Congressional report details how MA overpayments are driving up Part B premiums
A new congressional report finds that overpayments to Medicare Advantage (MA) plans have led to higher Part B premiums for all beneficiaries, adding $82 billion in premiums over the past 10 years. This briefing, produced by the Senate Joint Economic Committee (JEC), examines these burdens and opportunities for reform.
Key findings include:
Overpayments increase premiums for all beneficiaries, not just MA participants. In 2025, MA overpayments will increase Part B premiums by $212 per person, for a total of $13.4 billion. People with Original Medicare (OM), who do not receive the supplemental benefits offered by most MA plans, bear a burden of approximately $6 billion.
Taxpayers are also affected. Medicare enrollees pay approximately 85% of the additional premiums, with federal (9%) and state (6%) taxpayers covering the remainder.
This is a long-standing problem. Although Massachusetts promised to save Medicare money, it never did. Since 2016, MA overpayments have increased Part B premiums by $82 billion.
Higher premiums mean smaller Social Security checks. Because most beneficiaries (nearly 70 percent) have their Part B premiums deducted from their Social Security checks, any increase in premiums would directly reduce their benefits.
Without reform, overpayments will continue to cause premiums to skyrocket. Annual Part B premiums are expected to double between 2025 and 2035, from about $2,440 to $5,000. If MA continues to pay 120% of OM, the additional premium burden will increase from $212 to $450 per beneficiary during the same period.
Needs correction. The JEC recommended aligning MA payments with OM to “prevent unnecessary premium increases, increase Medicare affordability, and protect net Social Security checks.”
MA’s unfulfilled promises
Private MA plans contract with Medicare to provide Part A (Hospital Insurance) and Part B (Medicare Insurance) benefits; they often also provide supplemental benefits that are not available to OM patients.
MA was originally intended to save money, but this goal has not yet been achieved.
The JEC report acknowledged that the original intention of the MA was to save money, but that this goal has not yet been achieved. In addition to this historical context, its authors based their future projections on then (March 2025) data from the nonpartisan Medicare Payment Advisory Committee (MedPAC), which estimated that MA costs would be approximately 20% higher than OM in 2025, resulting in $84 billion in overpayments. A subsequent MedPAC analysis put the estimate closer to $76 billion.
The JEC defines overpayment in this context as “on average, relative to [O]M represents the same beneficiary. “
MA Overpayments and Part B Financing
Medicare Part B is funded through the Supplemental Medical Insurance (SMI) Trust Fund, which relies on a combination of beneficiary premiums and general fund transfers. Each year, Part B premiums will cover 25% of expected costs; some people pay more based on income. As the report notes, “a key aspect of this financing mechanism is that while the standard Part B premium varies with income, it does not vary based on whether an individual receives Part B benefits through OM or MA.” In other words, as the chart below shows, everyone (regardless of which coverage path they choose) faces the problem of MA plan overpayments.
The accompanying press release further explains: “By 2025, the cost of insuring MA beneficiaries is estimated to be 17% to 20% higher on average than in MA. [O]M.MA's overpayments increase Part B expenses, and because premiums will cover about a quarter of expected costs, premiums increase for everyone in Part B. “
Affordability Impact
MA overpayments make Medicare Part B more unaffordable. Additionally, people on Medicare are particularly affected by increases in Part B spending, which the JEC noted is rising:
“Per capita Part B spending is expected to nearly double over the next decade, from about $9,100 in 2025 to more than $18,000 in 2035. Because standard Part B premiums will cover 25% of expected costs, baseline premiums are also expected to nearly double, from about $2,200 per year in 2025 to about $4,500 per year in 2035. US$. Average premiums expected to rise According to these projections, premiums for seniors who rely on Medicare will rise significantly.”
Part B spending affects the cost of care that enrollees pay.
In addition to premiums, Part B payments also affect how much enrollees pay for care. For example, under Medicare cost-sharing rules, beneficiaries typically pay 20% of Part B services. When these services become more expensive, beneficiaries’ wallets take a direct hit.
Rising costs could have a dramatic impact, as many beneficiaries rely on fixed or limited incomes and cannot keep up: Half of all beneficiaries (nearly 33 million people) live on $43,200 or less per year, and a quarter have less than $18,950 in savings. If costs continue to climb as expected, more and more people may be forced to make impossible choices, such as paying their doctor's bills or paying their rent.
in conclusion
Going forward, the JEC concluded that “policymakers must act to prevent premiums from gradually eating away at seniors' Social Security checks.” They note that MA overpayments “are not inevitable. They ultimately result from policy choices to pay more for Medicare Advantage than for traditional Medicare. Aligning Medicare Advantage payment levels with traditional Medicare would directly limit this avoidable premium growth and protect the Social Security benefits of 50 million Part B beneficiaries. Reforms that gradually achieve payment parity could save approximately $2,600 per senior over the next decade.”
MA overpayments “result from policy choices to pay more for Medicare Advantage than for Traditional Medicare.”
Medicare Rights agrees that reforms are needed to improve MA payment accuracy, beneficiary health and financial security, and Medicare sustainability. Although Massachusetts promised to save Medicare money, it never did. The current system rewards insurance companies with higher profits but penalizes all beneficiaries through higher Part B premiums and taxpayers through increased costs. Without corrective measures centered on beneficiary needs, these impacts will only deepen.
For more information
Read the report Part B Premium Pass-through: Medicare Advantage overpayments drive premiums higher for everyone.
JEC released a companion analysis, the Medicare Affordability Tracker, that quantifies the premium burden caused by overpayments at the state and congressional district level.
The post-Congressional report detailing how overpayments in Massachusetts are driving up Part B premiums appeared first on Center for Medicare Rights.
