This week, the Medicare Payment Advisory Commission (MedPAC) delivered its annual report to Congress that examines Medicare’s payment policies, including Medicare Advantage (MA). In this year’s report, MedPAC reiterated its position that Medicare pays more for MA enrollees than it does for similar beneficiaries enrolled in traditional Medicare and added that it is impossible to judge the quality of MA plans, including plans specifically designed for those who are dually eligible for Medicare and Medicaid.

By MedPAC’s estimates, Medicare pays four percent more for beneficiaries who are enrolled in MA than it would if those beneficiaries were covered by traditional Medicare. These overpayments are a result of many complex policy choices. MedPAC notes that MA plan payments include adjustments “to account for differences in expected beneficiary medical costs. The purpose of risk adjustment is to ensure that plans are adequately and fairly compensated for treating all categories of enrollees—those with high medical costs as well as those with less health care utilization.” But risk adjustment can be gamed by plans who claim enrollees are sicker than they truly are, driving up payments per enrollee with no benefit to the patient or Medicare.

MedPAC is not alone in identifying this MA practice, called “upcoding” or “uncorrected coding intensity,” as a significant issue. For example, the U.S. Department of Health and Human Services Office of the Inspector General flagged billions of dollars of payments to MA plans based on diagnoses that were found only on medical records and that did not lead to any treatment. Researchers have found similar results, showing that hundreds of billions of dollars may be at stake due to upcoding. And insurers have faced significant federal lawsuits for the practice as well.

MedPAC highlights this excess funding for several reasons: It is worsening Medicare’s long-term fiscal sustainability; people in traditional Medicare are paying extra to fund MA plans; and more beneficiaries are attracted to MA’s extra benefits which are funded by rebates from upcoding, leading to exponential increases in costs and an unbalanced playing field.

In addition, MedPAC flags important gaps in quality information for MA plans, stating, “The current state of quality reporting is such that the Commission’s yearly updates can no longer provide an accurate description of the quality of care in MA.” The lack of reliable information on quality may put MA enrollees at risk. This problem is exacerbated in MA plans designed for those who are dually eligible for Medicare and Medicaid—D-SNPs. MedPAC is newly required to report on D-SNP quality, but it notes that “the performance data that MA plans report . . . provide limited insight on the relative performance of D–SNPs.”

Combined, these issues must be a wake-up call to policymakers about MA program payment, incentives, and oversight. We urge Congress and the Biden-Harris Administration to do more to rein in MA overpayment, to level the playing field between MA and traditional Medicare, and to find ways to meaningfully assess the quality of MA plans, especially D-SNPs.

Read the MedPAC report.

Read a research article about MA overpayment.