Dive Brief:
- Overpayments to Medicare Advantage plans are causing seniors’ Medicare premiums to spike by billions of dollars, according to new report from congressional investigators.
- Medicare Part B premiums rose by $212 per enrollee in 2025, totaling $13.4 billion in higher premiums, due to health insurer practices like recording extra member diagnoses to inflate government reimbursement, the report from the Joint Economic Committee published Tuesday found.
- Health insurance groups argued that the report is based on flawed data and that MA saves money and drives better health outcomes for enrollees.
Dive Insight:
Medicare Advantage was created in the late 1990s to save taxpayers and Medicare beneficiaries money and improve care for the program’s elderly and disabled beneficiaries. The idea was to incentivize private insurers to curtail unnecessary care and prevent avoidable medical events by paying a flat rate per member and allowing them to keep a slice of any financial savings they generate.
MA has proved popular with seniors, growing to cover more than half of all Medicare beneficiaries. But MA also costs significantly more than traditional Medicare — 20% more on average, according to estimates from the Medicare Payment Advisory Commission, a congressional advisory group.
That upcharge is borne by MA beneficiaries, along with state and federal taxpayers. But it’s also driving up the cost of Medicare’s Part B benefit and affecting seniors who haven’t opted into MA at all, according to the JEC’s new report, which is based on MedPAC’s analysis.
Since 2016, MA overpayments have added an estimated $82 billion in premiums for Part B, which covers outpatient services like office visits, lab tests and physician-administered drugs.
Seniors in traditional Medicare directly bore about $6 billion of that burden, essentially paying higher premiums to fund more expensive care for MA enrollees, the JEC found.
Over the next decade, per-person premiums are set to double from $2,440 to about $5,000, the JEC projected.
Of that total, about $450 will be due to overpayments if they continue at the current rate, according to the report, which called for MA payments to be better aligned with those in traditional Medicare.
“The excess burden from Medicare Advantage overpayments we document are not inevitable. They ultimately result from a policy choice to pay more for Medicare Advantage than for Traditional Medicare,” said the report, which was prepared by the JEC’s Republican majority staff.
Republicans historically have championed MA, but have become increasingly skeptical of the program amid growing research, regulatory investigations and media reports into how the practices of the largest MA carriers could be driving up healthcare costs.
“Let’s be honest about the math, when Medicare Advantage is overpaid, that money doesn’t just disappear, it shows up in the Medicare Part B premiums seniors pay every month, including those paid by traditional Medicare beneficiaries who are not getting extra benefits,” JEC Chairman David Schweikert, R-Ariz., said in a statement. “If Congress is serious about affordability, fiscal responsibility, and fairness, we must take a hard look at Medicare Advantage and make sure the rules are the same for everyone.”
One major concern is insurers’ billing. In MA, insurers are paid more to cover sicker members, incentivizing companies to exaggerate their enrollees’ health needs to the government. That upcoding — plus MA insurers tendency to enroll healthier Medicare beneficiaries — drives the higher cost of MA relative to traditional Medicare, according to MedPAC.
However, MedPAC’s methodology has sparked significant criticism from MA organizations, which instead point to industry-funded research that MA is actually cheaper for taxpayers, along with a recent CMS analysis showing a less drastic effect from upcoding.
Some MedPAC commissioners agree that their methodology is imprecise, but argue that evidence of overpayments is clear. Still, MedPAC later revised its estimate for 2025 overpayments down.
Insurance groups jumped on concerns about MedPAC’s methodology to argue that the JEC report is tarred by association.
MedPAC’s findings “rely on flawed analysis and ideological bias against private-sector participation in Medicare,” Mary Beth Donahue, president and CEO of MA lobby the Better Medicare Alliance, said in a statement Tuesday. “Claims that Medicare Advantage ‘overpayments’ significantly increase seniors’ Part B premiums stem directly from those disputed assumptions.”
The JEC report is “the latest example of a recurring reliance on MedPAC’s false narrative regarding MA’s payment rate compared to traditional Medicare,” argued the Healthcare Leadership Council, an association of healthcare executives from companies including UnitedHealth, the parent company of the largest MA insurer.
Still, concerns about overpayment have spurred regulators in both the Biden and second Trump administrations to reform how MA companies calculate the health needs of their members. Most recently, in January the CMS proposed removing one tool insurers use to record additional diagnoses, part of a larger payment rule for 2027 to hold reimbursement rates essentially flat.
The proposal sparked condemnation from the insurance industry, which warned the flat rate update would force them to further reduce benefits for seniors.
The final rate, which is expected to be higher, will be published in early April.
