Medicare advantage plans projected to cost significantly more than traditional medicare

A recent analysis by the Committee for a Responsible Federal Budget (CRFB) suggests that Medicare Advantage (MA) plans are projected to cost the federal Medicare program significantly more than traditional Medicare over the next ten years. The CRFB’s findings, based on a report from the non-partisan Congressional Budget Office (CBO), indicate a potential $1 trillion in MA overpayments by 2036 [Medicare Rights Center]. This could have implications for all Medicare beneficiaries, including higher Part B premiums.

Rising Costs and Enrollment

The CBO report highlights a notable increase in both enrollment and costs for Medicare Advantage. Enrollment in MA plans is expected to grow from 51% of all Medicare beneficiaries in 2026 to 57% by 2036. This trend means MA will account for an increasing share of Medicare's Part A and Part B spending, rising from 54% to 61% during the same period [Medicare Rights Center].

Beyond just growing enrollment, the CBO also projects that annual spending per MA enrollee will exceed that of traditional Medicare enrollees by approximately 7%—ranging between 5% and 10%—over the next decade. This difference translates to an estimated $550 billion in additional costs [Medicare Rights Center].

The Role of 'Upcoding'

A significant factor contributing to the higher costs in Medicare Advantage is a practice known as 'upcoding.' This involves MA plans increasing the number of diagnosis codes for patients, which can make individuals appear sicker than their medical records might otherwise suggest, 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 issue, leading to about 4% higher costs [Medicare Rights Center].

Impact on Beneficiaries and the Program

The CBO's analysis further suggests that if a person were to switch from traditional Medicare to an MA plan, it would increase Medicare spending on that individual by roughly 15%. This increase is primarily attributed to coding intensity and favorable selection, where MA plans may disproportionately enroll healthier individuals while still receiving higher payments based on reported diagnoses [Medicare Rights Center].

The projected $1 trillion in MA overpayments could also result in an estimated $150 billion in higher Part B premiums for all Medicare beneficiaries over the next decade. These findings align with other expert analyses; for instance, the Medicare Payment Advisory Commission (MedPAC) estimated earlier that MA costs Medicare 14% more in 2026 than traditional Medicare for comparable beneficiaries [Medicare Rights Center]. These analyses underscore a growing concern about the financial sustainability of the Medicare program in light of rising MA expenditures.