Medicare is running out of money. It’s evident to everyone in the healthcare system: payers, providers, lawmakers and regulators all recognize that the program is due to become insolvent by 2033.
At the same time, the cost of care continues to increase, making it obvious that the government and insurance companies are playing fast and loose with taxpayer dollars.
One of the most significant issues is Medicare Advantage, which combines private plans with traditional Medicare benefits. In theory, Medicare Advantage should deliver better care at lower costs through private-sector competition. Instead, the program is growing out of control due to overbilling by insurers. While insurers can compete against one another, they are more focused on maximizing their government checks, so the focus on delivering cost-effective care ends up in the wrong place.
Here’s how it works: Medicare Advantage insurers — sometimes in cooperation with doctors but often in conflict with doctors — overdiagnose patients with conditions they might not have, colloquially known as “upcoding.” Doctors frequently exaggerate the severity of other conditions or opt for the most expensive diagnosis to use. This means bigger government checks and increased profits for insurance companies. It also means higher prices across our healthcare system.
Another piece of the puzzle is the current risk adjustment system for Medicare Advantage plans. One government watchdog found that $7.5 billion in payments was a direct result of “health risk assessments,” questionnaires that patients fill out when signing up for Medicare Advantage. Doctors, not insurance companies or self-assessments, should be diagnosing patients.
Worst of all, the government doesn’t consistently verify these diagnoses, meaning billions of taxpayer dollars are spent on phantom care for phantom conditions, going virtually unchecked with limited oversight. In 2024, improper payments totaled $19 billion, and between 2023 and 2024, Medicare Advantage enrollment grew by about 7 percent. Medicare Advantage enrollment is projected to rise by up to 54 percent more than it is today in less than a decade.
It’s no wonder that, since its inception two decades ago, this program threatens to bankrupt Medicare.
The results are staggering. Upcoding and false risk adjustments cost taxpayers tens of billions of dollars yearly — money that the government should allocate toward patient care. Instead, they pad the bottom lines of the largest insurance companies while simultaneously draining Medicare of funds.
Insurers have perfected the art of gaming Medicare Advantage, but the program invites waste, fraud and abuse in the first place. The result: a massive government healthcare program with inadequate oversight and too many loopholes.
The Centers for Medicare & Medicaid Services has already vowed to audit Medicare Advantage plans annually as part of a crackdown on improper payments, but more needs to be done.
If Congress is serious about preserving Medicare from insolvency, it must act decisively.
The priority must be ending upcoding by requiring independent verification of billing diagnoses. Establishing this necessary oversight would claw back overpayments from insurers who knowingly submit inflated patient claims.
We must also reassess the Medicare Advantage model, removing incentives for overbilling to determine if it can deliver genuine value.
Free market reforms — such as allowing seniors to choose from more flexible, accountable healthcare plans that compete on value rather than risk-score manipulation — could help preserve Medicare’s promise while also saving the program.
Some measures in Congress are nearing these goals. The NO UPCODE Act would fix the risk-adjustment model by changing the duration from one year to two and limiting the use of outdated conditions to upcode more frequently. Lawmakers continue to drag their feet on this measure when it could save taxpayers billions.
Medicare isn’t another budget line item for insurance companies; it’s a lifeline for millions of seniors. Without serious reform to stop fraudulent billing, it will become another cautionary tale of a government program undermined by its design and exploited by those who know how to work the loopholes.
If we change nothing, insolvency by 2033 won’t be a cautionary warning; it will be a harsh reality for generations.