Medicare Advantage overpayments projected to exceed $1 trillion

Medicare Advantage (MA) plans are projected to generate over $1 trillion in excess payments over the coming decade, according to an analysis by the Committee for a Responsible Federal Budget (CRFB) citing a report from the non-partisan Congressional Budget Office (CBO) [Medicare Rights Center]. This substantial figure highlights growing concerns about the financial sustainability of the Medicare program and its potential impact on beneficiaries.

Rising Costs and Enrollment

The CBO report indicates a significant shift in Medicare spending towards MA plans. Enrollment in MA is expected to rise from 51% of all Medicare beneficiaries in 2026 to 57% by 2036 [Medicare Rights Center]. During this same period, MA's share of Part A and Part B spending is projected to increase from 54% to 61% [Medicare Rights Center]. This growth in MA enrollment directly contributes to the overall increase in program costs.

The Role of 'Upcoding' and Higher Payments

Beyond just enrollment numbers, the CBO expects annual spending per MA enrollee to be approximately 7% higher than for those in Original Medicare (OM) – a range between 5% and 10% [Medicare Rights Center]. This difference is largely attributed to a practice known as "upcoding." Upcoding involves MA plans increasing the number of diagnosis codes for patients to make them appear sicker, which in turn leads to higher payments from Medicare [Medicare Rights Center]. The CBO estimates that upcoding contributes about 4% to these increased costs, even after adjustments designed to mitigate this issue [Medicare Rights Center].

Financial Implications for All Beneficiaries

The CRFB analysis suggests that if a beneficiary switches from Original Medicare to a Medicare Advantage plan, Medicare spending for that individual could increase by roughly 15% [Medicare Rights Center]. This increase is primarily due to coding intensity and favorable selection, where MA plans may disproportionately enroll healthier individuals while still receiving higher payments [Medicare Rights Center].

These overpayments not only strain the Medicare budget but could also have direct financial consequences for all Medicare beneficiaries. The CRFB estimates that the $1 trillion in MA overpayments could lead to an additional $150 billion in higher Part B premiums for all Medicare enrollees over the next ten years [Medicare Rights Center].

Independent analyses support these findings. The CBO's comprehensive literature review concluded that existing adjustments do not fully correct for coding differences in MA plans [Medicare Rights Center]. Furthermore, in January, the Medicare Payment Advisory Commission (MedPAC) estimated that MA costs Medicare 14% more in 2026 than Original Medicare for comparable beneficiaries [Medicare Rights Center]. These consistent findings underscore a critical challenge facing the Medicare system.