CBO: Medicare Advantage Will Cost Taxpayers $1 Trillion More Than Traditional Medicare Over Next Decade

The Congressional Budget Office says the federal government is set to overpay Medicare Advantage plans by roughly $1 trillion over the next decade. It's based on the CBO's own analysis in "Federal Subsidies for Health Insurance 2026 to 2036," flagged by the Committee for a Responsible Federal Budget.

CBO estimates that if a beneficiary switched from traditional fee-for-service Medicare to a Medicare Advantage plan, federal spending on that person would rise by about 15%. Applied across the entire MA population, held steady over ten years, that comes out to roughly $1 trillion in extra federal spending, according to the Committee for a Responsible Federal Budget's analysis of the CBO data.

A significant driver is upcoding. Medicare Advantage insurers get paid based on how sick their enrollees appear on paper. CBO says plans add diagnosis codes to make patients look sicker than they are, which pushes payments higher even after the government tries to adjust for it. CBO's review of the literature also found many MA enrollees are actually healthier than their traditional Medicare counterparts to begin with, meaning insurers are getting paid more for patients who often need less care.

This lines up with earlier warnings. The Medicare Payment Advisory Commission estimated MA cost the federal government 14% more in 2026 than traditional Medicare for beneficiaries with equivalent health status, translating to $1.3 trillion in extra costs over a decade by the Committee for a Responsible Federal Budget's estimate. Two independent analyses, in the same ballpark, both say taxpayers are getting fleeced.

Medicare Advantage plans often deliver real value. They cap out-of-pocket costs, bundle in dental and vision coverage traditional Medicare doesn't offer, and some studies cited by MedPAC and others suggest MA can coordinate care more efficiently in certain markets. Insurers running these plans argue the extra payments reflect legitimate investment in preventive care and chronic disease management that keeps people healthier and out of hospitals. CBO's analysis says the price tag for those extra benefits and cost caps is being paid disproportionately by the federal government relative to what those same patients would actually cost in traditional Medicare, and that gap is what is driving the $1 trillion figure. Reducing the overpayment does not require killing MA plans, according to the Committee for a Responsible Federal Budget. It requires tightening how risk scores and diagnosis coding are calculated.

The overpayment story lands in the same news cycle as outright fraud. The Justice Department's National Fraud Enforcement Division announced 19 defendants charged in Philadelphia on August 4 in home-healthcare fraud schemes that allegedly netted more than $4 million, according to the Epoch Times. Assistant Attorney General Colin McDonald said aides were billing Medicaid while "hospitalized, working at other jobs, and even in jail." U.S. Attorney David Metcalf described one case where a company billed for a dead aide, racking up 600 fake clock-ins worth $225,000, and another where aides billed for care while vacationing in the Caribbean and Europe.

MA overpayments stem from legal payment formulas and coding incentives baked into the program's structure. The Philadelphia cases are alleged criminal fraud, now working through the courts. Both drain taxpayer money, but they require different fixes: one needs a policy rewrite in how risk adjustment works, the other needs prosecutors and convictions.

Scott Brady, executive director of the White House Fraud Task Force, told reporters the administration has "already stopped tens of billions of dollars in fraud, and we've already indicted and convicted hundreds of fraudsters," following Vice President JD Vance's appointment to head an anti-fraud task force after Medicaid fraud in Minnesota drew national attention last year. Brady's tally covers Medicaid fraud enforcement broadly, not the separate MA overpayment issue.

Meanwhile, seniors face a third threat that has nothing to do with government accounting: scammers exploiting the confusion. Becker's Health IT reported that twenty health systems are warning patients about phishing emails and texts advertising a "MyChart Medicare Kit" or "Senior Health Package," designed to steal login credentials or personal data by mimicking Epic's real MyChart patient portal. Fox News separately detailed how scammers impersonate Medicare and Social Security by phone, text, or email, creating false urgency about suspended benefits or compromised accounts to pressure victims into handing over Medicare numbers, Social Security numbers, or bank details.

None of these three threads will get resolved by year's end. CBO's $1 trillion projection covers 2026 through 2036 and depends on Congress actually acting on risk-adjustment reform, which no current legislation guarantees. The Philadelphia cases are pending prosecution. The phishing scams will keep evolving as long as Medicare's complexity gives scammers cover to sound official.