The Centers for Medicare and Medicaid Services will pay Medicare Advantage plans 76 billion dollars more in 2026 than if those same patients were enrolled in traditional fee-for-service Medicare, a status report to the Medicare Payment Advisory Commission revealed. This spending gap persists despite a policy redesigned in 2024 to limit MA plans’ ability to exaggerate patients’ health risks and obtain higher monthly payments.
The cost difference stems from two primary factors: MA plans’ aggressive coding practices that categorize patients as higher risk than they may actually be, and “favorable selection,” whereby healthier patients tend to enroll in MA plans rather than fee-for-service plans. The new policy, called V28, has begun phasing in a payment formula that prioritizes serious illnesses actually diagnosed rather than using algorithms to predict future diagnoses. According to MedPAC analysts, about 22 billion dollars of the 76 billion dollar gap is attributable to coding intensity alone.
Data reviewed by MedPAC showed that MA payments have consistently exceeded fee-for-service spending over a decade, ranging from at least 13 percent more in 2015 to 21 percent more in 2023. Kaiser Permanente agreed to pay 556 million dollars to resolve allegations of submitting invalid diagnosis codes to receive higher government payments. Commissioners expressed concern that the V28 policy may not fully address the issue, as plans could shift to coding different diagnoses. Plans spent 24 billion dollars on supplemental benefits in 2023, with 28 percent going to dental services and 24 percent to non-health-related benefits such as food, pest control, and housing support.
This article is an AI-assisted summary. All facts and figures are drawn from the original report: https://www.medpagetoday.com/publichealthpolicy/medicare/119500