At a Glance: Why This Matters to Your Wallet
- The Cost Burden: Experts estimate that Medicare Advantage (MA) overpayments added an average of $212 per person to Medicare Part B premiums in 2025.
- The Systemic Impact: When private MA plans are overpaid through “coding intensity,” it puts financial strain on the entire Medicare program, potentially leading to higher premiums and fewer benefits for all enrollees.
- The Outlook: With overpayments projected to reach $1.2 trillion by 2035, understanding the structural differences between MA and Traditional Medicare is essential for managing your future healthcare costs.
Did You Know?
Medicare Advantage plans now cover more than half of all Medicare beneficiaries in the U.S., which means system-wide payment changes can affect a large portion of the population.
If you’ve noticed your healthcare costs creeping up, even when nothing major has changed, you’re not imagining things.
Healthcare now represents one in every five dollars spent across the U.S. economy. This makes it one of the top costs for many Americans, and at least 32% are “very worried” about being able to afford it for themselves and/or their families.
A lot of people assume rising premiums are just “how it is.” However, behind the scenes, there’s a growing conversation about how Medicare Advantage overpayments may be affecting what people pay every month.
In fact, the Joint Economic Committee found Medicare Advantage overpayments increased Medicare Part B premiums by an average of $212 per person in 2025. That added about $13.4 billion in costs!
💡 Jargon Buster: What is “Coding Intensity”? You’ll often hear this term in policy debates. It refers to when a health plan records more specific or severe health diagnoses for a patient than necessary. Because the government pays more for “sicker” patients, higher coding intensity leads to higher payments from Medicare to the private plan.
Let’s break this down in a way that actually makes sense, including how overpayments might be impacting you.
First, What Is Medicare Advantage?
The Medicare Advantage program (also called Part C) is an alternative to traditional Medicare.
Instead of the federal government directly paying for your care, private insurance companies manage your coverage through Medicare Advantage plans (often called MA plans).
These plans can include extras like:
- Dental and vision
- Prescription drug coverage
- Gym memberships or wellness perks
That’s why many Medicare beneficiaries find them appealing. Meanwhile, traditional Medicare beneficiaries usually stick with Original Medicare (Parts A and B) and may add a supplement and Part D plan for prescriptions.
How Medicare Advantage Plans Get Paid
Under the Medicare program, the federal government pays insurance companies a set amount per person enrolled in MA plans. These are known as MA payments.
The payment amount is based largely on something called risk adjustment data validation.
In simple terms:
- The sicker a person is expected to be,
- The more the plan gets paid to cover them
This system is meant to keep things fair for insurers taking on higher-risk patients.
💡 Quick Tip: Risk scores are based on documented diagnoses, so accurate medical records matter more than most people realize.
So, Where Do Overpayments Come In?
Multiple reports from sources such as the Medicare Rights Center have raised concerns about overpayments to Medicare Advantage plans. New research even indicates that favorable sections and coding intensity could lead to overpayments topping $1.2 trillion through 2035.
These MA overpayments often stem from how health conditions are documented.
Here’s the issue:
- Some MA plans may code patients as having more or more severe conditions
- That leads to higher MA payments
- Even if the actual care costs don’t match those higher payments
This has led to ongoing scrutiny around risk adjustment data validation and whether it’s being applied consistently.
Did You Know?
“Coding intensity” doesn’t necessarily mean better care, it refers to how thoroughly conditions are documented, which can directly impact payments.
Why This Matters to You
This isn’t just a policy debate happening in Washington. Those overpayments to Medicare Advantage plans affect the broader Medicare program, which is funded by both taxpayers and the premiums paid by Medicare enrollees.
Even if you’re happy with your current coverage, these system-level changes can still show up in ways that hit close to home.
🔍 Myth vs. Reality
Myth: “If I’m not on a Medicare Advantage plan, these overpayments don’t affect my bank account.”
Reality: Because the federal government often adjusts Part B premiums based on total program spending, even those on Traditional Medicare end up sharing the cost of these system-wide overpayments.
Here’s how it can play out in real life:
1. Higher Premiums Over Time
As total MA spending rises due to ongoing MA overpayments, the federal government has to make up the difference somewhere. That often means higher Part B premiums or increased costs spread across all Medicare beneficiaries, not just those enrolled in Medicare Advantage plans.
In other words, even people in traditional Medicare can feel the impact.
2. Pressure on the National Health Program
The Medicare program is a major part of the country’s national health program, and it already carries long-term financial pressure as more people age into eligibility.
When spending grows faster than expected (especially from overpayments to Medicare Advantage), it puts added strain on the system. That can lead to tougher decisions down the road, like funding adjustments, policy changes, or efforts to reduce costs in other areas.
3. Shifts in Plan Offerings and Benefits
As the federal government and Medicaid Services (CMS) work to rein in MA payments, insurers may respond by adjusting their Medicare Advantage plans.
That can look like:
- Fewer “extra” benefits
- Narrower provider networks
- Higher copays or out-of-pocket costs
- Changes in drug coverage
These shifts don’t always make headlines, but they can affect what you actually get from your plan year to year.
The bottom line: When the system pays more than it should, the impact doesn’t stay behind the scenes. It tends to show up in premiums, plan changes, and the overall stability of the Medicare program over time.
Common Misconceptions
❌ “Medicare Advantage is always cheaper.”
While MA plans often have lower upfront premiums, total costs can vary depending on usage, networks, and out-of-pocket expenses.❌ “Overpayments only affect MA enrollees.”
In reality, these costs can impact all Medicare beneficiaries through higher Part B premiums.
Understanding these shifts is easier when you look at how the two systems actually function side-by-side. While both provide essential health coverage, their financial “engines” run very differently:
Comparing Medicare Advantage vs. Traditional Medicare
| Feature | Traditional Medicare | Medicare Advantage (Part C) |
| Payment Model | Fee-for-Service (Direct) | Per-Enrollee “Risk-Adjusted” Rate |
| Network | Any doctor accepting Medicare | Restricted Provider Networks |
| Cost Predictability | Standardized Part B premiums; costs when you use care vary without a supplement | Premiums vary by plan; monthly costs can shift year-to-year as MA spending changes |
| Out-of-Pocket Maximum | No cap on Part A or Part B costs (without a supplement, significant cost-sharing applies across hospital stays, skilled nursing, and outpatient services) | Annual Maximum Out-of-Pocket (MOOP) limit on all Medicare-covered services combined |
| “Extras” | Requires Supplement/Part D | Bundled (Dental, Vision, Gym) |
Seeing these differences on paper helps explain why the “overpayment” conversation is so prominent right now; the two models are essentially competing for the same federal pool of funds.
Still, Medicare Advantage Isn’t “Bad”
Let’s be clear: Medicare Advantage plans aren’t inherently a problem.
Many MA enrollees:
- Like the simplicity of bundled coverage
- Appreciate lower upfront costs
- Value the added benefits not found in traditional Medicare
And for some people, MA plans genuinely work well.
The issue isn’t the existence of the Medicare Advantage program. It’s how payments are calculated and whether those payments accurately reflect real healthcare needs.
What About Traditional Medicare?
With traditional Medicare, payments are more straightforward. Providers are paid directly for services, rather than through a private insurer managing care.
That’s why some policymakers compare:
- Spending for traditional Medicare beneficiaries
- Versus spending for MA beneficiaries
These comparisons are at the center of ongoing debates about fairness, cost, and long-term sustainability.
What Should You Do About This Right Now?
Don’t panic, you don’t need to overhaul your coverage overnight. However, this is a good reminder to stay informed.
When reviewing your options:
- Look closely at how Medicare Advantage plans work, not just the extras
- Compare costs with traditional Medicare + a supplement
- Pay attention to provider networks and out-of-pocket limits
Because at the end of the day, what looks like a “good deal” upfront doesn’t always stay that way.
Pro-Tip: Check Your ANOC Every September, you receive an Annual Notice of Change (ANOC). Don’t just file it away. Check if your Maximum Out-of-Pocket (MOOP) limit is increasing. If it is, it may be a sign of the plan adjusting to broader funding changes in the Medicare Advantage program.
Need Help Making Sense of Your Options, Including MA Plans?
At Terri Yurek Insurance, we work one-on-one with Medicare beneficiaries to break down the differences between Medicare Advantage plans and traditional Medicare in a way that actually makes sense.
What makes our approach different:
- We take the time to understand your doctors, prescriptions, and priorities
- We explain how different MA plans and traditional Medicare options may affect your costs (not just now, but down the road)
- We walk you through what’s changing in the Medicare program, including things like MA overpayments and how they may impact plans over time
We’re also independent, which means we’re not tied to just one carrier. That allows us to compare multiple Medicare Advantage plans and help you see what actually fits.
Most importantly, we stay with you after you enroll.
As plan benefits shift and the Medicare Advantage program continues to evolve, we’re here to review your coverage each year, answer questions, and help you make adjustments if needed.
Tip: Review your plan annually to stay on top of changes and ensure you’re not overpaying.
If you’re feeling unsure about your options or just want a second set of eyes, we’re here to help you sort through it and land on something that feels good. Contact us today to learn more.
Frequently Asked Questions (FAQs)
1. Does Medicare Advantage cost more in the long run?
- It depends. While Medicare Advantage plans often have lower premiums upfront, the total costs can vary depending on things like how often you use services, which doctors are in your plan’s network, and whether your plan changes over time. It’s important to keep an eye on these factors to avoid unexpected costs.
2. Why does coding intensity matter?
- Coding intensity refers to how health plans report a patient’s conditions. When a plan reports more severe or more conditions than necessary, it can result in higher payments from Medicare. While this is meant to cover higher-risk patients, it can lead to overpayments and increase overall spending, which affects everyone.
3. Are Medicare Advantage plans going away?
- No, Medicare Advantage plans aren’t disappearing anytime soon. However, payment structures and the benefits offered may change over time, especially as lawmakers continue to address the cost concerns associated with these plans.
4. Why are my Medicare Part B premiums increasing in 2026?
- Your Part B premiums may rise due to increasing Medicare Advantage overpayments. In 2025, these overpayments added an average of $212 to Part B premiums. As the program’s costs go up, the government adjusts premiums to cover those added expenses.
5. Do Medicare Advantage overpayments affect my Social Security check?
- Yes, they can. Social Security beneficiaries often have their Part B premiums deducted directly from their checks. So, when premiums rise due to overpayments, it means you take home less each month. If this trend continues, it could outpace the annual Social Security cost-of-living adjustments (COLA).
6. Is it true that Medicare Advantage costs the government more than Traditional Medicare?
- Yes. According to recent reports, the government will pay $76 billion more for Medicare Advantage in 2026 compared to what it would cost to cover the same beneficiaries under Traditional Medicare. This is largely due to favorable selection (healthier people choosing MA) and coding intensity (over-reporting conditions).
7. How can I tell if these systemic changes are affecting my specific plan?
- A great way to keep track is to check your Annual Notice of Change (ANOC), which you receive every September. Look for things like an increase in your Maximum Out-of-Pocket (MOOP) limit, or a decrease in extra benefits like over-the-counter (OTC) allowances or transportation perks; these are signs that your plan may be adjusting due to changes in federal payments.