Medicare Advantage Overpayments Increase Premiums, Erode Social Security Benefits for All, Lawmakers Say

‘Fiscally sustainable’ solution: Pay Medicare Advantage and original Medicare same rates for coverage

Tony Pugh,

AARP

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Published March 11, 2026

bright red first aid kit with a white cross sits on a teal background, overflowing with stacks of $100 bills to symbolize the financial waste and "pay and chase" nature of Medicare overpayments

Gregory Reid/Gallery Stock

Key takeaways

Medicare spends about 20% more for Medicare Advantage.
High payments are a key problem that was studied.
AARP urges fair payments, accurate coding of diagnoses.
Report is latest alarm bell for Medicare finances.

Overpayments to Medicare Advantage plans drive up Part B premiums for everyone in Medicare and reduce Social Security benefits for many older Americans, says an analysis that Republican members of a key congressional committee released Tuesday.

Medicare spent about 20 percent more for Medicare Advantage enrollees — a projected $84 billion in 2025 — than if the same people were in original Medicare, the Medicare Payment Advisory Commission (MedPAC) reported last year.

Medicare payment rates are core of the problem

That extra spending is the key building block for a new Joint Economic Committee analysis, which says a “concrete, fiscally sustainable” way to address the problem is to pay Medicare Advantage plans at the same level as original Medicare.

Doing so would “directly limit this avoidable premium growth and protect the Social Security benefits of 50 million Part B beneficiaries,” says the committee, which has representatives from both the House and Senate. “Reform that gradually achieves payment parity could save each senior approximately $2,600 over the next decade.”

'Every dollar in Medicare should be going to provide health care for the Americans who paid into it. At a time when Medicare premiums are rising, we cannot afford waste in the system.'

— Megan O’Reilly, AARP

Part B covers a host of Medicare outpatient services such as doctor visits, diagnostic tests and preventive services.

“With limited resources and tight budgets, every dollar in Medicare should be going to provide health care for the Americans who paid into it,” says Megan O’Reilly, AARP vice president for health and family issues. “At a time when Medicare premiums are rising, we cannot afford waste in the system.”

Unlike original Medicare, which pays for each medical service provided, Medicare Advantage plans are paid a monthly amount per beneficiary to cover their entire cost of care no matter how many services the enrollee uses. The higher Medicare Advantage payments stem mainly from two causes, the commission reported:

Favorable selection, which happens when healthier people choose or decide to switch to a Medicare Advantage plan.
And upcoding, also called coding intensity, a result of insurers increasing the number or severity of the diagnoses of patient ailments.

Spokesman Chris Bond of AHIP, a Washington, D.C.-based insurer trade group that shortened its name from America’s Health Insurance Plans in 2021, questioned MedPAC’s data.

“Numerous experts continue to warn that making policy based on MedPAC’s fundamentally flawed data, methodology and extrapolations could harm 35 million” Medicare Advantage beneficiaries, Bond says.

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AARP wants ‘fair and accurate’ rates

In a February letter, AARP backed a proposed rule from the Centers for Medicare & Medicaid Services (CMS) that would crack down on upcoding in 2027.

“Because the current system relies heavily on diagnosis data provided by Medicare Advantage insurance plans themselves, plans are incentivized to maximize patient diagnoses to receive higher payments,” O’Reilly says. “Fair and accurate payment rates are critical to ensuring Medicare remains strong for decades to come while keeping premiums affordable for seniors.”

If the current pay rate disparity continues and Part B spending continues to rise, “the additional premium burden would rise to roughly $450 per beneficiary per year in 2035,” the Joint Economic Committee projects. That would add $37.50 a month to Part B premiums without accounting for other pressures, such as inflation.

In 2025, the excess payments increased Part B premiums by nearly $18 a month per enrollee, or $13.4 billion, the committee says. Original Medicare beneficiaries bore roughly $6 billion of those costs even though they chose not to enroll in Medicare Advantage.

Since 2016, overpayments to Medicare Advantage plans have added $82 billion to Part B premiums, the committee estimates.

Because most older adults’ Part B premiums are withheld from their Social Security checks, “increases in premiums directly reduce take-home benefits for seniors,” the report said. “It is therefore imperative for policymakers to act to prevent premiums from gradually eating away at seniors’ Social Security checks.”

Report is latest Medicare critique

The analysis is the latest to raise concerns about the financial trajectory of Medicare.

In June 2025, the Medicare Board of Trustees reported the trust fund that pays for hospital inpatient stays won’t be able to pay all expected bills after 2033. That’s three years sooner than their 2024 projection.

An aging boomer population that continues to grow, greater use of medical services and inflation are expected to cause 7 percent to 8 percent annual increases in Medicare spending throughout the next decade, rising from $1 trillion in 2023 to $1.9 trillion in 2032, MedPAC estimates. Yet only 2.5 workers per beneficiary will pay into the program by 2029, down from 2.8 in 2023.

Medicare Advantage, which covers more than 51 percent of Medicare beneficiaries, caps catastrophic health-care costs and offers supplemental benefits such as some dental, hearing and vision coverage that original Medicare doesn’t offer. But the tradeoff is often fewer choices among providers and prior authorization for some procedures and services.

By law, Part B premiums are set each year to cover 25 percent of expected Part B spending per aged enrollee with some higher-income individuals paying additional premiums. This means that 26 percent to 28 percent of any Part B spending increase is passed on to beneficiaries as higher premiums.

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Tony Pugh is an award-winning writer and editor covering Medicare for AARP. He has also covered Medicare for Bloomberg Law and as a national correspondent for Knight Ridder/McClatchy Newspapers.

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