Healthcare Leadership Council Report Highlights MedPAC’s Misleading Medicare Advantage Cost Analysis

Ghazal: “MedPAC’s change in methodology has created a ‘Wizard of Oz’ illusion, presenting a cost surge when none existed.”

A new report from the Healthcare Leadership Council (HLC), an association of CEOs and C-suite executives from all sectors of healthcare, challenges the accuracy of recent Medicare Advantage (MA) spending estimates by the Medicare Payment Advisory Commission (MedPAC). The report, “Setting the Record Straight: The Facts Behind MedPAC’s Misleading Cost Analysis of Medicare Advantage,” exposes critical flaws in the Commission’s revised methodology underpinning its skewed estimates, and calls for greater transparency in evaluating the MA program.

Introduced suddenly in 2024 and then applied retroactively to previous estimates, MedPAC’s revised methodology dramatically inflates MA payment versus that of traditional fee-for-service Medicare (FFS). HLC’s report examines both the misguided assumptions and incomplete data behind the Commission’s analysis. It also demonstrates that the purportedly sharp increase is not driven by changes in the MA program itself, but rather by a significant shift in how MedPAC calculates its estimates – one that quadrupled its 2023 “overpayment” figure from 6% to 22% using the same data.

“MedPAC’s change in methodology has created a ‘Wizard of Oz’ illusion, presenting a cost surge when none existed,” said Maria Ghazal, HLC President and CEO. “Before acting on these distorted estimates, policymakers must look behind the curtain and understand the facts underlying the so called ‘increase in overpayment.’ HLC’s report is both a warning against reliance on these flawed estimates and a rebuttal to set the record straight.”

HLC’s analysis sheds light on:

• MedPAC’s Erroneous Comparison: MedPAC has never sought to quantify the value of MA – including affordability protections, care coordination, prescription drug coverage, wellness programs, and other benefits – beyond what’s available in FFS, draapprmatically reducing the usefulness of its estimate.
• A New, Misleading Methodology: The new methodology overstates MA payments by relying on problematic assumptions in two key areas, each responsible for roughly half of the “overpayment” estimate:
  • Favorable Selection: For the first time, MedPAC introduced a flawed estimate for “favorable selection,” which discounts 62% of the MA population and assumes lower-cost beneficiaries choose MA. This assumption is contradicted by data showing MA serves an increasingly diverse and medically complex population. Not part of the calculation in 2023, favorable selection accounted for 9% of the “overpayment” estimate in 2024 and 11% in 2025.
  • Coding Intensity: MedPAC’s new methodology for coding intensity doubled its estimate and conflates differences in health status with coding behavior. Only comprising 5% in 2023, coding intensity increased MedPAC’s “overpayment” estimate by 13% in 2024 and 11% in 2025.

With more than half of Medicare beneficiaries now choosing to enroll in MA, the report recommends future analyses reflect programmatic differences, representative data, and an accurate methodology developed collectively among MedPAC, health plans, and other stakeholders.

“As it stands, this ‘overpayment’ estimate is a distraction to policymakers whose focus is needed on productive reforms to strengthen access, improve health, reduce process burdens, and ensure MA is viable now and in the future,” said Ghazal.

The report, which is being sent to policy leaders on Capitol Hill and at the Centers for Medicare & Medicaid Services, comes on the heels of MedPAC’s fall meeting which focused on Medicare’s sustainability.

Published September 9, 2025