Medicare Advantage spending projected to exceed original Medicare by $1 trillion

A new analysis by the Committee for a Responsible Federal Budget (CRFB) indicates that Medicare Advantage (MA) plans could lead to over $1 trillion in excess spending compared to original Medicare over the next ten years [Medicare Rights Center]. This projection is based on a report from the non-partisan Congressional Budget Office (CBO), which highlights rising MA costs that impact the overall Medicare program and its beneficiaries [Medicare Rights Center].

Rising Enrollment and Costs

Medicare Advantage enrollment is steadily growing, with CBO estimating an increase from 51% of all beneficiaries in 2026 to 57% by 2036. This growth means MA will account for a larger share of Medicare Part A and Part B spending, climbing from 54% to 61% over the same period [Medicare Rights Center].

Crucially, the CBO's findings show that the annual spending per MA enrollee is expected to exceed that of original Medicare beneficiaries by approximately 7%, ranging between 5% and 10%. This difference translates into an additional $550 billion in costs over the decade [Medicare Rights Center].

The Role of 'Upcoding' and Higher Premiums

A significant factor contributing to these increased costs is what is known as "upcoding." This practice involves MA plans increasing the number of diagnosis codes for patients, which can make them appear sicker than they are, thereby leading to higher payments from Medicare. While the Centers for Medicare & Medicaid Services (CMS) has adjustments in place to counter this, the CBO believes these adjustments do not fully correct for the coding differences, leading to about 4% higher costs [Medicare Rights Center].

The CRFB's analysis suggests that if a beneficiary switches from original Medicare to an MA plan, it could increase Medicare spending for that individual by roughly 15%. This increase is primarily attributed to coding intensity and "favorable selection," where plans may disproportionately enroll healthier individuals [Medicare Rights Center]. These factors combined are estimated to contribute to the $1 trillion in MA overpayments and could result in an additional $150 billion in higher Part B premiums for all Medicare beneficiaries over the next decade [Medicare Rights Center].

Consistent Findings from Expert Analyses

The CBO's report draws on an extensive review of existing literature, with all published studies on differential coding indicating that CMS's adjustments do not entirely resolve the discrepancies [Medicare Rights Center]. These findings are consistent with other independent analyses. For instance, the Medicare Payment Advisory Commission (MedPAC) estimated in January that MA plans are costing Medicare 14% more in 2026 for similar beneficiaries compared to original Medicare [Medicare Rights Center]. Such consistent data from multiple sources underscores the financial challenges posed by the current structure of Medicare Advantage payments.