By NextBestFitMedicare Advantage overpayments and coding intensity
Private Medicare plans are paid more when enrollees look sicker on paper, which rewards aggressive diagnosis coding. MedPAC estimates MA costs about 20% more than traditional Medicare for similar people.
Evidence
- MA payments about 20% above fee-for-service-equivalent spending (about $84B in 2025).
Who's affected
Who is hurt
- Taxpayers and public budgets: Aggressive diagnosis coding raises payments to private Medicare plans.
- Medicare beneficiaries: Overpayments increase their premiums.
Who gains while it lasts
- Health insurers, brokers, and their shareholders: Plans receive larger payments when enrollees look sicker on paper.
- Health administration and software vendors: They provide risk-adjustment and coding services rewarded by larger payments.
Under your mix of paths
Paths that fix or soften it
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Root causes
- Risk-adjusted capitation without enough audit
- Favorable selection
Related costs
Open questions
- Should private plans manage public money at all? If so, under what payment and audit rules?
Solution paths (2)
Open a path for what it fixes, what it creates or worsens, who gains and who loses, precedents, and how it connects to other paths. See all paths as a decision tree.
End private Medicare plans; enrollees move to the universal public plan.
- +Medicare Advantage overpayments and coding intensity
- −Dental, vision, and hearing are mostly uncovered
- −Reduces income or business for affected groups
- −Losing the choice of health plan and insurer competition
Base risk adjustment on two years of data, exclude diagnoses from home visits and chart reviews, and audit plans.
- +Medicare Advantage overpayments and coding intensity
- +Losing the choice of health plan and insurer competition
- −Dental, vision, and hearing are mostly uncovered
- −Targets and quality metrics invite gaming