---
type: claim
domain: health
description: "MedPAC data projects MA overpayments split evenly between upcoding ($600B) and risk selection ($580B) creating fiscal crisis"
confidence: likely
source: "Committee for a Responsible Federal Budget, Medicare Advantage Will Be Overpaid by $1.2 Trillion (2025-2034), March 2025"
created: 2026-03-11
---

# Medicare Advantage overpayments total $1.2 trillion over 2025-2034 driven equally by coding intensity and favorable selection

Medicare Advantage plans will receive $1.2 trillion in overpayments relative to traditional Medicare costs over the 2025-2034 period, according to MedPAC data analyzed by CRFB. This overpayment splits almost evenly between two mechanisms: coding intensity ($600 billion) and favorable selection ($580 billion).

**Coding intensity** generates $600 billion in excess payments through diagnosis upcoding that increases risk scores beyond actual patient acuity. Despite CMS applying a 5.9% coding adjustment, MA plans still achieve a 10% net payment increase from coding practices. The trust fund impact is $260 billion, with beneficiaries bearing $110 billion through higher premiums.

**Favorable selection** contributes $580 billion through structural mechanisms that attract healthier beneficiaries to MA plans. Prior authorization requirements and narrow provider networks discourage care-seeking behavior, causing healthier Medicare beneficiaries to self-select into MA. This creates an 11% cost increase versus fee-for-service in 2025 from selection effects alone. The trust fund impact is $250 billion, with $110 billion passed to beneficiaries as premium increases.

The combined trust fund impact of ~$510 billion over the decade makes MA overpayments one of the largest single drivers of Medicare spending growth and a direct accelerant of trust fund insolvency (now projected for 2040 following the Big Beautiful Bill).

## Policy Options

CBO estimates that reducing MA payment benchmarks could save $489 billion over the decade. More aggressive reform—raising the minimum coding adjustment from 5.9% to 20%—could reduce deficits by over $1 trillion and substantially extend Medicare trust fund solvency.

## Evidence

- MedPAC data showing $1.2 trillion total overpayment projection (2025-2034)
- Coding intensity: $600B total ($260B trust fund, $110B beneficiary premiums)
- Favorable selection: $580B total ($250B trust fund, $110B beneficiary premiums)
- 10% net payment increase from coding despite 5.9% CMS adjustment
- 11% increased MA costs vs FFS in 2025 from favorable selection alone
- CBO benchmark reduction estimate: $489B savings
- Coding adjustment increase (5.9% → 20%) estimate: >$1T deficit reduction

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Relevant Notes:
- [[value-based care transitions stall at the payment boundary because 60 percent of payments touch value metrics but only 14 percent bear full risk]]
- [[CMS 2027 chart review exclusion targets vertical integration profit arbitrage by removing upcoded diagnoses from MA risk scoring]]
- [[proxy inertia is the most reliable predictor of incumbent failure because current profitability rationally discourages pursuit of viable futures]]

Topics:
- [[domains/health/_map]]
