The news: Seniors’ Medicare premiums were higher last year in part because private Medicare Advantage (MA) plans were overpaid by the government, according to a Joint Economic Committee report released this week.

Digging into the details: The average Medicare beneficiary paid an extra $212 in Part B premiums last year—an increase of about 10%, per the analysis. Medicare Part B covers doctors’ visits, preventive care, lab tests, and similar services, with premiums for most seniors deducted directly from their Social Security checks.

Rising Part B premiums were attributed to MA plans using tactics to secure higher government payments, the analysis revealed. For context, the government pays private insurers (e.g., UnitedHealth Group, Humana, and CVS/Aetna) to run MA plans, with higher reimbursements for covering sicker patients.

Overpayments to plans occur when insurers add diagnoses that are unsupported by patients’ medical records, which the report refers to as “coding intensity.” However, the leading trade group for the health insurance industry said the committee’s findings were based on “fundamentally flawed data, methodology, and extrapolations,” per The Wall Street Journal.

Why it matters: Medicare Advantage is under tighter scrutiny for alleged deceptive practices that drive up costs for taxpayers and the government.

• UnitedHealth, the largest MA insurer, is under DOJ investigation for alleged Medicare billing fraud, including claims it paid doctors to document conditions that boosted payments for its MA business.
• Other investigations, such as from WSJ, allege that UnitedHealth has billed Medicare for conditions that no doctor treated and that MA insurers have sent nurses into patients’ homes not to provide care but to document diagnoses that would trigger higher payments.

Stricter oversight and probes into MA overpayments are now hitting seniors’ wallets—not just creating headaches for insurers. By 2035, Part B premiums are projected to double from $2,440 to about $5,000 per beneficiary. Of that total, about $450 will be due to overpayments if they continue at the same rate, per the analysis.

Implications for health insurers and consumers: A more rigorous examination of MA plans will likely require insurers to change tactics that have previously led to higher government payments.

MA plans will likely respond by cutting existing benefits and continuing to push out “unprofitable” members—those who use more medical care than insurers want to cover. Some insurers may exit MA altogether if soon-to-come payment rates for future years fall short of expectations, while many consumers will face confusion over coverage options, premiums, and in-network providers.

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