Medicare Advantage now covers about 55% of eligible beneficiaries (about 35 million people) and costs the federal government a projected $76 billion more in 2026 than traditional fee-for-service Medicare would, according to a March report by the Medicare Payment Advisory Commission.
So when The University of Pennsylvania’s Leonard Davis Institute of Health Economics convened a panel discussion March 13 to ask “Is the program working?” — the answer carried real weight.
Sachin Jain, MD, MBA, COO of the SCAN Group and Health Plan, and Cheryl Damberg, PhD, principal senior economist and director of the Center of Excellence on Health System Performance at RAND, gave a layered answer: Yes, for many seniors, particularly those with modest incomes; no, by the measure policymakers originally promised; and deeply complicated in between.
Here are 10 key takeaways from the panel discussion:
1. The program is failing at its original mission. When Congress created Medicare Advantage more than two decades ago, the promise was that private-sector competition would drive down Medicare costs. That has not happened. “I think we all definitely agree that 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,” Dr. Jain said.
2. The federal government is overpaying by $76 billion this year. MedPAC’s March 2026 report to Congress found the federal government is paying 14% more per Medicare Advantage enrollee than it would spend on the same beneficiary in traditional fee-for-service Medicare. The total overpayment in 2026 is projected to reach $76 billion.
3. The program does deliver real value for lower-income seniors. Despite its fiscal problems, both panelists acknowledged Medicare Advantage has provided meaningful protections for beneficiaries with modest incomes. The program introduced out-of-pocket spending caps, reduced premiums and cost-sharing, and offered supplemental benefits — none of which traditional Medicare provides. However, Traditional Medicare enrollees can choose to add Medicare supplement plans to cover additional costs Medicare Parts A and B do not pay for. Dr. Damberg said these features have been “really important to low-income seniors.”
4. Efficiency gains have flowed to plans and shareholders, not to taxpayers. Medicare Advantage has reduced utilization and led to cost efficiencies including increased use of home health services versus skilled nursing facilities, according to Dr. Damberg.
“But the benefits from these improved efficiencies have largely accrued to private plans and, in some cases, their shareholders, not the government,” she said. “It provided a cap on out-of-pocket spending for beneficiaries, and this was important for limiting the financial burden for low-income seniors. Lastly, it lowered the cost of coverage to beneficiaries through lower premiums, reduced cost sharing, and the provision of extra supplemental benefits — also really important to low-income seniors.”
5. Four distinct forces drive the overpayment problem. Dr. Damberg outlined four key reasons:
- Benchmark disparities, where the government’s county-level target payments are sometimes set above traditional Medicare spending;
- Favorable selection, where healthier patients disproportionately enroll in Medicare Advantage;
- Upcoding, where more aggressive diagnosis coding inflates risk scores;
- Star ratings, which inject new federal spending into the program, unlike every other CMS pay-for-performance program, which is budget-neutral.
6. Risk adjustment gaming has distorted the market. Both experts agreed that risk adjustment is necessary; plans covering sicker patients should receive higher payments. But both said the system has been systematically exploited. Dr. Jain said some provider groups and plans became far more focused on maximizing coding revenue than on improving care while Dr. Damberg said the aggressive coding has distorted competition among plans. The updated CMS risk adjustment model, known as V28, moves in the right direction, but is only one step, according to Dr. Damberg, who called for further refinements, coding adjustments calibrated to each plan’s coding intensity and a ban on unlinked diagnoses.
7. Prior authorization and narrow networks are the program’s central trade-off. The tools insurers use to control costs — prior authorization and limited networks — block or limit care before patients receive it. Both panelists noted that denials are frequently overturned on appeal, suggesting the system can obstruct appropriate care. Dr. Jain pushed for a different model: rather than insurers reviewing care after the fact, physicians responsible for managing costs should be the ones steering patients away from low-value treatments.
8. Supplemental benefits are popular but often hollow — and raise equity concerns. Dr. Jain said many plans advertise attractive extra benefits but place barriers in the way of patients actually using them. Dr. Damberg raised a structural concern: the benefits have effectively expanded Medicare without a public policy debate about how to finance them. They also create inequities, since traditional Medicare beneficiaries receive none of the same offerings.
9. The market is too complex for beneficiaries to navigate. Both panelists said there are too many plan designs and too much benefit complexity for seniors to make informed choices. Dr. Jain compared the current Medicare Advantage landscape to the pre-standardization Medigap market and endorsed benefit standardization as a remedy. Dr. Damberg noted that seniors are routinely making suboptimal plan selections, often steered by brokers receiving commissions from MA plans, with no comparable sales infrastructure on the traditional Medicare side.
10. Reform is needed, but unlikely. Dr. Damberg’s priorities: standardize benefits, fix overpayments, and level the playing field between Medicare Advantage and traditional Medicare by extending out-of-pocket caps and supplemental benefits to traditional Medicare. Dr. Jain’s: standardize benefits, shift to multi-year enrollment periods so plans have more time to improve outcomes, and gradually push the program to provide better outcomes at lower cost. Both acknowledged that expecting Congress to modernize traditional Medicare in the near term is politically unrealistic, leaving Medicare Advantage — despite its flaws — as the primary vehicle for benefit innovation.
Editor’s note: The discussion was hosted by Penn’s Leonard Davis Institute of Health Economics and moderated by LDI Executive Director Rachel Werner, MD, PhD.
Click here to watch the full virtual panel discussion.
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