Traditional Medicare Enrollees Paid Billions More in Premiums Due to MA Overpayments

 Overpayments in Medicare Advantage (MA) plans led to higher premiums for the average Medicare enrollee, with $13.4 billion in added premium costs in 2025 alone, according to a bipartisan report from the Joint Economic Committee.

"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," said Committee Chairman Rep. David Schweikert (R-Ariz.) in a statement. "Seniors who stay in traditional Medicare are effectively subsidizing the system. That's not sustainable, it's not fair, and it can be reformed."

On average, spending per MA enrollee costs an estimated 120% of what it would cost if that individual had enrolled in traditional Medicare, the committee noted.

Altogether, the committee estimated that MA overpayments caused Part B premiums -- which cover office visits, outpatient procedures, lab tests, and other services -- to spike by $212 per enrollee in 2025, or $13.4 billion in total.

For context, MA plans, which are administered by private insurance companies such as UnitedHealthcare, Aetna, and Blue Cross Blue Shield, are bundled to include both Part A (hospital insurance) and Part B plans, as well as supplemental benefits not typically available in traditional Medicare.

By law, Part B premiums are required to cover about 25% of expected spending per enrollee. (Some enrollees do pay extra premiums based on their incomes.) Consequently, from 2025 to 2026, standard premiums rose from $185 to $203 per month to account for a bump in the expected average cost per enrollee from $8,880 to $9,739.

Standard Part B premiums differ by income but there's no difference for an individual who accesses Part B benefits through traditional Medicare versus MA, the report noted. About 55% of all Medicare enrollees are in MA plans.

Over the last decade, overpayments to MA plans have increased Part B premiums by approximately $82 billion, with traditional Medicare enrollees shouldering about $6 billion of that burden, the committee found.

By 2035, per-person premiums are projected to double from $2,440 to about $5,000 -- with overpayments responsible for approximately $450 of those higher costs.

Key findings in the report were based on estimates from the Medicare Payment Advisory Commission (MedPAC). A status report from MedPAC earlier this year projected that CMS will pay MA plans $76 billion more for services in 2026 than it would have if those same enrollees had chosen traditional Medicare.

In that report, MedPAC attributed the difference in spending between MA and traditional Medicare to two factors: MA plans' "coding intensity," the practice of aggressively categorizing patients as having higher risk scores, which may not reflect actual services or costs, and "favorable selection," the tendency for healthier, less costly patients to enroll in MA plans rather than fee-for-service plans.

The Joint Economic Committee argued in its report that a change is needed to level the playing field between MA and traditional Medicare.

"One concrete, fiscally sustainable approach is to align Medicare Advantage payment levels with traditional Medicare," the committee said, adding that doing so would limit "avoidable premium growth" and save every senior about $2,600 over the coming decade.

"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," Schweikert argued.

https://www.medpagetoday.com/publichealthpolicy/medicare/120263