Medicare Advantage Increases Government Costs, Not Saves Them, Reports Show

Medicare Advantage (MA), the program where private insurers manage Medicare benefits, has been found to increase government spending rather than save costs.

Contrary to its original intent to provide more efficient coverage than traditional Medicare, MA incurs approximately $84 billion more in government payments yearly, according to the Medicare Payment Advisory Commission. This cost rise is partially due to payment structures that compensate insurers based on traditional Medicare costs, despite MA enrollees generally being healthier and less expensive to cover.

MA plans often include additional benefits funded by the government, such as dental, vision, and transportation services, which drive up expenses. Insurers also have financial incentives to maximize payments through diagnostic coding practices, with settlements like Cigna's $172 million agreement highlighting issues of "upcoding." Investigations reveal that major insurers, including UnitedHealth Group, have pressured providers to inflate coding for higher reimbursements.

These financial dynamics contribute to persistent fees and administrative costs in MA, which continue to strain the Medicare program. The debate over Medicare Advantage's fiscal impact is central to discussions about healthcare spending, regulatory oversight, and program reform as the government seeks to control Medicare expenditures while maintaining beneficiary services.