Medpac Warns Of $1.2 trillion In MA Overpayments

MedPAC’s Medicare Advantage Overpayment Warning: What It Means for Carriers, Agencies, and Compliance Teams

The Medicare Payment Advisory Commission (MedPAC) is signaling a financial and regulatory pressure point that every Medicare Advantage (MA) stakeholder should understand. In its recent warning, MedPAC estimated MA overpayments at roughly $76 billion this year. More importantly, it cautioned that if current dynamics persist, cumulative overpayments could reach $1.2 trillion over the next decade.

For insurers, this is not just a headline number. It is a preview of intensifying scrutiny on risk adjustment, coding intensity, enrollment patterns, and the operational controls that support them. For agencies, it is a reminder that compliance narratives can quickly become market narratives, influencing consumer trust, carrier strategy, and plan stability.

Why MedPAC Says the Dollars Are So Large

MedPAC’s analysis points to two primary drivers behind this year’s estimated overpayments: coding-related risk score changes and favorable selection.

First, MedPAC attributed nearly $22 billion in overpayments to coding practices within MA that increase risk scores. In plain terms, higher documented acuity increases the payment MA plans receive from the federal government. When coding changes push risk scores up beyond what is supported by clinical reality, the payment increases become a program integrity concern.

Second, MedPAC noted that favorable selection, meaning healthier individuals disproportionately enrolling in MA, further widens the gap. When enrollees are healthier than the risk model predicts, federal contributions can exceed actual medical needs. MedPAC estimated this dynamic at about $57 billion this year.

“When public estimates get this large, the next move is rarely subtle. Oversight tightens, and every process becomes discoverable.”
— Renee Carter, Medicare Compliance Consultant

Coding Intensity: Where Operations Meet Regulation

Risk adjustment is a legitimate tool designed to pay more for members with higher expected costs. The challenge arises when coding programs, supported by analytics and AI-driven workflows, prioritize risk score lift more than accurate clinical documentation. MedPAC’s concern is that some “adjustments” function less like measurement and more like monetization.

From a compliance perspective, coding intensity is not an abstract idea. It touches vendor management, provider engagement, chart retrieval practices, in-home assessments, and the internal governance used to validate that coded conditions are clinically supported and properly documented.

MedPAC’s estimate, that coding-related behavior contributed to nearly $22 billion in overpayments, strengthens the case that auditors and regulators will ask harder questions about how diagnoses are sourced, validated, and retained over time.

Favorable Selection: A Market Dynamic with Payment Consequences

Favorable selection is often discussed as a market outcome rather than a compliance issue. Yet payment accuracy depends on matching federal dollars to actual expected costs. If the risk model pays for a population that is systematically healthier than predicted, the result can look like “overpayment” even if no single action is improper.

For carriers, the practical implication is that policymakers may pursue adjustments that reduce payment levels, modify model calibration, or increase guardrails around how risk is measured. For agencies, it can influence plan design, marketing oversight, and the way enrollment patterns are monitored and explained.

Even when favorable selection reflects consumer preference and benefit design, it can still become a legislative rationale for changing the rules. The larger the estimated gap, the more likely it is to move from discussion to action.

Program Integrity Spotlight: Why Scrutiny Is Increasing

MedPAC’s warning lands in an environment where allegations of systemic issues in MA risk adjustment have already attracted attention. Reports of suspected fraud and aggressive risk adjustment tactics, including public allegations involving major carriers, have reinforced a broader program integrity narrative.

Advocacy organizations, including groups focused on protecting Medicare and Social Security, have echoed MedPAC’s concerns and argued that the taxpayer burden is too high compared with traditional Medicare. At the same time, policymakers have called for stronger oversight and accountability across MA contracting, payments, and reporting.

Put simply, the conversation is shifting from “how big is the problem” to “what controls will prevent it,” and “who is responsible when controls fail.” That shift matters to every insurer and partner that touches documentation, coding, and claims.

“The fastest way to lose control is to treat risk adjustment as a growth lever instead of a documentation discipline.”
— Michael Tran, Former MA Audit Lead

What This Means for Carriers: Expect More Oversight and More Proof

When policymakers and regulators see numbers as large as $76 billion, the typical response is not a single policy tweak. It is a sequence: increased audits, expanded data requests, tighter guidance, and a higher bar for documentation quality. Carriers should anticipate that underwriting assumptions, claims trends, and provider coding patterns will be examined together rather than in isolation.

Operationally, this pressure often shows up in four places: vendor contracts, provider engagement programs, internal audit coverage, and executive reporting. Controls that were “good enough” for an earlier cycle can become insufficient when risk adjustment and AI-enabled coding are the headline issue.

What Agencies Should Watch: Stability, Messaging, and Enrollment Governance

Agencies are not setting risk adjustment policy, but they operate close to the customer and close to carrier strategy. When policy debates intensify, agencies often see the impact through plan availability, benefit changes, marketing oversight, and consumer questions.

In a heightened oversight climate, agencies can protect their brand and their book of business by staying aligned with carrier guidance, avoiding anything that could be interpreted as steering based on health status, and being ready to explain why plan benefits may change year to year.

Practical Steps to Take Now

No one can control the policy timeline, but carriers and agencies can control readiness. The goal is not to slow innovation in coding tools or analytics. The goal is to ensure those tools operate inside a defensible governance model.

A short readiness checklist

• Define documentation standards: Clear rules for what supports each coded condition.
• Audit the full workflow: From chart retrieval to submission to retention.
• Stress-test vendors: Contract terms, model transparency, and quality controls.
• Track risk mix over time: Enrollment patterns, outcomes, and risk score drift.
• Prepare a governance narrative: Who approves, who monitors, and how issues are corrected.

The Bottom Line

MedPAC’s overpayment estimates, $76 billion this year and a potential $1.2 trillion over the next decade, are more than budget math. They are a signal that the Medicare Advantage ecosystem is entering a more demanding phase of oversight, especially around coding intensity and risk adjustment integrity.

Carriers that invest in clear standards, strong validation, and transparent governance will be better positioned as rules tighten. Agencies that stay aligned, document their own marketing and enrollment practices, and communicate clearly with consumers will be better prepared for plan shifts driven by policy pressure.

In the current environment, sustainable growth is not just about enrollment. It is about earning the right to keep growing by proving the payments are accurate, the documentation is real, and the controls are working.