MedPAC estimates $84B in Medicare Advantage overpayments in 2025: 10 notes

The federal government will spend $84 billion more on Medicare Advantage enrollees than if they were enrolled in fee-for-service plans, according to new estimates from the Medicare Payment and Advisory Commission. 

MedPAC, which advises Congress on Medicare policy, published its annual report March 13. 

The group estimated that CMS will spend 20% more on Medicare beneficiaries enrolled in MA plans than if those beneficiaries were enrolled in fee-for-service in 2025. 

Here are 10 things to know: 

1. According to MedPAC, there are two factors accounting for the majority of overpayments to MA plans: coding intensity and favorable selection.
   
   
2. MA plans are paid based on enrollees' health risk scores. MedPAC estimated in 2025, risk scores for MA enrollees will be around 16% higher compared to similar enrollees in fee-for-service plans due to higher coding intensity.
   
   
3. Coding intensity varies widely among Medicare Advantage organizations, MedPAC reported. There are 16 MA organizations with average coding intensity more than 20% higher than fee-for-service. Among the 10 largest MA organizations, there was a 26-percentage point difference in average coding intensity.
   
   
4. Coding intensity will account for $40 billion of the projected $84 billion in overpayments, MedPAC estimates.
   
   
5. Nearly every major MA plan has seen or settled allegations of upcoding — making patients appear sicker than they are to receive higher reimbursements.
   
   
6. Health risk assessments and chart reviews account for many of the additional diagnostic codes added to MA beneficiaries risk scores, according to MedPAC. Medicare Advantage brought in $7.3 billion in "questionable" payments found during in-home visits and chart-reviews in 2023, according to an audit from HHS' Office of Inspector General.
   
   
7. Favorable selection accounts for the other $44 billion in estimated overpayments. MA enrollees tend to have lower healthcare costs than their risk score would suggest, according to MedPAC. This trend is evident in the years before these beneficiaries enroll in MA, meaning the lower spending is not related to coding or other actions from insurers.
   
   
8. MedPAC's estimates for 2025 spending are similar to 2024. Last year, the commission estimated that coding intensity and the types of enrollees who select Medicare Advantage plans would drive an additional $88 billion in payments to the program.
   
   
9. MedPAC has four recommendations to Congress to improve the MA program, including directing HHS to rework the program's risk-adjustment model and establish new benchmark payment policies.
   
   
10. The Better Medicare Alliance, a pro-Medicare Advantage group, has questioned the methodologies MedPAC uses to estimate differences between fee-for-service and MA spending.