New Data Suggests MA Overpayments of $1.2 Trillion Over the Next Decade

The Medicare Payment Advisory Commission (MedPAC) estimated that the Medicare Advantage (MA) program will be overpaid by roughly $76 billion in 2026. If continued, we estimate this would translate to $1.2 trillion of overpayments through 2035. Policymakers should work to reduce these overpayments, which would save significant money for taxpayers and Medicare beneficiaries alike.

Medicare Advantage (MA) is the private but government-funded alternative to traditional Fee-For-Service (FFS) Medicare. Unlike FFS, where providers are reimbursed for each procedure they perform, MA plans are paid a monthly amount per enrollee – with the size of that reimbursement adjusted based on the health (or risk) of each beneficiary. Although MA plans can be more efficient than FFS Medicare in terms of their underlying costs, the plans cost the federal government substantially more.

This additional cost arises mainly because the government overpays plans relative to the actual health of their enrollees. MedPAC disaggregates this phenomenon into two parts – coding intensity and favorable selection.

Coding intensity – or “upcoding” – refers to the practice in which plans increase the number of diagnoses for patients to make them appear sicker or more high risk. Although CMS reduces MA payments by the statutory minimum of 5.9% to adjust for this coding intensity, MedPAC estimates actual coding intensity is higher – and that MA plans overall cost 14% more than FFS, assuming equally healthy beneficiaries. Based on their figures, we estimate upcoding will cost the federal government roughly $470 billion through 2035.

This estimate is about 34% lower than our previous estimate thanks to new efforts by the Centers for Medicare & Medicaid Services (CMS) to reduce overpayments. Starting in 2024, CMS began phasing in a change to their mathematical model – referred to as Centers for Medicare & Medicaid Services Hierarchical Condition Category (CMS-HCC) Risk Adjustment Model, or “V28” – that aims to improve coding intensity calculations and therefore more accurately pay MA. This model was fully phased in for MedPAC’s 2026 estimates. MedPAC revised downwards the impact of coding intensity in 2025 from 16.4% to 12.5% and estimates that coding intensity in 2026 will be 10.3% higher as compared to FFS. MedPAC found that the model reduces payments, while maintaining benefits and plan availability.

While MA plans have higher coding intensity relative to FFS, evidence suggests costs should actually be lower than FFS since MA enrollees are healthier on average than those in traditional Medicare. MedPAC finds MA plans benefit from “favorable selection” due to plan designs, possibility of prior authorization, and comparatively narrower networks. MedPAC estimates that favorable selection will increase costs by 11% in 2026 compared to payments to FFS, and we estimate this amount to be roughly $730 billion through 2035. This is about 9% higher than our previous estimate.

Of the $1.2 trillion in total MA overpayments, we estimate $520 billion will come from the Medicare Hospital Insurance (HI) trust fund. This is nearly as large as the entire HI trust fund deficit as projected by the Medicare Trustees after adjusting for the effects of the One Big Beautiful Bill Act (OBBBA). Absent these overpayments, the HI trust fund would be solvent for the next decade and beyond. Instead, the trust fund is projected to run out of reserves in 2032. Additionally, MA overpayments also increase base premiums by $230 billion over a decade.

Estimated Medicare Advantage Overpayments (2026-2035)

Source: Committee for a Responsible Federal Budget estimates based on MedPAC analysis.
Numbers rounded to the nearest $10 billion and may not sum due to rounding.
Overpayment estimates are projections generated using the MedPAC analysis of MA payments using 2025 and 2026 as starting points.
*Medicare overpayments are net of premiums.

This MedPAC report adds to a growing body of literature and reports highlighting the excessive cost of the MA program. The Committee for a Responsible Federal Budget has written on this issue a number of times over the past decade. Recently, the Senate Judiciary Committee, chaired by Senator Chuck Grassley (R-IA), released a major report showing how one particular insurance company has exploited the MA payment structure to extract considerable overpayments.

Fortunately, there are plenty of options to address these overpayments and reduce health care costs for the federal government and beneficiaries.

For example, the No UPCODE Act, introduced by Senators Bill Cassidy (R-LA) and Jeff Merkley (D-OR), would eliminate the use of health risk assessments used to boost coding intensity and utilize two years of data to more accurately depict the health status of MA patients in order to reduce favorable selection. This could save $150 billion or more.

Another bill, the Medicare Advantage Reform Act, introduced by Representative David Schweikert (R-AZ), includes the provisions from the No UPCODE Act and goes further to reduce benchmarks for many plans and eliminate quality bonuses. While this bill has not been officially scored, it has the potential to save hundreds of billions of dollars, or perhaps even more.

Under our Health Savers Initiative, we put forward an alternative to increase the minimum coding intensity adjustments, which could save about $95 billion per percentage point increase in the adjustment. Alternatively, lawmakers could reduce the overall benchmark, which would save more than $60 billion per percentage point reduction. Lawmakers could also pay MA plans based on a competitive bidding process, which could reduce overpayments by encouraging more direct competition between plans.

With high and rising health care costs and the Medicare HI trust fund only six years from insolvency, now is the time to reform MA payments. Reducing overpayments would improve the long-term solvency of the Medicare HI trust fund, reduce premiums for beneficiaries, and reduce excessive and wasteful spending in the Medicare program.