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

A recent analysis from the Committee for a Responsible Federal Budget (CRFB) suggests that Medicare Advantage (MA) plans could lead to over $1 trillion in overpayments from the federal government over the next decade [Medicare Rights Center]. This projection is based on findings from the non-partisan Congressional Budget Office (CBO), which indicates that rising MA costs are putting a strain on the overall Medicare program [Medicare Rights Center].

Understanding the Cost Differences

The CBO report projects that annual spending per MA enrollee will be approximately 7% higher than for those in traditional Medicare (Original Medicare, or OM) over the next ten years. This disparity could result in an estimated $550 billion in additional costs [Medicare Rights Center]. A significant factor contributing to this difference is what is known as "upcoding," where MA plans increase the number of diagnosis codes for patients. This practice can make patients appear sicker than they are, leading to higher payments to the plans. Even after adjustments designed to counteract this, upcoding is believed to account for about 4% more in costs [Medicare Rights Center].

Further analysis by the CBO indicates that if a beneficiary switches from traditional Medicare to an MA plan, Medicare spending for that individual could increase by roughly 15%. This increase is primarily attributed to coding intensity and favorable selection, which refers to the tendency of healthier beneficiaries to enroll in MA plans [Medicare Rights Center].

Impact on Medicare and Beneficiaries

The CRFB analysis estimates that these MA overpayments could also lead to approximately $150 billion in higher Part B premiums for all Medicare beneficiaries over the next ten years [Medicare Rights Center]. This suggests that the financial implications of MA plans extend beyond the plans themselves, affecting those in traditional Medicare as well.

Enrollment in Medicare Advantage is also on the rise. The CBO estimates that MA enrollment will increase from 51% of all beneficiaries in 2026 to 57% by 2036. During this period, MA is expected to account for an even larger share of Part A and Part B spending, growing from 54% to 61% [Medicare Rights Center].

Consistent Findings from Experts

These findings from the CBO align with other independent expert analyses. The CBO's report was informed by an extensive review of existing literature, with all published studies on differential coding consistently showing that current adjustments do not fully correct for coding differences between MA and traditional Medicare [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 beneficiaries with similar health profiles [Medicare Rights Center].