Medicare advantage overpayments may increase costs for all beneficiaries

A new analysis highlights concerns about the financial impact of Medicare Advantage (MA) plans on the broader Medicare system. According to a report by the Committee for a Responsible Federal Budget (CRFB), drawing on projections from the non-partisan Congressional Budget Office (CBO), potential overpayments to MA plans could reach $1 trillion over the next ten years [Medicare Rights Center]. This trend may contribute to increased Part B premiums for all Medicare beneficiaries, regardless of their plan type [Medicare Rights Center].

Understanding the Cost Differences

Medicare Advantage enrollment is projected to grow significantly, from 51% of all beneficiaries in 2026 to 57% by 2036. As enrollment increases, MA plans are expected to comprise a larger share of Medicare's Part A and Part B spending, rising from 54% to 61% [Medicare Rights Center].

The CBO estimates that annual spending per MA enrollee is expected to outpace spending for those in Original Medicare (OM) by about 7% over the next decade, ranging between 5% and 10% [Medicare Rights Center]. This difference is largely attributed to what is known as "upcoding," where MA plans may increase the number of diagnosis codes for patients. This practice can make patients appear sicker than they are, leading to higher payments from Medicare [Medicare Rights Center]. Even with adjustments designed by the Centers for Medicare & Medicaid Services (CMS) to counteract this, CBO believes upcoding still results in approximately 4% higher costs [Medicare Rights Center].

Impact on Beneficiaries

If a person were to switch from Original Medicare to a Medicare Advantage plan, the CBO's analysis suggests Medicare spending on that individual would increase by roughly 15% [Medicare Rights Center]. This increase is primarily due to coding differences and what is termed "favorable selection," meaning MA plans may disproportionately enroll healthier beneficiaries while still receiving higher payments [Medicare Rights Center].

The CRFB indicates that these overpayments could translate into an additional $150 billion in higher Part B premiums for all Medicare beneficiaries over the next decade [Medicare Rights Center]. This suggests that even those who choose to remain in Original Medicare could face financial consequences from the rising costs associated with Medicare Advantage plans.

Consistent Findings

These findings are consistent with other independent analyses. For instance, in January, the Medicare Payment Advisory Commission (MedPAC) estimated that MA plans cost Medicare 14% more in 2026 than Original Medicare for comparable beneficiaries [Medicare Rights Center]. The CBO's exhaustive literature review further supports these conclusions, noting that all published studies on differential coding indicate that CMS's current adjustments do not fully correct for these coding discrepancies [Medicare Rights Center]. The ongoing discussion highlights a need for continued scrutiny of MA payment structures to ensure the long-term sustainability and fairness of the Medicare program for all.