In its status report on the MA program presented on Friday, MedPAC announced revised numbers for its estimates comparing the cost of MA to fee-for-service Medicare (FFS), concluding MA will cost the government 114% of what it would cost if those beneficiaries were enrolled in FFS in 2026.
In addition to its estimate for 2026, MedPAC retroactively recalculated estimates for recent years, including reducing its 2025 figure from 120% to 117% and lowering its 2024 figure from 122% to 118%. MedPAC credits this substantial decrease to incorporating new data on the impact of the new risk adjustment model, V28.
“Volatile numbers make for risky policymaking. HLC appreciates MedPAC’s effort to refine its methods, but even one corrected assumption leading to such a significant shift in so called ‘overpayment’ estimates underscores the need for greater stability and clarity in the analysis. Presenting misleading numbers with certainty risks policymakers responding with broad policy changes rather than targeted solutions to real problems in Medicare Advantage,” said Maria Ghazal, HLC President and CEO.
Last fall, HLC released the report “Setting the Record Straight: The Facts Behind MedPAC’s Misleading Cost Analysis of Medicare Advantage“, highlighting flawed assumptions underlying key errors in MedPAC’s methodology in the following areas:
- 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, dramatically reducing the usefulness of its estimate.
- Favorable selection methodology, introduced for the first time in 2024, discounts 62% of the MA population and assumes lower-cost beneficiaries choose MA.
- Coding intensity, the new “DECI” methodology adopted in 2024 had doubled estimates of the impact of coding intensity in recent years.
HLC is pleased that MedPAC has addressed at least one – inadequately accounting for the new MA risk adjustment model – of the nine assumptions across HLC’s report highlighted. This change reduced the “overpayment” estimate for 2024 by nearly a fifth, from 22% to 18%.
MedPAC’s March report will reveal more details on the methodology used in the 2026 estimate. However, it is notable that while the estimate for coding (4% in 2026) is less than half of what it has been in recent reports, the favorable selection estimate (11% in 2026) remains consistent with reports in the past few years.
As policymakers review MedPAC’s updated analysis and anticipate the March report to Congress, HLC reiterates our recommendations:
- Policymakers should take steps to ensure they have access to methodologically sound comparisons between the programs, along with a complete understanding of the limitations of any analysis.
- Any Medicare payment reform discussions affecting MA must account for the flaws of current estimates and consider the broader context of program design, risk adjustment, and structural differences between MA and FFS.
- Future analyses must reflect programmatic differences, representative data, and an accurate methodology developed collectively among MedPAC and healthcare stakeholders.
