150 billion in higher Part B premiums for all Medicare beneficiaries in the coming decade [Medicare Rights Center].

Consistent Findings

These findings align with other independent expert analyses. The CBO’s report was informed by an extensive literature review, with all available sources indicating substantial MA overpayment. As the CBO explains, “all published studies of differential coding show that the CMS adjustment does not fully correct for coding differences” [Medicare Rights Center]. For instance, in January, the Medicare Payment Advisory Commission (MedPAC) estimated that MA costs Medicare 14% more in 2026 than Traditional Medicare for comparable beneficiaries [Medicare Rights Center].