In response to the question “Is Medicare Advantage Working?” posed in a University of Pennsylvania panel discussion, two top experts concurred that the program is “working” in one narrow but powerful sense: It delivers more appealing coverage to many seniors, especially those with modest incomes. But it is not “working” in the sense originally promised by policymakers, because it is not saving public money and has encouraged a range of payment distortions, coding games, marketing excesses, and utilization-management conflicts.

“I think we all definitely agree that the original problem Medicare Advantage (MA) was trying to solve was high and rapidly increasing government costs. In that regard, the program has been a miserable failure,” said panelist Sachin Jain, MD, MBA, Chief Operating Officer of the SCAN Group and Health Plan, one of the country’s 10 largest Medicare Advantage organizations.

Hosted by Penn’s Leonard Davis Institute of Health Economics (LDI), the March 13 virtual discussion, moderated by LDI Executive Director Rachel M. Werner, MD, PhD, brought together Jain and Cheryl Damberg, PhD, Principal Senior Economist and Director of the Center of Excellence on Health System Performance at RAND.

Two Dozen Years Ago

In congressional testimony two dozen years ago, when the Medicare Advantage program was created, Tom Scully, then Administrator of the Centers for Medicare & Medicaid Services (CMS) and chief architect of the new Bush program, predicted it would use the economic magic of competition among private companies to drive down Medicare prices and improve the quality of senior care.

The bottom line in financial terms is that Medicare Advantage has always cost the federal government more than if those beneficiaries were enrolled in traditional fee-for-service Medicare. In terms of its quality, the health care experience for many seniors has been dominated by decades of complaints about prior authorization barriers, tight network restrictions, a star rating system that emphasizes process measures rather than clinical outcomes, a lack of information at the plan benefit level, and a pattern of inflating the apparent illness of enrollees to boost payments by gaming the risk adjustment system.

$76 Billion in 2026

In its March 2026 Report to Congress, MedPAC said the federal government is currently paying 14 percent more per Medicare Advantage-enrolled beneficiary than it would spend if those same seniors were in traditional Medicare. The total amount of those overpayments in 2026 is projected to be $76 billion.

Both panelists argued that MA has created real innovation and important protections for lower-income seniors. Their core disagreement was whether MA should be viewed mainly as a flawed, over-subsidized market or as the only politically realistic vehicle for modernizing Medicare benefits in the near term.

Damberg pointed out that despite its many challenges, MA has had some successes.

“It’s certainly tamped down on utilization of services and led to cost efficiencies such as greater use of home health services rather than skilled nursing facilities,” she said. “But the benefits from these improved efficiencies have largely accrued to private plans and, in some cases, their shareholders, not the government. It provided a cap on out-of-pocket spending for beneficiaries, and this was important for limiting the financial burden for low-income seniors. Lastly, it lowered the cost of coverage to beneficiaries through lower premiums, reduced cost sharing, and the provision of extra supplemental benefits — also really important to low-income seniors.”

Other Topics Covered

Some of the other topics the panelists covered were:

De Facto Safety Net

They agreed that MA now functions as an important subsidy for lower-income seniors — but in an uneven and arguably unfair way. Damberg argued that this support is being delivered through a distorted structure that advantages MA over traditional Medicare. She and Jain suggested that traditional Medicare itself should be modernized, even as they noted that expecting Congress to do that is unrealistic.

Benefits, Marketing, Broker Incentives

The two said MA’s rapid growth reflects both genuine consumer appeal and strong sales efforts by the MA plans, but emphasized that many people do not fully understand the trade-offs between traditional Medicare and Medicare Advantage when they enroll. Heavy marketing and broker commissions are major forces steering seniors toward MA, while traditional Medicare has no comparable sales infrastructure.

Often Hollow MA Supplemental Benefits

Jain said many MA plans advertise attractive extra benefits but then place barriers in the way of patients redeeming or using them. In a related point, Damberg said the benefits have effectively created a backdoor expansion of Medicare benefits without a full public policy debate about how to finance them. She also said they create inequities because traditional Medicare beneficiaries do not receive the same offerings.

Benefit Inequities

Damberg went on to say MA’s supplemental benefits have effectively created a backdoor expansion of Medicare benefits without a full public policy debate about how to finance them. She said they create inequities because traditional Medicare beneficiaries do not receive the same offerings.

Over Complexity

One of the program’s underappreciated problems is that the market is too complicated for beneficiaries to navigate, with too many plan designs and too much benefit complexity. Damberg said seniors are often making suboptimal choices. Jain agreed and endorsed benefit standardization, comparing today’s MA landscape to earlier Medigap complexity before standardization.

Overpayment

Damberg cited four reasons that together drive overpayments to MA and higher taxpayer costs:

• Benchmark disparities. The government sets a target payment (the “benchmark”) for each county, but in some places that target is intentionally set above what traditional Medicare spends. When that happens, Medicare Advantage plans can be paid more than the cost of caring for the same patients in the standard fee-for-service program.
• Favorable selection, with healthier people tending to enroll in MA rather than traditional Medicare.
• Upcoding, meaning more aggressive diagnosis coding that raises payments.
• A star rating system that increases federal spending because it pays Quality Bonus Payments to plans out of new federal spending, in contrast to all other CMS pay-for-performance programs that are budget neutral.

Gaming Risk Adjustment System

Both agreed that risk adjustment is essential because plans that take sicker patients should be paid to cover costs of treating those patients. But both also said the system has been exploited. Jain argued that some provider groups and plans became far more focused on maximizing coding revenue than on improving care. Damberg said aggressive coding has led to overpayments and distorted competition among MA plans.

Risk Adjustment Model V28

They discussed the updated version of the CMS Hierarchical Condition Category (HCC) risk adjustment model, known as V28. It’s the federal government’s latest, stricter formula for calculating how much Medicare pays Medicare Advantage plans based on how sick each patient is. It is designed to curb inflated payments from aggressive upcoding. Damberg said V28 moves policy in the right direction but is only one step. She suggested additional reforms, including continued refinement of the risk adjustment model, coding adjustments that vary in size based on different plans’ intensity of coding, and not allowing unlinked diagnoses.

Prior Authorization and Limited Networks

The panelists said one of MA’s biggest trade-offs is this: The tools insurers use to control costs — such as prior authorization and limited networks — are designed to block or limit care before patients receive it. These tools can prevent some unnecessary treatments but often lead to delays, denials, confusion, and frustration. In many cases, denials are later overturned, suggesting the system can in some cases obstruct appropriate care. Jain argued that instead of insurers blocking care, it would be better if physicians responsible for managing costs avoid ordering low-value treatments in the first place — keeping decisions closer to the patient rather than with insurance reviewers.

Public vs. Private Administration

In one of his strongest comments, Jain argued that for-profit firms have incentives that can conflict with beneficiary interests, especially when aggressive utilization management or margin-seeking behavior is involved. He suggested policymakers should more seriously consider whether for-profit companies should administer Medicare. He also warned that recent MA payment and policy shifts are being made too quickly and may destabilize the market.

Costly Star Ratings

Jain said MA star ratings at least force plans to focus on quality measures and consumer experience in a way traditional Medicare often does not. But both speakers acknowledged major problems. Jain said the measures are outdated and sometimes not meaningfully discriminating among plans. Damberg argued that star ratings are not just rewarding quality — they are also injecting new taxpayer money into the MA system each year, and she suggested policymakers should move toward a budget-neutral model.

As the session ended, Werner asked each panelist: “If you could set a North Star for what MA should accomplish in the next decade, what goals would you set?”

Damberg:
– Simplify choice through benefit standardization.
– Fix overpayments.
– Level the playing field between MA and traditional Medicare, partly by improving traditional Medicare including out-of-pocket caps and offering supplemental benefits.

Jain:
– Standardize benefits.
– Switch to multiyear enrollment so plans have time to improve health outcomes.
– Gradually push MA to deliver better outcomes at lower cost.

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