Medicare advantage overpayments projected to reach $1 trillion over next decade

A recent analysis from the Committee for a Responsible Federal Budget (CRFB) suggests that Medicare Advantage (MA) plans are poised to cost the Medicare program an additional $1 trillion over the next decade due to overpayments [Medicare Rights Center]. This projection is based on a report from the non-partisan Congressional Budget Office (CBO), which indicates that rising MA costs are shifting Medicare spending and potentially impacting the program's financial health [Medicare Rights Center].

Understanding the Cost Differences

The CBO report highlights that annual spending per MA enrollee is expected to outpace that of traditional Medicare (OM) enrollees by approximately 7% within the next ten years, ranging between 5% and 10% [Medicare Rights Center]. This difference is largely attributed to a practice known as "upcoding," where MA plans increase the number of diagnosis codes for patients to make them appear sicker, thereby increasing payments received [Medicare Rights Center]. Even with current adjustments designed by the Centers for Medicare & Medicaid Services (CMS) to counter this, the CBO believes upcoding still accounts for about 4% higher costs [Medicare Rights Center].

Impact on Enrollment and Premiums

Enrollment in Medicare Advantage is a significant factor in these escalating costs. The CBO estimates that MA enrollment will climb from 51% of all beneficiaries in 2026 to 57% by 2036, leading MA to comprise a growing share of Part A and Part B spending, from 54% to 61% [Medicare Rights Center].

The analysis further indicates that if a beneficiary switches from traditional Medicare to an MA plan, it could increase Medicare spending for that individual by roughly 15%. This increase is primarily due to coding intensity and favorable selection, which refers to MA plans enrolling healthier individuals [Medicare Rights Center]. The CRFB suggests this could translate into $150 billion in higher Part B premiums for all Medicare beneficiaries over the next decade, regardless of whether they are in MA or traditional Medicare [Medicare Rights Center].

Consistent Findings from Experts

These findings align with other independent expert analyses. For instance, the Medicare Payment Advisory Commission (MedPAC) estimated in January that MA is costing Medicare 14% more in 2026 than traditional Medicare for similar beneficiaries [Medicare Rights Center]. The CBO's exhaustive literature review in formulating its report found that all published studies on differential coding show that the CMS adjustment does not fully correct for these coding differences [Medicare Rights Center]. The sustained evidence of MA overpayment suggests a need for ongoing examination of payment structures to ensure the long-term sustainability of the Medicare program.