In the labyrinth of America's healthcare system, few programs embody the tension between innovation and exploitation quite like Medicare Advantage. Launched in the late 1990s as a beacon of efficiency, this public-private partnership promised to inject competition into the staid world of government-run Medicare. The pitch was seductive: Private insurers would offer seniors more choices—think gym memberships, dental coverage, and vision care—while trimming billions from the federal budget through market-driven efficiencies. Fast-forward to today, and that vision has curdled into a trillion-dollar bonanza for corporate giants, leaving taxpayers footing the bill for deceptive practices that inflate costs and erode trust.
As of 2025, Medicare Advantage enrolls over 34 million beneficiaries—more than half of the 62.8 million Americans on Medicare. Yet, what began as a cost-saving experiment has morphed into a "cash cow," as critics aptly describe it, costing 22% more than traditional Medicare. That's an extra $83 billion annually siphoned from public coffers. At its core, the program reimburses private insurers based on risk-adjusted scores for their enrollees, theoretically aligning payments with the expected cost of care. But insurers have gamed this system through two insidious tactics: "favorable selection" and "upcoding." These aren't mere loopholes; they're engineered strategies that have projected overpayments reaching $1 to $1.4 trillion from 2024 to 2033—equivalent to the combined budgets of six major federal agencies.
To understand the scale of this advantage, consider the mechanics. Traditional Medicare, the fee-for-service model run directly by the government, pays providers based on actual services rendered. Medicare Advantage, by contrast, hands lump-sum payments to insurers like UnitedHealthcare and Cigna, who then manage care for their members. The Centers for Medicare & Medicaid Services (CMS) calculates these payments using Hierarchical Condition Category (HCC) codes, which assign higher reimbursements to sicker patients. Insurers, incentivized to maximize revenue, have turned this into a profit engine. They spend just 11% less on patient care than the government reimburses, pocketing the surplus while delivering subpar access in some regions.
Favorable selection is the subtler scam. Insurers don't randomly enroll seniors; they target the healthiest ones in low-cost areas to understate real expenses while overclaiming federal funds. Picture a Memphis-based plan recruiting diabetic patients from a network of bargain-rate doctors. The insurer knows local care costs peanuts—perhaps $5,000 per patient annually—but submits risk scores implying $8,000 or more under traditional Medicare. The government wires the higher amount, and the insurer banks the difference. This cherry-picking distorts the risk pool, leaving traditional Medicare with costlier, sicker enrollees. The result? A self-perpetuating cycle where private plans thrive on subsidized health, while the public program shoulders the burden.
Upcoding takes deception a step further, bordering on fraud. It's the art of inflating diagnoses to juice those HCC scores. A routine checkup for mild hand soreness might get coded as "early signs of rheumatoid arthritis," bumping the patient's risk profile and triggering thousands in extra reimbursements. During the COVID-19 pandemic, upcoding surged; diagnoses for conditions like malnutrition and falls spiked inexplicably among Medicare Advantage patients, even as overall health metrics suggested stability. Whistleblowers and audits paint a grim picture: From 2019 to 2023, risk scores for UnitedHealthcare's Medicare Advantage enrollees ran 36% higher than those of the nonprofit Alliance of Community Health Plans. In 2021 alone, UnitedHealthcare captured 42% of all overpayments, a windfall that fueled its parent company, UnitedHealth Group, to a market cap exceeding $500 billion.
This isn't abstract policy wonkery—it's a direct hit to everyday Americans. Medicare's total spending hit $867 billion in 2024, accounting for 7% of the federal budget, with Advantage plans gobbling up 53% of that pie at $462 billion. These overruns exacerbate the program's looming insolvency: The Medicare trustees project a $52.8 trillion shortfall over the next 75 years. Every dollar funneled to private profiteers accelerates that doomsday clock, forcing future generations to choose between tax hikes, benefit cuts, or crippling debt. And the pain isn't evenly distributed. Rural communities, already underserved, bear a disproportionate load. In places like Maine, patients endure six-month waits for primary care, thanks in part to the expiration of the Geographic Practice Cost Index adjustment on September 30, 2024. This tweak once boosted reimbursements for rural doctors to offset higher practice costs; without it, providers are dropping Medicare Advantage plans en masse. A 2024 Healthcare Financial Management Association survey found 35% of major health systems had already axed at least one plan, with 45% mulling the same.
UnitedHealthcare exemplifies the private equity playbook in action. As the dominant player covering 29% of Medicare Advantage enrollees, it has faced relentless scrutiny. In March 2025, a federal jury slapped the company with a $2.1 billion verdict in a Department of Justice lawsuit over upcoding schemes. Smaller fry like Cigna and Independent Health have coughed up settlements too, but the fines are mere slaps on the wrist compared to the trillions in play. Private equity firms, sensing blood in the water, have piled in. Giants like Blackstone and KKR have snapped up Medicare Advantage providers, transforming them into vehicles for leveraged buyouts and fee harvesting. These investors don't just seek returns; they engineer them by squeezing administrative efficiencies—read: layoffs and corner-cutting on care—while lobbying fiercely against reforms.
The irony is thick. Medicare Advantage was sold as empowerment: More benefits, lower premiums, freedom from bureaucratic red tape. Insurers still tout flashy extras—Silver Sneakers fitness classes, over-the-counter allowances—to lure enrollees. But dig deeper, and the "advantage" is illusory. Studies show Advantage patients often face narrower networks, prior authorizations that delay treatments, and outright denials at rates double those of traditional Medicare. A 2024 analysis by the Medicare Rights Center revealed that 15% of Advantage claims were rejected versus 7% in fee-for-service. For cancer patients, this can mean weeks of limbo; for heart attack survivors, it's a gamble with life itself.
Why has this persisted? Political inertia and industry muscle. The insurance lobby, shelling out $100 million annually on campaign contributions and ads, has bipartisan buy-in. Democrats tout expanded access; Republicans cheer privatization. Yet, cracks are showing. Enrollment growth has slowed as word spreads of access woes, and provider revolts mount. In home health care, a sector rife with Advantage overpayments, agencies report reimbursement rates 20% below costs, prompting closures that strand vulnerable elders.
Reform isn't a pipe dream—it's imperative. The Prompt and Fair Pay Act, gaining traction in Congress, would peg Advantage reimbursements to traditional Medicare benchmarks, slashing incentives for favorable selection and upcoding. By standardizing payments and mandating audits, it could claw back $140 billion yearly—the upper end of those trillion-dollar projections. Pair this with renewed rural incentives and transparency rules on risk scores, and Medicare could reclaim its role as a solvent safety net.
As we stare down 2026, with Medicare's hospital trust fund projected to deplete by 2031 absent changes, the trillion-dollar advantage demands reckoning. Private insurers have feasted on a program meant for the aged and infirm, turning public trust into private profit. Taxpayers, from millennials funding the system via payroll taxes to boomers navigating denials, deserve better. It's time to end the bilking and restore Medicare's promise: Care without the con.
Editorial comments expressed in this column are the sole opinion of the writer.
