---
type: source
title: "Medicare Advantage Will Be Overpaid by $1.2 Trillion (2025-2034)"
author: "Committee for a Responsible Federal Budget (CRFB)"
url: https://www.crfb.org/blogs/medicare-advantage-will-be-overpaid-12-trillion
date: 2025-03-26
domain: health
secondary_domains: []
format: report
status: processed
priority: high
tags: [medicare-advantage, overpayment, fiscal-impact, coding-intensity, favorable-selection, trust-fund]
processed_by: vida
processed_date: 2026-03-11
claims_extracted: ["medicare-advantage-overpayments-total-1-2-trillion-over-2025-2034-driven-equally-by-coding-intensity-and-favorable-selection.md", "favorable-selection-in-medicare-advantage-is-structural-not-fraudulent-because-plan-design-discourages-care-seeking-among-sicker-beneficiaries.md"]
enrichments_applied: ["value-based care transitions stall at the payment boundary because 60 percent of payments touch value metrics but only 14 percent bear full risk.md", "CMS 2027 chart review exclusion targets vertical integration profit arbitrage by removing upcoded diagnoses from MA risk scoring.md", "Devoted is the fastest-growing MA plan at 121 percent growth because purpose-built technology outperforms acquisition-based vertical integration during CMS tightening.md"]
extraction_model: "anthropic/claude-sonnet-4.5"
extraction_notes: "Two major claims extracted: (1) the overall $1.2T overpayment structure and fiscal impact, (2) favorable selection as a structural (non-fraudulent) mechanism that's equally large as coding intensity but less discussed in policy debate. Three enrichments applied to existing payment boundary, CMS chart review, and Devoted claims. The symmetry between coding ($600B) and selection ($580B) as overpayment drivers is the key insight—policy focuses on fraud but half the problem is legal plan design."
---

## Content

### Headline Projection
- **$1.2 trillion** in MA overpayments over 2025-2034 (based on MedPAC data)
- Two equally large drivers: coding intensity ($600B) and favorable selection ($580B)

### Breakdown by Impact Channel
**Coding Intensity ($600B total):**
- Medicare HI Trust Fund impact: $260 billion
- Beneficiary premium costs: $110 billion
- MA plans see 10% net payment increase from coding intensity even after 5.9% CMS adjustment

**Favorable Selection ($580B total):**
- Medicare HI Trust Fund impact: $250 billion
- Beneficiary premium costs: $110 billion
- 11% increased MA costs vs FFS in 2025 from favorable selection alone
- Causes: prior authorization and plan networks discouraging care-seeking (healthier people self-select into MA)

### Policy Options
- CBO estimates reducing benchmarks could save **$489 billion**
- Raising minimum coding adjustment from 5.9% to 20% could reduce deficits by **over $1 trillion**
- Both would substantially extend Medicare trust fund solvency

### Fiscal Context
- Combined trust fund impact: ~$510 billion over decade
- Combined beneficiary premium impact: ~$220 billion
- MA overpayments are one of the largest single drivers of Medicare spending growth

## Agent Notes
**Why this matters:** Translates MedPAC's technical findings into fiscal policy language. The $1.2T number is the scale at which MA's payment structure becomes a Medicare solvency issue. Combined with the trust fund insolvency acceleration (now 2040 due to Big Beautiful Bill), this creates a fiscal collision course.
**What surprised me:** The symmetry between coding intensity and favorable selection as overpayment drivers. Policy debate focuses on upcoding fraud, but favorable selection is almost exactly as large — and it's structural, not illegal. MA plans benefit from attracting healthier members and there's no fraud to prosecute.
**KB connections:** [[proxy inertia is the most reliable predictor of incumbent failure because current profitability rationally discourages pursuit of viable futures]]
**Extraction hints:** Claim about the fiscal unsustainability of unreformed MA — $1.2T over a decade is not a pricing error, it's a structural transfer from taxpayers to MA plans.

## Curator Notes
PRIMARY CONNECTION: [[value-based care transitions stall at the payment boundary because 60 percent of payments touch value metrics but only 14 percent bear full risk]]
WHY ARCHIVED: Quantifies the fiscal stakes of MA reform — connects insurance market structure to Medicare solvency timeline.
EXTRACTION HINT: The favorable selection mechanism deserves its own claim — it's the less-discussed half of the overpayment equation.


## Key Facts
- MA overpayments: $1.2 trillion total (2025-2034)
- Coding intensity: $600B ($260B trust fund, $110B beneficiary premiums)
- Favorable selection: $580B ($250B trust fund, $110B beneficiary premiums)
- Current CMS coding adjustment: 5.9%
- Net payment increase from coding despite adjustment: 10%
- MA cost increase vs FFS from selection (2025): 11%
- CBO benchmark reduction savings estimate: $489B
- Coding adjustment increase (5.9% → 20%) deficit reduction: >$1T
