Trillion$ more being spent by Medicare than necessary?

Medicare Advantage Plans are popular and enrollment is growing. Many seniors are willing to trade flexibility in where they receive health care and often when for what they perceive to be more for less.

The problem is there is growing evidence that MA is not a good deal for American taxpayers. For-profit health insurance plans may unfairly be benefiting from Medicare rules.

March 11, 2024 – Medicare Advantage enrollment has increased by 1.7 million beneficiaries since 2023, with for-profit health plans dominating the market, a Chartis report revealed.

Among 65.9 million Medicare-eligible individuals, 33 million are enrolled in Medicare Advantage in 2024. The private program saw a 5.4 percent enrollment growth from last year—a slower increase than previous years. Meanwhile, traditional Medicare enrollment declined by 515,000 beneficiaries, marking a smaller loss than the last two years.

In 26 states, over half of Medicare beneficiaries are enrolled in a Medicare Advantage plan. States with low penetration saw the highest growth rates, while states with high enrollment rates going into the year had slower growth rates.

Public Payers News

Update 2/2/24: We have updated our estimate for MA overpayments due to new research into coding intensity and favorable selection from MedPAC. We find overpayments could be between $1.0 and $1.4 trillion over the 2024-2033 period.

In June, two published studies by the USC Schaeffer Center for Health Policy and Economics and the Medicare Payment Advisory Commission (MedPAC) provided new insight into the degree to which Medicare overpays private Medicare Advantage (MA) plans relative to traditional fee-for-service (FFS) Medicare. When combined with our prior research for the Health Savers Initiative, this new analysis suggests that MA plans might be overpaid by between $810 billion and $1.6 trillion over the next decade. 

Private MA plans cost the federal government significantly more per beneficiary than FFS in large part due to diagnostic “coding intensity,” which makes MA enrollees look sicker than demographically similar enrollees in the FFS program. As we have written before, this behavior leads to substantial overpaymentsfrom the federal government to MA plans. 

Committee for a Responsible Federal Budget