Three events happened in the past week that should be concerning to all physicians and hospitals that take care of patients on Medicare Advantage Plans. First, the U.S. Congress Joint Economic Committee issued a brief concluding that Medicare Advantage Plans overcharge Medicare and cost 120% of traditional Medicare per enrollee. Second, Aetna was fined $117 million because of Medicare Advantage Plan false claims. And third, a study in JAMA found that in 2026, 10% of enrollees in Medicare Advantage Plans are being dropped from coverage. These three events will have a direct impact on medical practices.
What are Medicare Advantage Plans?
When a U.S. citizen turns age 65, they have a choice – either enroll in traditional Medicare or enroll in a Medicare Advantage Plan. Traditional Medicare includes Part A and Part B. Part A is free and funded by payroll taxes. Seniors pay a monthly premium for Part B with the rest of Part B funded by federal income tax. Most people with traditional Medicare will purchase a separate Medigap policy through a commercial health insurance company that helps cover deductibles, co-pays, and other healthcare expenses not covered by traditional Medicare. Additionally, most people with traditional Medicare will purchase a Medicare Part D policy to cover outpatient medications that are not covered by traditional Medicare.
A Medicare Advantage Plan (also known as Medicare Part C), is an all-inclusive health insurance policy sold by commercial insurance companies that bundles Medicare Part A, Medicare Part B, Medigap coverage, and usually a Medicare Part D plan. In addition, many Medicare Advantage Plans also provide perks that are not available to seniors on traditional Medicare such as gym memberships, dental insurance, or vision insurance. Medicare Advantage Plans are usually less expensive than the combined cost of traditional Medicare Part B plus a Medigap plan plus a Medicare Part D plan. For this reason, the Medicare Advantage Plans are very popular. Currently, 54% of Medicare beneficiaries are enrolled in a Medicare Advantage Plan and only 46% are enrolled in traditional Medicare.
Medicare Advantage Plans are inexpensive because commercial insurance companies have tactics to control costs that Medicare lacks. These include:
- Prior authorization. By requiring many services, procedures, and referrals to get prior authorization, insurance companies can impose strict authorization criteria that must be met before a physician or hospital can perform a procedure or service. This is done under the guise of preventing unnecessary procedures and services. However, many insurance companies have very strict criteria that can create a barrier for procedures or services that are actually needed by patients. In addition, the prior authorization process is onerous, requiring time and expense for doctors and hospitals to call the insurance company and negotiate with an insurance representative. Because this is such a hassle, many physicians find the path of least resistance to be to forgo a certain test or procedure rather than have to deal with another tedious prior authorization, even if they believe that the test or procedure is needed for optimal care of the patient.
- Denials. Frequently, there is no time to get prior authorization, for example, for an emergency hospital admission or for an urgently needed outpatient CT scan. In these situations, the Medicare Advantage Plan insurance company can retrospectively deny payment for the hospital admission or CT scan if the insurance company decides that there was insufficient indication for that hospital admission or CT scan. Physicians and hospitals can appeal those denials but the appeals require a great deal of time and paperwork. As a result, many of these services and procedures are written off because of the cost and effort necessary to appeal. Thirty years ago, a claims worker for one of the major health insurance companies told me that their company’s policy was to randomly deny every 20th claim because many physicians and hospitals would not bother to appeal them, ultimately saving the insurance company millions of dollars every year.
- Provider networks. With traditional Medicare, a beneficiary can see any physician or hospital in the country that takes Medicare. Because nearly all doctors and hospitals that provide care to adults accept Medicare, this means that the person with traditional Medicare can see any doctor he or she wants. Each Medicare Advantage Plan insurance company will have its own limited number of in-network doctors and hospitals. Beneficiaries have to pay steep extra costs to see a doctor who is out-of-network or go to a hospital that is out-of-network. This is sometimes unavoidable, for example, if a person needs a surgery done by an in-network surgeon but the anesthesiologist is out-of-network. In the past, insurance companies had no motivation to keep their list of in-network physicians current. Indeed, they were actually incentivized to let those lists become out of date with “ghost doctors”, physicians who had retired or moved and were no longer practicing in the area. By making it harder for enrollees to find a doctor in a particular specialty, it reduced the chances that the enrollee would eventually see a specialist and thus avoided having to pay for expensive services or procedures. A recent class action lawsuit has resulted in Medicare Advantage Plans now being required to ensure that their lists of in-network physicians is current.
- Favorable selection. Since Medicare Part B pays the Medicare Advantage Plan commercial insurance company on a per-enrollee basis, the more healthy enrollees the insurance company can attract, the less that insurance company will have to pay for healthcare services and procedures. The average amount paid by Medicare Part B this year is $9,739 per beneficiary. If a commercial insurance company can attract a group of enrollees that will on average generate less than $9,739 in healthcare expenses per year, then the insurance company stands to make a profit. There are several tactics that insurance companies use to preferentially attract healthier patients. Zero premium Medicare Advantage Plans often appeal to healthier seniors who do not require frequent, costly healthcare. Perks such as gym memberships attract more active, healthier seniors. Targeted advertising can reach seniors who are likely to have lower healthcare costs – this could include targeting geographic areas or demographic groups that are likely to have lower healthcare requirements. Provider network design can emphasize primary care providers with limited access to specialists, thus selectively appealing to seniors with no medical conditions requiring specialist care. The bottom line is that the more healthy people a Medicare Advantage Plan can enroll, the more profitable that plan will be for the commercial insurance company.
- Upcoding. Medicare pays commercial insurance companies administrating Medicare Advantage Plans based on the number of enrollees and how medically complex those enrollees are. The more medical problems an enrollee has, the more Medicare will pay the commercial insurance company for that particular enrollee. Therefore, the insurance companies are incentivized to exaggerate the number and severity of medical illnesses for every enrollee. When I first enrolled in a Medicare Advantage Plan, the insurance company kept wanting to send out a nurse to my home to do a “wellness visit”. That nurse’s real job was to find and document as many medical conditions as possible. If the nurse finds that the enrollee’s blood pressure is 1 mm Hg above normal, the insurance company can claim that the enrollee has hypertension and charge Medicare more. If the nurse weighs the enrollee with all of their clothes and shoes on and the enrollee’s weight is 1 pound above the threshold for morbid obesity, then the insurance company can document morbid obesity and charge Medicare more. Needless to say, I refused the wellness visits.
Medicare Advantage Plans overcharge Medicare
On March 10, 2026, the Joint Economic Committee of the U.S. Congress issued a brief stating that Medicare Advantage Plans are overpaid, resulting in an increase in Medicare premiums for all Medicare beneficiaries. The original intention of the Medicare Advantage Plans was to decrease cost of care by reducing unnecessary medical services and procedures and by substituting private insurance company efficiency for Medicare government bureaucratic inefficiency. The original projection was that Medicare Advantage would cost 95% of what traditional Medicare costs per beneficiary. The reality is that Medicare Advantage costs 120% of what traditional Medicare costs per beneficiary. In other words, rather than saving money, Medicare Advantage Plans are costing Americans more money. MedPAC estimates that this year, commercial insurance companies will be over-charging Medicare by $76 billion because of upcoding. This ends up costing Medicare beneficiaries more in Part B premiums and costing American taxpayers more in income taxes.
Medicare Part B covers outpatient healthcare services and doctors’ charges. By statute, 25% of Medicare Part B is covered by monthly Medicare premiums charged to all Medicare enrollees (both traditional Medicare and Medicare Advantage Plan enrollees). The annual Medicare Part B premiums are based on income with $2,435 per year for most Medicare enrollees. Higher income enrollees pay as much as $8,279 per year. The other 75% of the cost of Medicare Part B is covered by income taxes paid by working Americans. Because Medicare Part B pays the Medicare Advantage Plan insurance companies on a per-enrollee basis, the more the insurance companies charge per-enrollee, the more Medicare Part B has to pay. This increases the overall cost of Medicare Part B and that increase in cost results in higher Medicare Part B premiums for enrollees and more money from federal income taxes.
Over the next 9 years, Medicare Part B premiums are projected to double to approximately $5,000 per year in 2035 for most Americans. Of this amount, $450 will result from Medicare Advantage Plan overpayments. Commercial health insurance companies are for-profit corporations and as such, they are incentivized to charge as much money as possible – because the Medicare Advantage Plans are paid by Medicare, they are incentivized to charge Medicare (i.e., the federal government) as much money as possible. The temptation to upcode is just too great.
Aetna’s recent $117 million penalty
Aetna is owned by CVS Health and has the 4th largest number of Medicare Advantage Plan enrollees (after UnitedHealthcare, Humana, and Blue Cross/Blue Shield affiliates). The U.S. Attorney’s office in Philadelphia announced last week that Aetna agreed to pay $117.7 million to settle federal charges of false claims of billing. The allegation is that Aetna added diagnosis codes in an attempt to upcode Medicare Advantage Plan enrollees to make them appear to be sicker than they actually are. $11.5 million of the penalty went to a whistleblower who alleged that Aetna added inaccurate diagnosis codes for morbid obesity.
Forced disenrollments from Medicare Advantage Plans
A study published in JAMA last week found that 10% of Americans enrolled in Medicare Advantage Plans were forcibly disenrolled in 2026. Disenrollment happens when a commercial insurance company stops offering its Medicare Advantage Plan in a certain geographic location. The main reason that a Medicare Advantage Plan leaves a local market is financial – they lose money in that particular market area. Prior to 2025, the annual disenrollement was less than 1% per year. In 2025, disenrollment increased to 6.9% and in 2026, increased further to 10.0%.
Disenrollees were more likely to have been in smaller Medicare Advantage Plans, in plans with a lower Medicare star rating, and in rural areas. Seven states had very high disenrollment rates (>40%): Vermont, New Hampshire, Maryland, North Dakota, South Dakota, Wyoming, and Idaho. Vermont is particularly notable with 92.2% of Medicare Advantage Plan enrollees in Vermont being disenrolled in 2006.
The good news is that most of these Medicare Advantage Plan enrollees were able to switch to a different Medicare Advantage Plan insurance company. However, this often results in patients needing to switch doctors when their previous doctor is not in-network for their new Medicare Advantage Plan. This can also affect hospitals that are not in-network for the new plan. Even for those doctors and hospitals that remain in-network for their patient’s new Medicare Advantage Plan, it can mean re-submitting prior authorization applications for upcoming services or procedures.
The recent uptick in Medicare Advantage Plan disenrollments is a sign that commercial insurance companies are finding some areas of the United States to be unprofitable. For disenrollees, the only option to enrolling in a different Medicare Advantage Plan is to go back to traditional Medicare. But switching to traditional Medicare can be fraught with hazard.
The problem with switching from a Medicare Advantage Plan to traditional Medicare.
When a person turns 65-years-old, that person can choose to either enroll in traditional Medicare or a Medicare Advantage Plan. For a Medicare beneficiary who is already enrolled in a Medicare Advantage Plan, there are two times each year that they can change back to traditional Medicare: either during the Medicare Open Enrollment period (October 15 – December 7) or during the Medicare Advantage Open Enrollment period (January 1 – March 31).
But there is a catch. Most people on traditional Medicare will also have a Medigap policy to cover the out of pocket healthcare expenses not covered by traditional Medicare. When you are 65 and first enroll in Medicare, commercial insurance companies offering Medigap policies have to accept everyone, regardless of pre-existing medical conditions. But once you are enrolled in a Medicare Advantage Plan, if you go back to traditional Medicare, the insurance company can deny you a Medigap policy if you have pre-existing conditions such as cancer, diabetes, or heart disease. In other words, if you have a significant pre-existing medical condition, once you go on a Medicare Advantage Plan, you realistically cannot go back to traditional Medicare because you won’t be able to get a Medigap policy. And if a Medicare Advantage Plan has upcoded diagnoses in your insurance record, you may find yourself ineligible for a Medigap policy because the number or severity of your medical problems was exaggerated by the Medicare Advantage Plan insurance company.
What should doctors and hospitals expect next?
With greater public awareness of the practice of upcoding by Medicare Advantage Plans, we can expect more whistleblowers and more prosecutions such as occurred last week with Aetna. If commercial insurance companies dial back their upcoding efforts, they will need to look to other ways of ensuring Medicare Advantage Plan profitability. That is likely to mean ramping up their prior authorization requirements, further restricting the number of in-network providers, and increasing denials.
In anticipation of this, doctors should ensure that their chart documentation is complete and accurate to reduce retrospective denials. We should be sure that the diagnoses associated with test and procedure orders are correct and complete to reduce prior authorization phone calls. And we should check every patient’s current insurance at every visit in order to avoid denials for being unexpectedly out-of-network.
Hospitals should ensure that their revenue cycle departments are fully staffed with personnel to handle prior authorizations and denials. There should be robust processes in place to distinguish observation hospital stays versus inpatient admissions. And patients’ current insurance should be checked at every visit since the prior authorization for an elective hip surgery obtained in March may not be honored when the surgery is actually performed in April if the patient had to switch to a different Medicare Advantage Plan in the interim.
We should have all seen this coming. The Medicare Advantage Plans were supposed to reduce healthcare costs by substituting the streamlined efficiency of private industry for the bloated inefficiency of the federal government’s Medicare operations. But it turns out that Medicare is actually more cost-effective than commercial insurance companies because unlike UnitedHealthcare for example, Medicare isn’t required to turn a profit each year, didn’t have to pay a CEO $26 million in salary last year, and didn’t have to pay shareholders $8 billion in dividends last year. When it comes to making a profit, businesses will always find a way. Even if that way results in higher Medicare Part B premiums to all seniors and increased income tax burden on all American taxpayers.
March 17, 2026
