Medicare Advantage now covers roughly 55% of eligible beneficiaries — about 35 million Americans. Yet, according to a March 2026 report by the Medicare Payment Advisory Commission (MedPAC), the program costs the federal government a projected $76 billion more in 2026 than traditional fee-for-service Medicare would. That gap raises a critical question: Is this program actually working?
On March 13, the University of Pennsylvania’s Leonard Davis Institute of Health Economics convened a panel to answer that very question. Sachin Jain, MD, MBA, COO of the SCAN Group and Health Plan, and Cheryl Damberg, PhD, principal senior economist at RAND, offered a layered, nuanced response. Their conclusion: yes, for many lower-income seniors; no, by the measure policymakers originally promised; and deeply complicated everywhere in between.
Here are the 10 key takeaways from that discussion.
1. The Program’s Broken Promise
Original Goals vs. Current Reality
Congress created Medicare Advantage more than two decades ago with a clear goal: private-sector competition would reduce Medicare costs. That has not happened. “The original problem Medicare Advantage was trying to solve was high and rapidly increasing government costs. In that regard, the program has been a miserable failure,” said Dr. Jain. Consequently, the program’s foundational premise remains unmet.
2. The $76 Billion Overpayment Problem
Federal Spending Outpaces Fee-for-Service
MedPAC’s March 2026 report to Congress confirms the federal government pays 14% more per Medicare Advantage enrollee than it would for the same beneficiary under traditional fee-for-service Medicare. Furthermore, the total overpayment in 2026 is projected to hit $76 billion. This staggering gap signals a systemic funding imbalance.
3. Real Value for Lower-Income Seniors
A Safety Net That Traditional Medicare Lacks
Despite its fiscal shortcomings, Medicare Advantage delivers meaningful protections for lower-income beneficiaries. The program introduced out-of-pocket spending caps, reduced premiums, lowered cost-sharing, and offered supplemental benefits — features traditional Medicare does not include. According to Dr. Damberg, these provisions have been “really important to low-income seniors.” Traditional Medicare enrollees can add supplement plans, but access is not equivalent.
4. Efficiency Gains: Where Did the Money Go?
Savings Went to Shareholders, Not Taxpayers
Medicare Advantage has driven real efficiencies. For instance, it increased the use of home health services over costlier skilled nursing facilities. However, those savings did not flow back to the government. “The benefits from these improved efficiencies have largely accrued to private plans and, in some cases, their shareholders — not the government,” Dr. Damberg explained. In short, efficiency gains benefited the industry, not the public.
5. Four Drivers of the Overpayment Crisis
Why the System Keeps Overpaying
Dr. Damberg identified four specific forces fueling the overpayment problem:
- Benchmark disparities — county-level government payments sometimes exceed actual traditional Medicare spending in that region.
- Favorable selection — healthier patients disproportionately enroll in Medicare Advantage, making the risk pool cheaper to insure.
- Upcoding — aggressive diagnosis coding artificially inflates risk scores and, therefore, government payments.
- Star ratings — unlike every other CMS pay-for-performance program, star ratings inject new federal spending into Medicare Advantage without maintaining budget neutrality.
Together, these forces compound the program’s financial strain year after year.
6. Risk Adjustment Gaming and Market Distortion
A Necessary Tool, Systematically Exploited
Both experts agreed that risk adjustment is essential. Plans covering sicker patients should receive higher payments. Nevertheless, both also agreed the system has been widely gamed. Dr. Jain noted that some provider groups grew far more focused on maximizing coding revenue than on improving patient outcomes. Meanwhile, Dr. Damberg added that aggressive coding has distorted fair competition among plans.
The updated CMS risk adjustment model, known as V28, moves in the right direction. Still, Dr. Damberg called for further reforms: coding adjustments calibrated to each plan’s intensity and a ban on unlinked diagnoses.
7. Prior Authorization: The Central Trade-Off
Cost Controls That Can Block Appropriate Care
Prior authorization and narrow networks are the primary tools insurers use to control costs. Yet both panelists pointed out that these tools often obstruct necessary care before patients receive it. Notably, denials are frequently overturned on appeal — suggesting the system regularly blocks appropriate treatment. Dr. Jain proposed a different model: instead of insurers reviewing care after the fact, physicians managing patient costs should guide patients away from low-value treatments.
8. Supplemental Benefits: Popular but Hollow
Extras That Look Better on Paper
Supplemental benefits are a major selling point for Medicare Advantage plans. However, Dr. Jain warned that many plans advertise attractive extras while placing barriers in the way of patients who try to use them. Additionally, Dr. Damberg raised a structural concern: these benefits have quietly expanded Medicare’s scope without any public policy debate about how to fund them. They also create inequity, since traditional Medicare enrollees receive none of the same offerings.
9. A Market Too Complex for Seniors
Too Many Choices, Too Little Guidance
Today’s Medicare Advantage market offers an overwhelming number of plan designs. Both panelists agreed the complexity makes it nearly impossible for seniors to make informed choices. Dr. Jain compared the current landscape to the pre-standardization Medigap market and advocated for benefit standardization. Dr. Damberg highlighted another concern: seniors routinely make suboptimal plan selections, often steered by brokers who receive commissions from MA plans. Traditional Medicare, by contrast, has no comparable sales infrastructure to guide beneficiaries.
10. Reform Is Needed — But Unlikely
Political Obstacles Block Progress
Dr. Damberg outlined her reform priorities: standardize benefits, fix overpayments, and level the playing field by extending out-of-pocket caps and supplemental benefits to traditional Medicare. Dr. Jain proposed shifting to multi-year enrollment periods, giving plans more time to improve outcomes and gradually lowering costs. Both panelists, however, acknowledged one hard reality: Congress is unlikely to modernize traditional Medicare in the near term. As a result, Medicare Advantage — despite its significant flaws — remains the primary vehicle for benefit innovation.
