---
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: unprocessed
priority: high
tags: [medicare-advantage, overpayment, fiscal-impact, coding-intensity, favorable-selection, trust-fund]
---

## 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.
