CMS just locked in a 2.48% payment increase – far higher than anyone expected. Here’s what it means for your premiums, your benefits, and your choices this fall.

If you’re one of the more than 35 million Americans enrolled in a Medicare Advantage plan or if you’re about to turn 65 and weighing your options — the 2027 rate announcement from the Centers for Medicare & Medicaid Services is news that directly touches your wallet, your benefits, and your peace of mind.

On April 6, 2026, CMS dropped a number that surprised practically everyone: a 2.48% average rate hike for Medicare Advantage (MA) plans in Calendar Year 2027. That’s a 27-fold jump from the measly 0.09% that the agency floated back in January and it translates into more than $13 billion in additional government payments flowing to MA insurers next year. If you had seen health insurer stocks – UnitedHealth and CVS Health each jumped more than 9% in after-hours trading, while Humana surged around 12%, you already sensed the significance.

But what does any of this mean for you, sitting at your kitchen table trying to figure out whether your dental coverage will still be there in 2027? Let’s break it all down plainly, honestly, and without the Washington jargon.

What is the Medicare Advantage Rate Hike for 2027?

Every year, CMS – the federal agency that runs Medicare, sets the payment rates it will use to reimburse private insurance companies for running Medicare Advantage plans. Think of it as the government’s annual check to companies like Humana, UnitedHealthcare, Aetna, and CVS Health in exchange for providing Medicare coverage to their enrollees.

The 2027 final rate announcement, officially released on April 6, 2026, finalizes a net average payment increase of 2.48% or more than $13 billion above what the government was paying plans in 2026. When you factor in the estimated trend in MA risk scores (driven by population changes and coding practices), the effective increase reaches a full 4.98%.

From Panic to Relief: How the Final Number Jumped So Much

The story of the 2027 rate is really the story of two very different numbers. In January 2026, CMS published its Advance Notice proposing just a 0.09% increase — barely above zero. Industry analysts described it as a near-catastrophe. Insurance companies warned they’d have to slash benefits, hike premiums, or exit entire markets. The Better Medicare Alliance, a major advocacy organization, mobilized thousands of beneficiaries to flood CMS with public comments.

By the time the final number landed in April, the story had flipped. CMS walked back its proposed risk adjustment model recalibration — the single biggest driver of the original low figure and incorporated updated Medicare claims data through Q4 2025. The result: a 2.48% final increase that Wall Street cheered and patient advocates quietly welcomed, even if the insurance industry had hoped for closer to 3–5%.

Breaking Down the 2027 Medicare Advantage Payment Changes

The final rate announcement is more than just one headline number. It’s a collection of interlocking policy decisions, each of which shapes how much money flows to plans and ultimately to beneficiaries. Here’s what’s actually inside the 2027 announcement.

1. The Effective Growth Rate

This is the backbone of the rate increase. The Effective Growth Rate reflects projected growth in Medicare Advantage benchmarks, largely driven by growth in Original (Traditional) Medicare per capita costs as estimated by CMS’s Office of the Actuary. The incorporation of updated program experience data including original Medicare claims through Q4 2025 – significantly lifted the growth rate from what was initially proposed in January.

2. The Risk Adjustment Model: A Major Reversal

This was the most controversial element of the 2027 cycle. In January, CMS had proposed updating the risk adjustment model with far more recent data — shifting from calibration based on 2018 diagnoses and 2019 expenditures to 2023 diagnoses and 2024 expenditures. Insurers argued this would dramatically reduce their payments and they hadn’t had enough time to absorb the Biden-era V28 model changes that were just fully phased in.

CMS listened. For 2027, the agency will continue using the 2024 MA risk adjustment model calibrated with the older data, giving the market more time to adjust. Industry analysts called the reversal “hard to overstate” as a victory for the MA sector.

3. Excluding Diagnoses From Unlinked Chart Review Records

Not everything went the industry’s way. CMS did finalize a meaningful anti-upcoding measure: starting in 2027, diagnoses from unlinked Chart Review Records (CRRs) – records not tied to an actual patient encounter will no longer count toward risk scores. There is one exception: beneficiaries switching from one MA organization to another.

This matters because upcoding where insurers submit diagnoses that make patients appear sicker than they are to collect higher risk-adjusted payments has been estimated to cost taxpayers tens of billions of dollars annually. The Medicare Payment Advisory Commission (MedPAC) recently found that MA costs the government $76 billion more per year in 2026 compared to a scenario where all beneficiaries were in Traditional Medicare.

4. Star Ratings and Quality Bonus Payments

The 2027 payment rates incorporate 2026 Star Ratings for quality bonus payments. Plans that earn four or more stars receive meaningful payment bonuses — which in turn often fund the richer benefits (like dental, vision, and fitness) that attract enrollees to MA in the first place. CMS also finalized a major Star Ratings overhaul in early April 2026, which is expected to send billions of additional dollars to higher-performing plans over the next decade.

5. Part D Risk Adjustment Updates

The 2027 announcement also covers Medicare Part D — prescription drug coverage. CMS finalized updates to the Part D risk adjustment model that account for changes under the Inflation Reduction Act, reflect more current costs, and separately account for MA-PD (prescription drug plans bundled with MA) and standalone PDP costs. These changes are designed to bring greater stability to drug benefits for all Medicare beneficiaries.

Payment Component	Proposed (Jan 2026)	Final (Apr 2026)	Direction
Net Average Payment Increase	0.09% (~$700M)	2.48% (~$13B+)	Significantly Higher
Effective Increase (incl. risk scores)	2.54%	4.98%	Higher
Risk Adjustment Model Recalibration	Proposed (2023 data)	Withdrawn (2018 data retained)	Favorable for Plans
Unlinked CRR Diagnoses Excluded	Proposed	Finalized (with exception)	Anti-upcoding measure
Part D Risk Adjustment Update	Proposed	Finalized	More accurate drug pricing

What Does the 2027 Rate Hike Mean for Medicare Beneficiaries?

Here’s where it gets personal. The rate hike affects insurers directly but its ripple effects reach every person holding a Medicare Advantage card. Here’s what you should actually be thinking about.

Will My Premiums Go Up or Down in 2027?

The short answer: the 2.48% increase is a positive signal for premium stability, but it doesn’t guarantee your specific plan’s premiums won’t rise. Government payment rates are one input into what insurers charge – medical utilization trends, local market competition, and plan-specific Star Ratings all matter too.

Before the final rate was announced, AHIP (the major health insurer trade group) commissioned a study projecting that if the nearly flat 0.09% rate had been finalized, the typical senior couple would face a premium increase of $23/month – over $550/year. That worst-case scenario is now off the table. But industry groups note that 2.48% still doesn’t fully keep pace with the actual cost pressures facing insurers and the physicians they contract with.

What About My Extra Benefits – Dental, Vision, Hearing?

This is the question most beneficiaries care about most. Over the past two years, many MA enrollees experienced benefit cuts in dental, vision, over-the-counter allowances, and fitness programs as insurers trimmed costs in response to elevated medical utilization after the pandemic. The 2.48% final rate takes some pressure off but it does not guarantee a return to the richer benefit packages of 2022 and 2023.

Analysts at Mizuho noted that the boost may help companies expand margins in 2027 — if they keep reducing benefits and managing expenses. In other words, the extra money could go to shareholder returns as easily as it goes back to your dental plan. Watch your Annual Notice of Change carefully when it arrives in the fall.

Action Step for Beneficiaries:

Every year, MA plans must mail you an Annual Notice of Change (ANOC) by September 30. This document will spell out exactly what’s changing in your plan for 2027 – premiums, copays, deductibles, and covered benefits. Read it. Don’t file it away. The Annual Enrollment Period (AEP) runs October 15 – December 7, giving you the window to switch plans if yours is cutting benefits.

Will My Plan Still Be Available in 2027?

Plan exits were a major concern heading into the 2027 cycle. Most major insurers trimmed their MA membership going into 2026, sacrificing growth for profitability. CMS officials acknowledged they weighed the risk of coverage disruptions for seniors – especially with November 2026 midterm elections approaching – when setting the final rate. The more generous 2.48% figure is intended, in part, to reduce the incentive for plans to exit underperforming markets.

Rural Beneficiaries: Still at Greater Risk

Under the original 0.09% proposal, AHIP research found that approximately 70% of MA beneficiaries lived in counties projected to experience payment cuts, with rural communities facing the steepest reductions. The final 2.48% rate relieves much of that pressure but rural access remains a structural challenge, with fewer competing plans and thinner provider networks already in place.

The Bigger Picture: Is Medicare Advantage Still Worth It in 2027?

Medicare Advantage covers more than half of all Medicare beneficiaries – a landmark crossed in 2025. The program’s appeal has always been the combination of lower monthly premiums and extra benefits not available in Original Medicare. But the program has faced mounting scrutiny over the past few years, driven by three overlapping concerns.

The Overpayment Problem

MedPAC’s finding that MA costs the government $76 billion more per year than Traditional Medicare — largely due to coding practices — is not a partisan talking point. It’s a bipartisan fiscal concern that both CMS administrators under both parties have tried, with varying success, to address. The exclusion of unlinked Chart Review Records in 2027 is a step in the right direction, but critics argue the structural incentives to upcode haven’t been eliminated.

The Benefit Volatility Problem

The past two enrollment cycles exposed a growing vulnerability in MA: supplemental benefits (dental, vision, OTC allowances) can disappear year to year. Unlike Original Medicare, where covered benefits are set by federal law and don’t change annually, MA benefits are determined by what plans choose to offer — and what the government payment rate will sustain. This volatility has prompted some seniors to reconsider whether the extra benefits are worth the uncertainty.

The Access Problem

Prior authorization requirements, narrow networks, and treatment denials have drawn congressional scrutiny. CMS’s 2027 reforms include a new special enrollment period trigger: beneficiaries will be able to switch plans outside of open enrollment when their provider exits an MA network — even without CMS having to determine whether the departure was “significant.” That’s a small but meaningful improvement in consumer protections.

Original Medicare vs. Medicare Advantage: A Quick Comparison for 2027

Original Medicare (Parts A & B): Federal program with set benefits, freedom to see any Medicare-accepting provider nationwide, no annual cap on out-of-pocket costs without a Medigap supplement, predictable year-to-year coverage.

Medicare Advantage (Part C): Private plans covering A, B, and usually D; often lower premiums; extra benefits like dental, vision, and hearing; but network restrictions, prior authorization requirements, and year-to-year benefit variability.

Bottom line: There’s no universal answer. It depends on your health status, your doctors, your finances, and your tolerance for plan changes. The 2027 rate hike slightly tilts the MA calculus in a more favorable direction but the structural trade-offs remain.

How the 2027 Rate Compares to Recent Years

Plan Year	Proposed Rate	Final Rate	Additional Payments
2025	~3.7%	~3.7%	~$16B
2026	2.2%	5.06%	~$25B
2027	0.09%	2.48%	$13B+

The pattern of CMS proposing a low number and then finalizing a much higher one is becoming notable. For 2026, the gap between proposal and final was nearly 3 percentage points. For 2027, it was even wider in relative terms – from a near-zero proposal to a 2.48% final rate.

5 Smart Steps Every Medicare Beneficiary Should Take Before 2027

1. Read your Annual Notice of Change (ANOC) in September 2026. This is the document that tells you exactly what your plan is changing. Don’t let it sit unopened on a table.
2. Log on to Medicare.gov’s Plan Finder during the Annual Enrollment Period (Oct. 15 – Dec. 7, 2026). Compare your current plan to alternatives in your ZIP code. Drug formularies, network doctors, and out-of-pocket maximums can vary significantly even within the same insurer family.
3. Check your plan’s Star Rating. Higher-rated plans (4–5 stars) tend to be more financially stable, have better member satisfaction, and often provide richer benefits. CMS publishes Star Ratings each fall at medicare.gov.
4. If you have a specialist you can’t afford to lose, verify they’re in-network — every year. Provider networks can change annually. Don’t assume your cardiologist or oncologist will still be in your plan’s network just because they were last year.
5. Talk to a licensed Medicare counselor (SHIP). Every state has a free State Health Insurance Assistance Program (SHIP) that offers one-on-one, unbiased Medicare counseling. They can help you compare plans without trying to sell you anything.

Don’t Wait Until Open Enrollment to Get Informed

The 2027 Medicare Advantage rate announcement is decided but how it affects your specific plan, your premiums, and your benefits won’t be clear until fall 2026. Start preparing now so you can make a confident choice during the Annual Enrollment Period. Compare Plans at Medicare.gov.

Frequently Asked Questions

1. What is the Medicare Advantage rate hike for 2027?

CMS finalized a net average payment increase of 2.48% for Medicare Advantage plans in Calendar Year 2027, announced on April 6, 2026. This adds more than $13 billion in government payments to MA plans compared to 2026. When accounting for estimated risk score trends due to population changes and coding practices, the effective increase reaches 4.98%.

2. Will Medicare Advantage premiums go up in 2027?

The higher-than-proposed final rate reduces upward pressure on premiums. However, individual plan premiums depend on many factors beyond the government payment rate — including local medical costs, the plan’s Star Rating, competition in your market, and insurer decisions about benefit design. Your specific premium changes will be announced in your Annual Notice of Change, which plans must send by September 30, 2026.

3. When will 2027 Medicare Advantage plan details be available?

MA plans submit their 2027 benefit designs to CMS over the summer of 2026. Official plan details become publicly available when the Annual Enrollment Period opens on October 15, 2026. You can compare plans at Medicare.gov’s Plan Finder. Plans must also mail you an Annual Notice of Change by September 30, 2026.

You’ve heard about Ozempic everywhere on the news, from your doctor, maybe even from a neighbor who swears by it. And if you’re on Medicare, the question burning in your mind is probably a simple one: Will Medicare pay for this?

The short answer? It depends and the rules are changing fast.

As of 2026, Medicare does cover Ozempic, but only under specific circumstances. If you have Type 2 diabetes, there’s a good chance your Part D plan has you covered. If you’re hoping to use it for weight loss alone, you’ve hit a legal wall for now. But major policy changes on the horizon could flip that reality by mid-2026.

This guide breaks it all down in plain English – no insurance jargon, no runaround so you can walk into your next doctor’s appointment (or phone call with your insurer) fully informed.

What is Ozempic and Why Does Everyone Want It?

Before diving into coverage, let’s make sure we’re all on the same page about what Ozempic actually is.

Ozempic (semaglutide) is a once-weekly injectable medication made by Novo Nordisk. The FDA first approved it in 2017 for the treatment of Type 2 diabetes, specifically to help adults manage blood sugar levels. It also reduces the risk of major cardiovascular events like heart attack and stroke in adults with Type 2 diabetes and existing heart disease. More recently, it gained approval for reducing the risk of worsening kidney disease.

Ozempic belongs to a class of drugs called GLP-1 receptor agonists (glucagon-like peptide-1). These drugs work by:

• Stimulating your pancreas to release insulin when blood sugar rises
• Slowing down how quickly food leaves your stomach
• Reducing the amount of sugar your liver produces
• Signaling your brain that you’re full, which is where the weight loss side effect comes from

That last point is what launched Ozempic into pop culture stardom. Although Ozempic is not FDA-approved for weight loss, many people experience significant weight reduction as a side effect. This led to widespread off-label use and a massive demand surge that Medicare beneficiaries are caught right in the middle of.

Does Medicare Cover Ozempic in 2026?

Here’s the straightforward breakdown:

Medicare DOES Cover Ozempic For:

• Type 2 diabetes management — Most Medicare Part D prescription drug plans cover Ozempic when a doctor prescribes it for blood sugar control.
• Cardiovascular risk reduction — If you have Type 2 diabetes and a history of heart disease, Ozempic may be covered for reducing the risk of heart attack or stroke.
• Kidney disease prevention — Coverage may also apply for adults with Type 2 diabetes and chronic kidney disease.

Medicare Does NOT Currently Cover Ozempic For:

• Weight loss — Full stop. A 2003 federal law (the same one that established Medicare Part D) explicitly prohibits Part D plans from covering drugs used solely for weight loss.
• Off-label use — If your doctor prescribes Ozempic for any purpose other than its FDA-approved indications, Medicare will not cover it.

Important: Just because a drug appears on your plan’s formulary (drug list) doesn’t automatically mean you qualify for coverage. You’ll need documented proof of your diagnosis typically a confirmed Type 2 diabetes diagnosis to get coverage approved.

How Medicare Part D Covers Ozempic?

Medicare Part D is the prescription drug component of Medicare. It’s offered either as a standalone Part D plan (paired with Original Medicare) or bundled into a Medicare Advantage (Part C) plan.

Here’s how Ozempic coverage works within Part D:

1. Formulary Placement

Most Part D plans list Ozempic on their formulary, usually in Tier 3 or Tier 4 — which means it’s a “non-preferred brand” or “specialty drug.” The tier determines your copay or coinsurance amount, and costs can vary significantly from plan to plan.

2. Prior Authorization

Many Part D plans require prior authorization before covering Ozempic. This means your doctor must submit documentation proving that the medication is medically necessary for your approved condition. Don’t skip this step – it’s one of the most common reasons claims get denied.

3. Step Therapy

Some plans require you to try a less expensive diabetes medication first before they’ll approve Ozempic. This is called “step therapy.” If you’ve already tried other treatments that didn’t work, your doctor can usually document that to bypass this requirement.

4. Quantity Limits

Plans may also set quantity limits on how much Ozempic you can fill per month. Make sure you check your plan’s specific rules.

How Much Does Ozempic Cost Under Medicare?

Without coverage, Ozempic has a list price of approximately $997.58 per monthly injection – a significant financial burden for most seniors on fixed incomes.

With Medicare Part D coverage, your out-of-pocket costs depend on your plan’s design. Here’s what you should know for 2026:

• Annual out-of-pocket cap: In 2026, Medicare Part D limits yearly out-of-pocket costs for covered drugs to $2,100 – a major improvement for people on expensive medications.
• Deductibles and coinsurance still apply until you hit that cap.
• Without diabetes coverage: You’d be paying full list price nearly $1,000/month, which is why the upcoming policy changes matter so much.

The Big News: Medicare Coverage for Ozempic Is Expanding

This is where things get genuinely exciting for Medicare beneficiaries who need Ozempic for weight management.

The BALANCE Model (Starting 2026–2027)

On December 23, 2025, the Centers for Medicare & Medicaid Services (CMS) announced the BALANCE Model which stands for Better Approaches to Lifestyle and Nutrition for Comprehensive Health. This is a five-year demonstration program designed to expand GLP-1 drug coverage to more Medicare beneficiaries.

Here’s the timeline:

• May 2026: BALANCE begins for Medicaid
• July 2026: A six-month “bridge” program launches for Medicare Part D beneficiaries
• January 2027: Full Medicare Part D phase-in begins

The GENEROUS Model

In November 2025, President Trump announced the GENEROUS Model (GENErating cost Reductions fOr U.S. Medicaid) in partnership with pharmaceutical companies Eli Lilly and Novo Nordisk. This model extends GLP-1 coverage to both Medicare and Medicaid beneficiaries who don’t have Type 2 diabetes — specifically targeting obesity.

What Will Beneficiaries Pay?

Under the new pilot programs, the anticipated cost structure looks like this:

Medication	Program Cost	Beneficiary Copay
Ozempic / Mounjaro (diabetes doses)	~$245/month	~$50/month
Wegovy / Zepbound (obesity doses)	~$350/month	~$50/month

This compares to the current list price of $997–$1,350/month without coverage — a dramatic reduction.

Who Will Qualify?

To qualify for GLP-1 coverage under the new obesity-focused programs, preliminary criteria suggest beneficiaries must have:

• A BMI over 35, OR
• A BMI of 27 or higher combined with at least one weight-related health condition (like high blood pressure, sleep apnea, or cardiovascular disease)

One important caveat: Plans must opt in to the pilot program. Not every Part D or Medicare Advantage plan will automatically offer this benefit, so you’ll want to confirm with your specific insurer.

Medicare Drug Price Negotiations

In January 2025, CMS selected Ozempic, Rybelsus, and Wegovy for its second round of Medicare drug price negotiations. The negotiated prices are expected to take effect in 2027, with a projected cost of around $274 for a 30-day supply down from the current near-$1,000 list price.

What about Wegovy – is it Different?

Yes and this is a distinction that trips a lot of people up.

Wegovy is the same active ingredient as Ozempic (semaglutide), but it’s FDA-approved specifically for weight management in adults with obesity or overweight combined with a weight-related condition.

Here’s how Medicare covers Wegovy differently:

• Cardiovascular disease + obesity/overweight: In March 2024, the FDA approved Wegovy to reduce cardiovascular risk in adults with established heart disease who are also overweight or obese. This opened the door for Medicare Part D plans to cover Wegovy — but only for this specific indication, not for weight loss alone.
• MASH (liver disease): In mid-2025, the FDA approved Wegovy for metabolic-associated steatohepatitis, which may create additional coverage pathways.
• Weight loss only: Still not covered by Medicare under current law.

If you have documented cardiovascular disease and meet the BMI criteria, talk to your doctor – you may qualify for Wegovy coverage right now, before the pilot programs even launch.

What About Mounjaro and Zepbound?

While this article focuses on Ozempic, it’s worth knowing how Medicare handles the other major GLP-1 drugs:

• Mounjaro (tirzepatide): Covered by most Part D plans for Type 2 diabetes management.
• Zepbound (tirzepatide): May be covered when prescribed to treat obstructive sleep apnea in adults with obesity – not for weight loss alone.

Does Medicare Advantage Cover Ozempic?

Medicare Advantage (Part C) plans are offered by private insurance companies and must cover everything Original Medicare covers but they often include additional benefits.

Some Medicare Advantage plans may offer more favorable Ozempic coverage depending on your plan’s formulary. However, the same federal restriction applies: no coverage for weight loss as the sole indication.

If you’re shopping for a Medicare Advantage plan and Ozempic coverage is a priority, compare plan formularies carefully and call the insurer directly to ask about their specific coverage rules.

What Medicare DOES Cover for Weight Management

Even if you don’t qualify for Ozempic coverage right now, Medicare still offers several weight-related benefits:

Intensive Behavioral Therapy (IBT) for Obesity

• Covered under Medicare Part B
• Available if you have a BMI of 30 or higher
• Must be performed by a primary care provider in a primary care setting
• No cost to you – coinsurance and the Part B deductible are waived

Medical Nutrition Therapy (MNT)

• Covered under Part B if you have diabetes or kidney disease and your doctor refers you
• Provides individualized nutrition counseling with a registered dietitian

Bariatric Surgery

• Covered for certain conditions when specific medical criteria are met
• Talk to your doctor to determine if you qualify

How to Get Ozempic Covered by Medicare: Step-by-Step

If you have Type 2 diabetes and want to pursue Ozempic coverage through your Medicare Part D plan, here’s what to do:

Step 1: Confirm your diagnosis is documented. Your doctor needs to have a formal Type 2 diabetes diagnosis in your medical records. Verbal acknowledgment isn’t enough.

Step 2: Check your plan’s formulary. Log in to your Part D plan’s website or call member services. Search for Ozempic (semaglutide) and note the tier placement and any coverage restrictions.

Step 3: Ask your doctor for a prior authorization. Request that your doctor’s office submit the necessary prior authorization paperwork to your insurance plan.

Step 4: Inquire about step therapy exceptions. If you’ve already tried other diabetes medications without success, make sure your doctor documents this. It may help you skip the step therapy requirement.

Step 5: Appeal if denied. If your claim is denied, you have the right to appeal. Your doctor can help by submitting a letter of medical necessity.

Ways to Save on Ozempic If Medicare Won’t Cover It

If you’re not eligible for Medicare coverage of Ozempic, you’re not completely out of options:

• Novo Nordisk Savings Offer: The manufacturer sometimes offers introductory pricing for new patients paying cash – reportedly around $199/month for eligible patients.
• GoodRx, SingleCare, WellRx: Online discount platforms compare pharmacy prices and can significantly reduce your out-of-pocket cost.
• Patient Assistance Programs (PAPs): Novo Nordisk offers a patient assistance program for people who meet income criteria.
• Employer insurance: If you’re still working or covered under a spouse’s employer plan, check that plan’s GLP-1 coverage – nearly all employer plans now cover GLP-1s for diabetes, and about half of large employer plans (500+ employees) cover them for weight loss.
• TrumpRx: The White House announced this drug discount initiative in 2025, which provides links to manufacturer discounts directly.

Real Talk: What This Means for You

Let’s bring this home with a couple of scenarios that illustrate how these rules play out in real life.

Scenario 1 — Margaret, 68, with Type 2 diabetes: Margaret was diagnosed five years ago and her doctor recommends Ozempic to better control her A1C levels. She has a Medicare Part D plan. With prior authorization from her doctor documenting her diabetes diagnosis, her plan covers Ozempic at a Tier 3 copay of around $47/month. She pays a fraction of the list price.

Scenario 2 — David, 72, without diabetes but with obesity: David’s doctor thinks Ozempic could help him lose weight and reduce strain on his joints. But because David doesn’t have a diabetes diagnosis, his Medicare Part D plan won’t cover it. He’s paying $997/month out of pocket — and he’s watching the 2026 pilot program news very closely.

Scenario 3 — Linda, 70, with heart disease and obesity: Linda was diagnosed with cardiovascular disease last year. Her doctor prescribes Wegovy – not Ozempic specifically to reduce her cardiovascular risk. Because Wegovy is FDA-approved for that purpose and Linda meets the criteria, her Part D plan covers it.

Frequently Asked Questions (FAQs)

Does Medicare Part D cover Ozempic for weight loss?

No. As of 2026, federal law prohibits Medicare Part D from covering medications prescribed solely for weight loss. However, pilot programs launching in mid-2026 may change this for eligible beneficiaries.

Is Ozempic covered by Medicare if I have diabetes?

Yes. Most Medicare Part D plans cover Ozempic when it’s prescribed for Type 2 diabetes management. You’ll likely need prior authorization and your plan must list Ozempic on its formulary.

What is the cost of Ozempic with Medicare Part D?

It varies by plan and tier placement, but you should expect copays or coinsurance after meeting your deductible. In 2026, the out-of-pocket cap is $2,100/year for covered drugs, providing meaningful protection against high costs.

Will Medicare cover Ozempic for heart disease?

Medicare may cover Ozempic if you have Type 2 diabetes and heart disease, as the FDA has approved semaglutide for reducing cardiovascular risk in that population. Talk to your doctor and check with your specific plan.

What is the difference between Ozempic and Wegovy for Medicare coverage?

Both contain semaglutide, but they’re FDA-approved for different uses. Ozempic is approved for Type 2 diabetes; Wegovy is approved for cardiovascular risk reduction in people with established heart disease and obesity/overweight. Medicare may cover Wegovy for the cardiovascular indication in eligible patients.

When will Medicare start covering Ozempic for weight loss?

A pilot program (the BALANCE Model and GENEROUS Model) is expected to begin making GLP-1 drugs more accessible for obesity treatment starting mid-2026. Full Medicare Part D coverage through negotiations is targeted for 2027, when negotiated prices around $274/month are expected to take effect.

Can my doctor prescribe Ozempic off-label and have Medicare cover it?

No. Medicare Part D does not cover off-label prescriptions for Ozempic or any other GLP-1 medication.

Does Medicaid cover Ozempic?

Most state Medicaid programs cover Ozempic for Type 2 diabetes treatment, though coverage rules vary by state. Some states require step therapy or prior authorization. The BALANCE and GENEROUS Models also aim to expand Medicaid GLP-1 access for obesity starting in 2026.

How do I appeal a Medicare denial for Ozempic?

If your Part D plan denies coverage, you can file a formal appeal. Work with your doctor to provide a detailed letter of medical necessity, and submit the appeal within the timeframe specified in your denial notice.

Is there a generic version of Ozempic covered by Medicare?

As of early 2026, there is no FDA-approved generic version of Ozempic. However, the FDA approved an oral version of Wegovy (a semaglutide pill) expected to be available in early 2026, which may open up additional coverage options.

The Bottom Line

Navigating Medicare coverage for Ozempic isn’t simple but it’s not hopeless either. Here’s a quick summary of where things stand:

• You have Type 2 diabetes? You very likely qualify for Ozempic coverage under Medicare Part D – talk to your doctor and check your formulary.
• You want it for weight loss only? Coverage isn’t available under current law, but 2026 and 2027 will bring major changes worth watching.
• You have heart disease and obesity? Ask your doctor about Wegovy – you may already qualify for coverage right now.
• You’re paying out of pocket? Explore manufacturer discounts, GoodRx, and patient assistance programs to reduce your costs while you wait for policy changes to catch up.

The policy landscape is shifting more rapidly than at any time in Medicare’s history when it comes to GLP-1 drugs. Staying informed and proactive could save you hundreds of dollars a month.

Take Action Today

Don’t wait for the next annual enrollment period to figure this out.

Here’s your action plan:

1. Call your Medicare Part D plan (the number is on your member ID card) and ask specifically whether Ozempic or Wegovy is covered under your diagnosis.
2. Talk to your doctor at your next appointment about whether Ozempic is appropriate for you and what documentation they can provide to support a prior authorization.
3. Check back on Medicare.gov for updates on the BALANCE program rollout and eligibility details as they are announced.
4. Compare plans during the next Open Enrollment Period (October 15 – December 7) if your current plan doesn’t cover Ozempic and a competitor’s plan does.

The right coverage could make a $1,000/month medication accessible at $50/month and that’s worth a phone call.

Imagine this: you just had a serious medical procedure. Your doctor has recommended follow-up rehabilitation at a specialized facility. You’ve paid your premiums faithfully all year. Then comes the letter – your Medicare Advantage plan has denied the claim. Sound familiar? You’re not alone.

More than 34 million Americans are currently enrolled in Medicare Advantage (MA) plans. While many seniors sign up expecting seamless, affordable coverage, thousands find themselves stuck with plans that deny care, restrict providers, or leave them with sky-high out-of-pocket bills.

In this comprehensive guide, we break down the worst Medicare Advantage plans – what makes a plan bad, which insurers have earned the lowest ratings, what red flags to watch for, and how to protect yourself during open enrollment. Whether you’re choosing a plan for the first time or reconsidering your current coverage, this is the guide you need.

What Makes a Medicare Advantage Plan ‘The Worst’?

Not all Medicare Advantage plans are created equal. The quality gap between the best and worst plans is staggering and it can directly impact your health and financial wellbeing. Experts and regulators use several key indicators to identify low-quality plans.

1. Low CMS Star Ratings

Every year, the Centers for Medicare & Medicaid Services (CMS) rates Medicare Advantage plans on a 1-to-5-star scale. Plans are judged on customer service, member experience, preventive care, chronic disease management, and drug plan performance.

The concerning trend: The average star rating (weighted by enrollment) fell from 4.14 in 2023 to 4.04 in 2024. For 2025, CMS flagged eight contracts with a ‘low performing’ icon — up from six the year before. Seven of those eight were Medicare Advantage plans.

Red Flag: Any plan with 3 stars or below should be approached with extreme caution. CMS considers plans with consistently low ratings as failing to meet quality benchmarks.

2. High Prior Authorization Denial Rates

Prior authorization (PA) is the process where your insurer must approve a service or medication before you receive it. While Original Medicare requires PA for only a limited set of services, Medicare Advantage plans routinely require it for far more and deny it far too often.

Key data point: According to KFF, nearly 53 million prior authorization requests were submitted to Medicare Advantage insurers in 2024, and 4.1 million – roughly 7.7% were denied outright.

What’s alarming is that when denied patients appeal these decisions, they succeed over 80% of the time. This suggests many initial denials are inappropriate — and the worst plans use denials as a cost-cutting tool at patients’ expense.

3. Poor Member Satisfaction Scores

The 2025 J.D. Power Medicare Advantage Study surveyed nearly 11,000 enrollees and found that overall satisfaction dropped 29 points to just 623 out of 1,000 – the steepest decline in the study’s 11-year history. The primary driver? A 39-point collapse in member trust.

• Only 38% of first-year members say their plan fulfills their service expectations
• Common complaints include confusing explanation of benefits, difficulty finding in-network doctors, and prior authorization delays
• Highmark New York ranked as the lowest-rated plan for customer satisfaction in 2025

4. Narrow Provider Networks

Restricted networks are a hallmark of low-quality Medicare Advantage plans. Unlike Original Medicare – where you can see any provider that accepts Medicare anywhere in the country – MA plans typically limit you to an approved network. The worst plans have narrow networks that exclude major hospitals or specialists you depend on.

If your preferred doctor or hospital is suddenly out of network which happens more often than you’d think, since networks change annually – you either pay out-of-pocket or switch providers.

5. Hidden Out-of-Pocket Costs

The maximum out-of-pocket limit for in-network care in 2026 is $9,250 and that doesn’t include prescription drug costs. Prescription costs are separately capped at $2,100 in 2026. The worst plans are structured so that beneficiaries hit these limits quickly, especially for serious or chronic conditions.

The fine print matters: Plans advertise $0 premiums but fail to disclose high copays, strict prior authorization rules, or the cost of out-of-network emergencies.

Major Insurers With Declining Ratings in 2025–2026

While individual plan performance varies by region, several major national carriers have seen notable declines in quality metrics. Here’s what the data reveals:

UnitedHealthcare

CMS 2025 Star Rating: Average 3.5–4.0 across contracts, with a year-over-year decline of 0.39 stars — worse than the industry average.

Enrollment: UnitedHealthcare is the largest Medicare Advantage insurer with 9.9 million members in 2025.

Despite its massive scale, UnitedHealthcare has faced scrutiny for prior authorization denials and network changes. Its stock fell approximately 36% year-to-date as of December 2025, reflecting financial pressures that can translate to benefit cuts.

• Announced plans to scale back Medicare Advantage offerings in 2026
• Engaged in legal disputes with CMS over star rating methodologies
• Members in some regions reported unexpected network changes mid-year

Humana

Star Rating Drop: Humana saw the largest average star rating decline among the top 15 plans — a drop of 0.74 stars — representing a significant quality erosion.

Humana has cut supplemental benefits in recent years to manage rising medical costs. While it has stabilized some offerings for 2026, the insurer’s stock also declined significantly, and the company announced plans to scale back its MA footprint.

• Cut dental, vision, and hearing benefits in multiple markets
• Increased prior authorization requirements for certain services
• Members auto-transferred to different plans due to consolidations

Centene

Prior Authorization Concern: Centene had one of the highest prior authorization denial rates among major Medicare Advantage insurers, according to Kiplinger. While its appeals overturn rate was high (93.6%), this means a huge proportion of initial denials were likely inappropriate.

With only about 1.1 million MA enrollees and a 2% market share, Centene’s outsized denial rate makes it particularly concerning for the seniors who depend on it.

CVS Health / Aetna

CMS Star Ratings: Most Aetna plans are rated 3–4 stars. CVS Health had the second-highest prior authorization denial rate among major insurers, with 89.7% of its appealed denials overturned — again suggesting many denials were unwarranted.

With a 12% market share and 4.1 million enrollees, even a fraction of unnecessary denials affects hundreds of thousands of Americans.

Zing Health

Among smaller plans, Zing Health had one of the lowest-performing contracts in the 2025 CMS star ratings — a warning sign for members in markets where Zing operates.

Highmark New York

According to the 2025 J.D. Power study, Highmark New York ranked dead last for member satisfaction in its market — a distinction no plan wants and no enrollee deserves.

Red Flags That Identify the Worst Medicare Advantage Plans

So how do you spot a bad Medicare Advantage plan before you’re locked into it? Here are the red flags that consumer advocates and healthcare experts say to watch closely:

• Low CMS Star Rating (below 3.5 stars): CMS publishes star ratings every fall before open enrollment. Plans with 3 stars or below are consistently underperforming on care quality and member satisfaction.
• High prior authorization requirements: Plans that require prior authorization for a long list of routine services create unnecessary barriers to care. Review a plan’s prior authorization list before enrolling.
• Very narrow provider networks: If your current doctors aren’t in-network, that’s a serious problem. Always check the plan’s provider directory and verify independently, since directories are often outdated.
• Annual benefit reductions: Plans that keep cutting dental, vision, hearing, or prescription benefits year after year are prioritizing profits over patient care.
• High out-of-pocket maximums: In 2026, the maximum is $9,250 for in-network care. Plans near that ceiling offer less financial protection than they appear to.
• Confusing or misleading marketing: CMS has reported double-digit increases in complaints about misleading Medicare Advantage marketing. Watch for promises of ‘free’ coverage that ignores copays and restrictions.
• Frequent plan consolidations: If a plan keeps merging with others or exiting markets, your coverage and providers could change without warning.
• No or minimal digital tools: The J.D. Power study found that digital satisfaction among the highest-performing plans was 98 points higher than among the lowest-performing ones. Poor digital tools signal poor member support overall.

The Prior Authorization Crisis: By the Numbers

Prior authorization has become the single biggest pain point for Medicare Advantage members and the statistics are alarming.

53 million prior authorization requests were submitted in 2024 alone.

4.1 million (7.7%) of those requests were denied – up from under 6% in 2019–2021.

Over 80% of appealed denials are overturned – suggesting widespread inappropriate denials.

Only ~10% of denied patients even bother to appeal – leaving millions without the care they’re entitled to.

73% of Americans say delays and denials of care by health insurers are a ‘major problem,’ according to a 2025 KFF poll.

47% of people who needed prior authorization found the process ‘somewhat’ or ‘very’ difficult to navigate.

The most troubling finding: When Medicare Advantage denials are appealed, they’re overturned 82% of the time. In traditional Medicare, only 29% of appealed denials are overturned. This gap suggests that MA plans are systematically over-denying care.

The Senate Homeland Security Committee’s investigative subcommittee has scrutinized large Medicare Advantage insurers specifically for their high rates of prior authorization denials for post-acute care – like skilled nursing facilities and inpatient rehabilitation – services that are critical for seniors recovering from surgery or illness.

How to Evaluate and Compare Medicare Advantage Plans

The good news: you have more tools than ever to research plans before committing. Here’s a step-by-step framework:

Step 1: Check the CMS Star Rating

Visit Medicare.gov and use the Plan Finder tool. Filter by star ratings. Aim for plans with 4 stars or above. Five-star plans have the added bonus of being available for enrollment year-round.

Step 2: Verify Your Doctors Are In-Network

Don’t rely solely on the plan’s online directory. Call your doctor’s office directly and ask whether they accept the specific Medicare Advantage plan you’re considering — including the specific contract number if possible.

Step 3: Review the Prior Authorization List

Starting in 2026, Medicare Advantage insurers are required to publish a list of all services requiring prior authorization, along with their approval and denial rates. Review this carefully, especially if you have chronic conditions or anticipate surgeries or specialist care.

Step 4: Calculate Your True Costs

Add up the monthly premium plus the expected copays for the services you use most. Compare the total cost – not just the premium against Original Medicare plus a Medigap supplement plan.

Step 5: Check Drug Coverage

Ensure your specific medications are on the plan’s formulary. Drug plan deductibles can be no higher than $615 in 2026, and out-of-pocket prescription costs are capped at $2,100 for 2026. Verify that your drugs are in the lowest possible tier.

Step 6: Read the Annual Notice of Change (ANOC)

Your current plan must send you an ANOC by September 30 each year. This document spells out every change to your benefits, costs, and network for the coming year. Read it carefully and if anything significant has changed, it’s time to compare alternatives during Open Enrollment (Oct 15 – Dec 7).

When to Switch Away From Your Medicare Advantage Plan

You don’t have to stay in a bad plan. Here are the most important times when you can make a change:

• Annual Open Enrollment (October 15 – December 7): You can switch to any Medicare Advantage plan or return to Original Medicare. Changes take effect January 1.
• Medicare Advantage Open Enrollment (January 1 – March 31): If you’re already in an MA plan and unhappy, you can switch to another MA plan or return to Original Medicare during this window.
• Special Enrollment Periods (SEPs): If your plan leaves your area, loses its Medicare contract, or if you move, you may qualify for a Special Enrollment Period to switch plans outside the normal window.
• 5-Star Enrollment: Five-star plans can be joined at any time during the year – a major advantage if you miss open enrollment.

Important: Switching from Medicare Advantage back to Original Medicare may be difficult if you have pre-existing conditions and want to buy a Medigap supplement policy. In most states, Medigap insurers can use medical underwriting outside of specific guaranteed issue windows. Consider this carefully before switching.

Medicare Advantage vs. Original Medicare: The Real Comparison

For many seniors, especially those with complex health needs, Original Medicare paired with a Medigap supplement plan provides superior protection. Here’s a quick comparison:

Provider Access: Original Medicare allows you to see any provider that accepts Medicare nationwide. Medicare Advantage restricts you to an in-network panel.

Prior Authorization: Original Medicare requires PA for a small set of services. Medicare Advantage can require PA for a far broader list.

Travel Coverage: Original Medicare covers you across all 50 states. Most Medicare Advantage plans only cover emergency care outside their service area.

Out-of-Pocket Predictability: Medigap plans can cover nearly all of Original Medicare’s cost-sharing, offering far more financial predictability than MA plans.

Extra Benefits: Medicare Advantage plans often include dental, vision, and hearing. Original Medicare does not – though standalone plans are available.

The bottom line: if your priority is access to any doctor, minimal paperwork, and predictable costs – especially if you have serious or complex health needs – Original Medicare with Medigap may serve you better than the average Medicare Advantage plan.

Take Action Before Open Enrollment Closes

Don’t wait until you’re denied care to realize your plan isn’t working for you. Take these steps today:

• Visit Medicare.gov/plan-compare to check your plan’s star rating
• Call 1-800-MEDICARE (1-800-633-4227) for free, unbiased assistance
• Contact your State Health Insurance Assistance Program (SHIP) for personalized guidance at no cost
• Report misleading marketing or wrongful denials to 1-800-MEDICARE or your State Senior Medicare Patrol (SMP)

Frequently Asked Questions (FAQ)

Q: How do I find out if my Medicare Advantage plan is rated poorly?

Visit Medicare.gov and use the Medicare Plan Finder. Every plan shows its CMS star rating from 1 to 5 stars. Plans rated 3 stars or below are considered low-performing. You can also view ‘low performing’ icons on the Plan Finder for plans that have consistently failed quality benchmarks.

Q: Which Medicare Advantage plan has the most complaints?

Complaint data varies by region, but national data from J.D. Power’s 2025 study identified Highmark New York as the lowest-ranked plan for member satisfaction. CMS also maintains a low-performing plan list with eight contracts flagged for 2025 – primarily Medicare Advantage plans. Centene and CVS Health/Aetna also drew attention for high prior authorization denial rates.

Q: Can I switch out of a bad Medicare Advantage plan mid-year?

In most cases, you can only switch during the Annual Open Enrollment Period (October 15 – December 7) or the Medicare Advantage Open Enrollment Period (January 1 – March 31). However, certain life events – like moving, losing other coverage, or your plan losing its Medicare contract – may qualify you for a Special Enrollment Period that allows mid-year changes.

Q: What happens if my Medicare Advantage plan denies a claim?

You have the right to appeal. Request a written denial notice if you haven’t received one, then file a formal appeal with your plan. If the plan upholds the denial, you can escalate to an independent review entity. Statistics show that over 80% of appeals are successful, so it is absolutely worth fighting an unjust denial. Contact 1-800-MEDICARE or your SHIP counselor for free help navigating the appeals process.

Q: Is Original Medicare better than Medicare Advantage?

It depends on your individual health needs, finances, and priorities. Original Medicare offers nationwide provider access with no network restrictions and minimal prior authorization requirements. Paired with a Medigap supplement plan, costs become highly predictable. Medicare Advantage can offer lower premiums and extra benefits like dental and vision, but often comes with restricted networks, prior authorization hurdles, and less financial predictability. For those with complex or chronic health conditions, Original Medicare with Medigap is often the safer choice.

Q: What is the out-of-pocket maximum for Medicare Advantage in 2026?

The in-network out-of-pocket maximum for Medicare Advantage plans in 2026 is $9,250. Note that prescription drug costs are handled separately and are capped at $2,100 in 2026. Out-of-network costs may be even higher, depending on your plan type.

Q: How do I report a bad Medicare Advantage plan or misleading marketing?

You can file a complaint directly with CMS by calling 1-800-MEDICARE (1-800-633-4227), available 24/7. You can also contact your State Health Insurance Assistance Program (SHIP), file a complaint with your state insurance department, or report suspected fraud or abuse to your regional Senior Medicare Patrol (SMP).

Q: Do Medicare Advantage plans get worse every year?

Not necessarily, but the trend is concerning. Average star ratings have declined for several consecutive years, and member satisfaction hit a multi-year low in 2025. Several major insurers have scaled back benefits and narrowed networks to manage costs. The landscape is changing rapidly, which makes it more important than ever to review your plan each year during Open Enrollment rather than simply auto-renewing.

Final Thoughts: Your Coverage, Your Health, Your Choice

Medicare Advantage is not inherently bad but the worst plans can genuinely put your health and finances at risk. Low star ratings, aggressive prior authorization denials, narrow networks, and misleading marketing are real problems that affect millions of Americans every year.

The good news is that you have the power to make an informed choice. Use the tools available to you CMS star ratings, J.D. Power satisfaction scores, prior authorization transparency data, and free counseling through SHIP to evaluate every plan on its actual merits, not just its marketing.

Your health is too important to leave to chance or a slick advertisement. Review your plan annually, know your rights, and don’t hesitate to switch if your plan isn’t serving you well.

Medicare Secondary Payer rules determine when Medicare becomes the second payer for beneficiaries with other insurance coverage. For U.S. healthcare executives, MSP compliance represents a complex operational challenge with direct financial implications, heightened enforcement risk, and evolving regulatory requirements that demand systematic attention.

What is Medicare Secondary Payer?

Medicare Secondary Payer refers to situations where the Medicare program does not hold primary payment responsibility. When another entity—a group health plan, liability insurer, no-fault insurer, or workers’ compensation program has the obligation to pay first, Medicare becomes the secondary payer.

Enacted in 1980, MSP legislation shifted costs from Medicare to appropriate private payment sources. Before MSP, Medicare paid first for nearly all claims except those covered by Workers’ Compensation, Federal Black Lung benefits, and Veterans Administration benefits. Today, MSP provisions protect the Medicare Trust Fund by ensuring Medicare does not pay for services when other coverage is primarily responsible.

The distinction is operational, not theoretical. Providers must identify primary payers, bill them first, and only submit claims to Medicare after receiving the primary payer’s adjudication. Federal law takes precedence over state laws and private contracts. Even when state law or an insurance policy suggests Medicare should pay first, MSP provisions apply.

Why Medicare Secondary Payer Matters Now

1. Financial Impact on Medicare Trust Fund

MSP savings are substantial. According to the Department of Health and Human Services, MSP laws and regulations reduced Medicare spending by approximately $9.7 billion in fiscal year 2021. These provisions are not peripheral—they are vital to Medicare’s fiscal integrity.

The 2024 Medicare Board of Trustees’ report projects that total Part A spending will exceed incoming revenues by 2030. By 2036, insufficient funds will exist to pay full benefits. MSP recovery and coordination efforts directly address this solvency challenge.

2. Increased CMS Enforcement in 2025

CMS formalized civil money penalty (CMP) authority in October 2023. Penalties became enforceable in October 2024. CMS now randomly audits 250 submissions each calendar quarter, imposing penalties of $1,000 per day for untimely reporting.

This represents a fundamental shift. What was once primarily a compliance obligation with limited enforcement has become an area where CMS actively monitors, audits, and penalizes non-compliance. Responsible Reporting Entities (RREs)—including insurance carriers, self-insureds, and third-party administrators—face real financial exposure for reporting failures.

3. New Reporting Requirements Taking Effect

April 4, 2025 marked a watershed moment for workers’ compensation settlements. CMS now mandates Section 111 reporting of Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) data for all settlements involving Medicare beneficiaries, including those with zero-dollar allocations and settlements below the $25,000 CMS review threshold.

This gives CMS unprecedented visibility into settlement practices. The agency now knows whether future medical allocations were included in low-dollar settlements and when no WCMSA was established. This data enables enhanced coordination of benefits and identifies potential compliance gaps.

How Medicare Secondary Payer Works

Medicare remains the primary payer for beneficiaries without other health insurance coverage. However, specific situations trigger secondary payer status:

Medicare pays primary when:

• The beneficiary has no other insurance
• The beneficiary has only Medicare Supplement (Medigap) insurance
• The group health plan covering the beneficiary is from a small employer (fewer than 20 employees for working aged; fewer than 100 employees for disabled beneficiaries)
• The 30-month coordination period for ESRD has ended and other coverage remains through employment

Medicare pays secondary when:

• A beneficiary age 65 or older has group health plan coverage through current employment (their own or a spouse’s) with an employer of 20 or more employees
• A disabled beneficiary under 65 has group health plan coverage through current employment (their own or a family member’s) with an employer of 100 or more employees
• A beneficiary has ESRD and group health plan coverage during the first 30 months of Medicare eligibility
• Payment has been made or can reasonably be expected from liability insurance, no-fault insurance, or workers’ compensation

The Five Main MSP Categories

1. Working Aged: Beneficiaries age 65 or older covered by a group health plan through current employment where the employer has 20 or more employees.

2. Disability: Beneficiaries entitled to Medicare based on disability who are covered under a group health plan through current employment where the employer has 100 or more employees.

3. End-Stage Renal Disease (ESRD): Beneficiaries with ESRD who have group health plan coverage during the 30-month coordination period following Medicare eligibility.

4. Liability Insurance (including self-insurance): Coverage that may be responsible for payment when a beneficiary’s medical condition results from an accident or alleged negligence of another party.

5. No-Fault Insurance and Workers’ Compensation: Coverage for medical expenses resulting from automobile accidents (no-fault) or work-related injuries or illnesses (workers’ compensation).

The Role of the Benefits Coordination & Recovery Center (BCRC)

The BCRC administers coordination of benefits for Medicare by maintaining the Common Working File (CWF), a CMS database that stores MSP data and investigation information. The BCRC collects data from multiple sources including IRS/SSA/CMS data matches, voluntary data sharing agreements with large employers, and mandatory Section 111 reporting from insurers.

When the BCRC identifies that another payer should be primary to Medicare, it posts an MSP occurrence to Medicare’s records. This information flows to Medicare Administrative Contractors (MACs) who use it to process claims correctly.

The BCRC also manages conditional payment recovery for non-group health plan situations. When Medicare pays conditionally for services that should have been covered by liability, no-fault, or workers’ compensation insurance, the BCRC seeks reimbursement after settlement, judgment, or award.

MSP Impact on Healthcare Operations

1. Cost Implications for Providers

MSP compliance affects the bottom line in several ways. First, claims submitted incorrectly as primary when Medicare should be secondary will be denied, creating rework and delaying payment. Clean claim rates drop when MSP information is missing or inaccurate.

Second, Medicare’s secondary payment amount is calculated based on the primary payer’s allowed amount and payment. If a provider has a favorable contract with the primary payer, Medicare’s secondary payment may be minimal. Understanding this calculation is essential for accurate revenue forecasting.

Third, conditional payments create recovery obligations. If Medicare pays conditionally and later determines another payer was responsible, Medicare seeks reimbursement. Providers who received the conditional payment may face recovery demands if they also collected from the primary payer.

2. Claims Processing and Revenue Cycle Effects

MSP adds complexity to every stage of the revenue cycle. Registration staff must collect comprehensive insurance information. Billing staff must verify which payer is primary before submitting claims. Claims must include specific MSP-related codes, condition codes, occurrence codes, and value codes to process correctly.

When Medicare is secondary, claims cannot be submitted until the primary payer has adjudicated the claim. The Explanation of Benefits (EOB) from the primary payer must accompany the Medicare claim. This sequential billing extends days in accounts receivable.

Electronic claims require proper loop and segment population for MSP information. Paper claims require specific form completion. Common billing errors include claims that don’t balance (when adjustment amounts don’t equal the total charge), missing value codes for auto/no-fault/workers’ compensation situations, and incorrect payer sequencing.

3. Compliance Requirements and Documentation Burden

Providers must make good faith efforts to determine whether Medicare is the primary or secondary payer. This requires asking beneficiaries specific questions about their insurance coverage during intake, admission, and at regular intervals for recurring services.

Documentation requirements are extensive. Providers must:

• Ask MSP-related questions at each hospital admission and outpatient visit
• Verify MSP information every 90 days for recurring outpatient services
• Maintain records of insurance information collected
• Keep documentation showing they asked the required questions, even when the beneficiary states nothing has changed
• Retain records for at least three years after the service date

For workers’ compensation situations, providers must inquire whether the beneficiary is taking legal action and bill workers’ compensation first even when the claim is disputed, unless workers’ compensation will not pay promptly.

Common MSP Mistakes Healthcare Providers Make

1. Failing to Verify Insurance at Each Encounter

The most frequent MSP error is inadequate insurance verification. Many providers collect insurance information once and never update it. Employment status changes. Spouses retire. COBRA coverage ends. Each change potentially affects MSP status.

CMS requires verification at specific intervals:

• Each inpatient hospital admission
• Each hospital outpatient visit
• Every 90 days for recurring outpatient services

Providers often misunderstand “recurring services.” These are identical services and treatments received on an outpatient basis more than once within a billing cycle. For such services, MSP information must be no older than 90 days from the service date.

2. Incomplete or Incorrect Claim Coding

MSP claims require specific coding elements. Missing or incorrect codes trigger denials. Common coding errors include:

Missing payer codes: Payer codes identify insurance coverage type. Each coverage category requires a specific payer code driven by the value codes reported on the claim.

Incorrect value codes: Value code 44 (other than accident-related) indicates the amount the provider agreed to accept from the primary payer as payment in full. Medicare uses this amount in its secondary payment calculation. Omitting VC 44 when applicable or using it incorrectly affects payment.

Missing Claim Adjustment Reason Codes (CARC): These codes explain why the primary payer’s paid amount differs from the billed amount. CMS requires CARC codes for all adjustments made by the primary payer.

Claims that don’t balance: MSP claims reject when primary claim adjustment amounts in the CAS segment plus the amount paid by the primary in the AMT segment don’t equal the total charge.

3. Not Understanding Conditional Payment Recovery

Many providers believe that once Medicare pays a claim, the transaction is complete. This is not true for MSP situations involving liability, no-fault, or workers’ compensation.

When Medicare makes a conditional payment—paying for services another payer may be responsible for—Medicare retains recovery rights. The payment is “conditional” because it must be repaid when a beneficiary receives a settlement, judgment, award, or other payment.

Providers sometimes collect from both Medicare (conditional payment) and the primary payer. Medicare then seeks recovery of the conditional payment. Understanding this recovery process is essential to avoid duplicate payments and subsequent recovery demands.

4. Missing the 90-Day Verification Window for Recurring Services

The 90-day verification requirement for recurring outpatient services is widely misunderstood. Providers often verify insurance at the start of a treatment series and assume this suffices for months of ongoing care.

When audited, CMS expects documentation showing MSP information was verified within 90 days of each service date for recurring services. “Verified” means asking the questions, not just confirming that insurance information looks the same in the system.

Providers should implement systematic prompts in their registration systems to trigger re-verification at appropriate intervals. Documentation should explicitly note that MSP questions were asked and record the beneficiary’s responses or statement that nothing has changed.

Group Health Plans vs. Non-Group Health Plans: Understanding the Difference

1. GHP Rules for Working Aged and ESRD Patients

Group Health Plans operate under specific size thresholds. For working aged beneficiaries (65 or older), the employer must have 20 or more employees for the GHP to be primary. For disabled beneficiaries under 65, the employer must have 100 or more employees.

These thresholds apply per employer, not per plan. All common law employees count, including part-time employees, regardless of whether they’re enrolled in the GHP. Separate legal entities under common ownership may be aggregated when determining size.

ESRD presents unique rules. During the first 30 months of Medicare eligibility based on ESRD, group health plan coverage through current employment remains primary. After 30 months, Medicare becomes primary. This is called the “30-month coordination period.”

If the beneficiary has ESRD and also qualifies for Medicare based on age or disability, separate rules apply depending on which entitlement came first. Providers should consult CMS guidance for these dual entitlement scenarios.

2. NGHP Coverage: Liability, No-Fault, and Workers’ Compensation

Non-Group Health Plans include liability insurance (including self-insurance), no-fault insurance, and workers’ compensation. These coverages typically arise from unexpected incidents: car accidents, work-related injuries, or injuries caused by another party’s negligence.

When an NGHP situation exists, Medicare will not pay for injury-related care if payment has been made or can reasonably be expected from the NGHP. If the NGHP insurer will not pay promptly—or if responsibility is disputed—Medicare may make conditional payments to ensure the beneficiary has access to care.

Providers must bill the NGHP first. Only after receiving the NGHP’s denial or if the NGHP will not pay promptly may the provider submit a conditional payment request to Medicare. This requires specific documentation explaining why the primary payer did not pay.

MSP Conditional Payments and Recovery Process

A conditional payment is a payment Medicare makes for services another payer may be responsible for. Medicare makes conditional payments so beneficiaries do not have to use their own money to pay medical bills while determining liability or waiting for settlements.

The payment is “conditional” because it must be repaid to Medicare when a settlement, judgment, award, or other payment is made. Medicare’s recovery rights are established by federal statute (42 U.S.C. § 1395y(b)) and override state laws and private contracts.

Conditional payments most commonly occur in liability, no-fault, and workers’ compensation situations. When a beneficiary is injured in a car accident or at work, medical care begins immediately. Determining who will ultimately pay may take months or years while liability is investigated and claims are negotiated. Medicare pays conditionally to ensure the beneficiary receives necessary care.

A. How the Recovery Process Works

The conditional payment recovery process follows several stages:

1. Reporting the case: When a liability, no-fault, or workers’ compensation case exists, it must be reported to the BCRC. This can be done by the beneficiary, their attorney, the insurer, or a provider aware of the situation. Reporting triggers the BCRC’s investigation.

2. BCRC investigation: The BCRC collects information from multiple sources including claims processors, Section 111 mandatory insurer reporting, and workers’ compensation entities. The BCRC identifies any conditional payments Medicare made that relate to the injury or illness.

3. Conditional Payment Letter (CPL) or Conditional Payment Notice (CPN): The BCRC sends a letter listing the conditional payments Medicare made and their total amount. This letter provides 30 calendar days to respond.

4. Dispute process: If the beneficiary or their representative believes certain claims should not be included, they must submit documentation supporting that position. The BCRC reviews disputes and adjusts the conditional payment amount if it agrees the claims are unrelated. This review takes up to 45 days.

5. Final demand: Once disputes are resolved and a settlement occurs, the BCRC issues a final demand letter specifying the repayment amount. This amount must be paid from the settlement proceeds.

6. Payment: Payment can be made via pay.gov using ACH, debit card, or PayPal. Failure to repay Medicare’s conditional payments can result in the debt being referred to the Department of Treasury for collection.

B. Using the Medicare Secondary Payer Recovery Portal (MSPRP)

The MSPRP is a web-based tool that allows attorneys, insurers, beneficiaries, and recovery agents to manage MSP recovery cases online. The portal provides several capabilities:

• Viewing conditional payment amounts in real time
• Submitting proof of representation and consent to release documentation
• Initiating demand letters earlier than the default 30-day period
• Disputing individual claims included in the conditional payment amount
• Requesting access to unmasked claims data
• Making electronic payments
• Tracking correspondence and case status

Registration is required before accessing the MSPRP. Users must complete identity proofing and multi-factor authentication to request access to unmasked claims data.

The MSPRP significantly accelerates the resolution process. Before the portal, everything occurred via mail and fax with extensive delays. The portal allows real-time updates and substantially reduces resolution timelines.

C. Timeline and Appeal Rights

The recovery process has defined timelines. After receiving a conditional payment letter or notice, parties have 30 days to respond. If no response is received, the BCRC may issue a demand letter.

After a demand letter is issued, beneficiaries have appeal rights. The first level of appeal is a redetermination. Redetermination requests must be filed within 120 days of receiving the demand letter. The redetermination officer reviews the case and issues a decision.

If the redetermination is unfavorable, subsequent appeal levels include reconsideration by a Qualified Independent Contractor (QIC), Administrative Law Judge hearing, Medicare Appeals Council review, and judicial review in federal district court.

Waivers of recovery are available in limited circumstances. Beneficiaries may request a waiver if recovering the conditional payment would cause financial hardship or if they were not at fault in creating the overpayment situation. Waiver requests cannot be processed until after a recovery demand letter is issued.

Old Way vs. Modern Approach to MSP Compliance

Old Way:

• Passive insurance verification at admission only
• Manual paper-based claims submission with minimal MSP coding
• Reactive response to Medicare denials and recovery demands
• Limited understanding of conditional payment obligations
• Minimal technology support beyond basic claims systems
• Siloed compliance efforts without cross-functional coordination
• Treating MSP as a billing issue rather than an enterprise risk

Modern Approach:

• Systematic verification at every encounter with automated prompts
• Electronic claims with comprehensive MSP data elements and validation edits
• Proactive identification of MSP situations before claims submission
• Clear recovery process workflows with designated staff responsibilities
• Integrated technology platforms connecting eligibility, claims, and compliance functions
• Cross-functional compliance teams involving revenue cycle, compliance, legal, and clinical leadership
• Enterprise risk management framework treating MSP as a financial and regulatory exposure requiring board-level attention

The modern approach recognizes that MSP compliance cannot be relegated to billing staff. It requires organizational commitment, technology investment, and systematic processes spanning registration through final payment resolution.

Leading organizations implement real-time eligibility checking that queries CMS systems to identify MSP indicators before services are rendered. They use automated claim scrubbing that validates MSP coding requirements before submission. They establish dedicated conditional payment coordinators who manage recovery cases and interface with the BCRC.

Most importantly, they treat MSP compliance as a strategic priority rather than an operational nuisance. Executive dashboards track MSP-related denials, recovery demands, and compliance metrics. Compliance committees review MSP performance quarterly. Leadership allocates resources to technology and training that prevent errors upstream rather than fixing them downstream.

The Next 12-36 Months: What Healthcare Leaders Should Expect

1. Enhanced CMS Monitoring and Auditing

CMS’s enforcement posture will continue strengthening. The civil money penalty framework established in 2023-2024 represents the beginning of enhanced enforcement, not its conclusion.

Expect expanded audit activity. CMS currently audits 250 quarterly submissions (1,000 annually). This may increase as CMS gains confidence in its audit processes and as agency resources grow.

Expect data analytics to drive audit selection. CMS now has unprecedented data through Section 111 reporting, including WCMSA information. The agency will identify statistical outliers—RREs with unusual reporting patterns, late submissions, or zero-dollar MSAs in circumstances suggesting underfunding. These outliers will receive closer scrutiny.

Expect False Claims Act activity to increase. The Department of Justice has shown interest in MSP non-compliance as a potential False Claims Act theory. Failure to properly identify and bill primary payers before Medicare may constitute false claims. Qui tam relators (whistleblowers) are increasingly focusing on MSP-related issues.

Healthcare leaders should prepare for this enhanced environment by establishing robust compliance programs, conducting internal audits to identify gaps, and remediating issues proactively before they become enforcement targets.

2. Technology Solutions Gaining Traction

Technology vendors are developing increasingly sophisticated MSP compliance solutions. These tools integrate with core systems to provide:

Real-time eligibility verification: Automated queries to CMS Coordination of Benefits databases during registration, surfacing MSP indicators immediately so registration staff can collect proper insurance information.

Rules-based claim validation: Pre-submission validation that checks claims for required MSP data elements, verifies coding logic, and flags potential errors before claims leave the organization.

Predictive analytics: Machine learning models that identify high-risk claims likely to generate MSP-related denials based on historical patterns.

Workflow automation: Automated routing of MSP-related tasks to appropriate staff, deadline tracking for conditional payment responses, and systematic follow-up on pending issues.

Reporting and analytics: Dashboards providing visibility into MSP denial rates, recovery demand volumes, compliance metrics, and financial impact.

Organizations should evaluate these solutions based on integration capabilities with existing systems, vendor expertise in MSP compliance, implementation support, and total cost of ownership. The right technology can significantly reduce manual effort while improving accuracy and compliance.

3. Policy Evolution and Regulatory Clarity

CMS will likely continue refining MSP guidance. The WCMSA Reference Guide has undergone multiple revisions in 2025 alone. The Section 111 User Guide updates regularly. This pattern will persist as CMS responds to industry feedback and emerging compliance issues.

Legislative activity may occur. Congressional interest in Medicare solvency creates potential for MSP-related legislation. Possible areas include:

• Standardization of WCMSA thresholds and processes
• Expansion of mandatory reporting beyond current requirements
• Enhanced CMS audit authority and penalties
• Private right of action provisions allowing Medicare beneficiaries to sue for MSP violations

Healthcare leaders should monitor regulatory developments through industry associations, CMS updates, and legal counsel. Participating in comment periods when CMS proposes rule changes allows organizations to shape policy and prepare for implementation.

The trajectory is clear: MSP compliance requirements will become more detailed, enforcement will intensify, and technology will play an increasingly central role. Organizations that prepare now will manage this transition more effectively than those waiting for problems to emerge.

Practical Takeaways for U.S. Healthcare Leaders

1. Treat MSP as an enterprise risk, not a billing issue. MSP compliance requires executive attention, cross-functional coordination, and board-level oversight. Financial exposure from penalties, recovery demands, and denied claims can be substantial.

2. Implement systematic verification processes at every encounter. One-time insurance collection at admission is insufficient. Build verification prompts into registration workflows at each service date and every 90 days for recurring services. Document that questions were asked and record responses.

3. Invest in technology that prevents errors upstream. Real-time eligibility checking, automated claim validation, and workflow management tools reduce manual effort while improving accuracy. The ROI from reduced denials and faster payment typically justifies technology investments.

4. Establish clear accountability for conditional payment management. Designate specific staff responsible for monitoring conditional payment notifications, responding to BCRC inquiries, managing disputes, and coordinating with legal counsel when necessary. These responsibilities cannot be “additional duties as assigned” for already-overloaded billing staff.

5. Conduct regular internal audits of MSP compliance. Review claims data to identify MSP-related denials, analyze root causes, and implement corrective actions. Audit documentation of insurance verification to ensure processes are being followed. Identify training needs and address gaps proactively.

6. Develop relationships with specialized MSP counsel. Complex MSP situations—particularly involving conditional payments, WCMSAs, and Section 111 reporting—require specialized legal expertise. Establish relationships with attorneys experienced in MSP compliance before problems arise.

7. Monitor regulatory developments and participate in policy discussions. CMS guidance evolves continuously. Subscribe to CMS listservs, participate in industry associations, and allocate staff time to staying current with changes. When opportunities arise to comment on proposed rules, provide input based on operational experience.

Medicare Advantage has crossed a watershed moment: more than half of all eligible Medicare beneficiaries 54% as of 2025 now receive their coverage through private insurance plans rather than traditional Medicare. This represents 34.1 million people out of approximately 62.8 million Medicare beneficiaries with Parts A and B, and the Congressional Budget Office projects this will climb to 64% by 2034.

For healthcare executives, health system leaders, and policy-aware operators, this shift isn’t just a market trend; it’s a fundamental restructuring of how Medicare operates, how revenue flows through the system, and how care gets delivered. Understanding Medicare Advantage’s mechanics, financial implications, and operational realities has become essential to strategic planning in U.S. healthcare.

What Is Medicare Advantage?

Medicare Advantage (MA), also known as Medicare Part C, is an alternative to traditional fee-for-service Medicare. Instead of the federal government paying providers directly for each service rendered, Medicare pays private insurance companies a fixed monthly amount per enrollee. These MA organizations (MAOs) then assume responsibility for providing all Medicare-covered benefits and often add supplemental benefits not available in traditional Medicare.

Traditional Medicare operates as a single-payer, fee-for-service system. Beneficiaries can see any provider who accepts Medicare, pay standardized cost-sharing (20% coinsurance for Part B services, no out-of-pocket maximum), and receive coverage for Medicare-defined services only. Medicare Advantage, by contrast, operates through managed care structures typically HMOs, PPOs, or Private Fee-for-Service plans with provider networks, prior authorization requirements, and the ability to negotiate rates with providers.

How the Payment Model Works

Medicare pays MA plans through a risk-adjusted capitation model. CMS calculates a “benchmark” for each county based on traditional Medicare spending in that area, adjusted for factors including:

• County-level fee-for-service costs
• Quality bonus payments (Star Ratings)
• Demographic characteristics
• Risk scores reflecting enrollee health status

Plans submit bids indicating what they believe it will cost to provide Medicare-covered benefits. If a plan’s bid comes in below the benchmark, the plan receives a rebate—a percentage of the difference—which must be used to provide additional benefits, reduce premiums, or lower cost-sharing. In 2024, benchmarks averaged 108% of traditional Medicare spending before accounting for coding intensity or favorable selection. Bids averaged 82% of traditional Medicare spending. After rebates, payments reached approximately 100% of traditional Medicare spending—before adjusting for the two factors that drive overpayment concerns: coding intensity and favorable selection.

Why Medicare Advantage’s Growth Matters Now

Medicare Advantage enrollment grew by 1.3 million beneficiaries between 2024 and 2025, a 4% increase. While this growth rate has decelerated from the 7% increase seen the prior year, the absolute numbers remain substantial. The program is projected to cost taxpayers $507 billion in 2026.

UnitedHealth Group dominates the market with 29% of all MA enrollment in 2025, up from 18% in 2010. Combined with Humana at 17%, these two organizations control 46% of the entire Medicare Advantage market. Behind them, Elevance Health, CVS (Aetna), and Blue Cross Blue Shield plans round out the top tier, while market concentration continues to increase.

Special Needs Plans—designed for dual-eligible beneficiaries, those with chronic conditions, or those requiring institutional-level care—are driving disproportionate growth. SNPs captured 48% of the total enrollment increase between 2024 and 2025, despite representing only 21% of total MA enrollment. Within this segment, Dual-Eligible SNPs (D-SNPs) account for 83% of SNP enrollment, reflecting both the program’s appeal to vulnerable populations and plans’ strategic focus on high-margin segments.

Financial Implications for the Medicare Program

The Medicare Payment Advisory Commission estimates that Medicare Advantage plans will be overpaid by $76 billion in 2026 compared to what the government would spend if those same beneficiaries remained in traditional Medicare. The Committee for a Responsible Federal Budget projects this could total $1.2 trillion over the next decade if current trends continue.

This overpayment stems from two primary mechanisms. First, coding intensity: MA plans document more diagnoses per beneficiary than traditional Medicare physicians, making enrollees appear sicker and increasing risk-adjusted payments. Although CMS reduces MA payments by the statutory minimum of 5.9% to adjust for coding intensity, MedPAC estimates the actual effect is closer to 10-14% higher payments. Second, favorable selection: MA enrollees tend to be healthier than traditional Medicare beneficiaries with similar risk scores. MedPAC estimates this adds 11% to MA costs compared to traditional Medicare, totaling approximately $57 billion in overpayments in 2026.

Of the projected $1.2 trillion in overpayments through 2035, approximately $520 billion will come from the Medicare Hospital Insurance trust fund—nearly as large as the entire HI trust fund deficit. Beneficiaries will pay an additional $220 billion in premiums as a result of these overpayments.

How Medicare Advantage Actually Operates

Medicare pays MA plans based on enrollee risk scores generated through CMS’s Hierarchical Condition Category (HCC) model. This model assigns each beneficiary a risk score based on demographic factors (age, sex, disability status, Medicaid eligibility) and diagnosed medical conditions from the previous year. Higher risk scores generate higher monthly payments.

The fundamental challenge: traditional Medicare doesn’t use diagnosis codes to determine payment. Providers billing fee-for-service Medicare have no financial incentive to document every condition. MA plans, however, directly benefit from comprehensive diagnosis coding—creating what critics call “upcoding” and what the industry defends as “appropriate clinical documentation.”

A 2024 Wall Street Journal investigation revealed that MA plans diagnosed approximately 18,000 enrollees with HIV between 2018 and 2021, but these individuals weren’t receiving HIV treatment from physicians. In many cases, these diagnoses appeared to be added without physician knowledge, raising questions about the accuracy and appropriateness of MA coding practices.

CMS has implemented a new risk adjustment model being phased in over three years (starting at 33% in 2024, increasing to 52% in 2025) to address some coding disparities. This represents a technical adjustment related to medical education costs in the growth rates, but the fundamental incentive structure remains unchanged.

Special Needs Plans and Market Segmentation

Special Needs Plans have become the fastest-growing segment within Medicare Advantage, with enrollment increasing 10% from 2024 to 2025—though this represents a deceleration from the 17% average annual growth rate over the previous five years. SNPs now account for more than one in five MA enrollees.

D-SNPs, which serve beneficiaries eligible for both Medicare and Medicaid, dominate with 83% of SNP enrollment. These plans coordinate benefits across both programs and often provide enhanced care management. However, MedPAC’s analysis excludes the care coordination costs D-SNPs incur when comparing spending to traditional Medicare, potentially overstating the overpayment estimate for this segment.

Chronic Condition SNPs (C-SNPs) saw explosive growth of over 70% between 2024 and 2025, compared to just 3% for D-SNPs and flat growth for institutional SNPs. This reflects both genuine innovation in managing specific chronic conditions and the financial attractiveness of higher risk-adjusted payments for these populations.

Supplemental Benefits as a Competitive Weapon

MA plans use supplemental benefits—services not covered by traditional Medicare—as their primary competitive differentiator. In 2024, 97% of plans offered dental coverage, making it essentially mandatory. More than 86% offered $0 primary care provider copays, recognizing that strong PCP relationships drive better outcomes, lower medical costs, improved Star ratings, and more accurate risk adjustment.

Part B premium buyback plans have increased in prevalence, directly reducing enrollees’ out-of-pocket Medicare premiums. Over-the-counter drug coverage reached 85% of plans, while $0 Part D deductibles appeared in 66% of plans. However, for the first time in years, growth in several supplemental benefits stabilized rather than expanded from 2023 to 2024, reflecting the financial headwinds MA plans faced entering the 2025 bid cycle.

Average value-added benefits (combining Part C medical benefits, Part D drug benefits, and premium reductions) grew approximately $20 per member per month annually from 2021 to 2023, but increased by less than $3 from 2023 to 2024. This deceleration signals a market inflection point where plans are prioritizing margin protection over benefit richness.

Impact on Cost: The $76 Billion Overpayment Question

MedPAC’s methodology compares spending on beneficiaries who switch from traditional Medicare to MA with spending on similar beneficiaries who remain in traditional Medicare. Using data from Medicare “switchers,” MedPAC estimates that MA payments in 2026 will be 22% higher than traditional Medicare would spend for the same population.

Approximately $22 billion of the projected $76 billion in 2026 overpayments stems from coding intensity. MA plans document significantly more diagnoses per beneficiary than traditional Medicare providers, even when the underlying health status appears similar. This isn’t necessarily fraudulent—many MA plans argue they’re simply capturing conditions that exist but weren’t previously documented—but it creates a fundamental payment asymmetry.

The challenge for policymakers: distinguishing between legitimate clinical documentation improvement and aggressive upcoding designed to inflate payments. CMS’s statutory 5.9% coding intensity adjustment has proven insufficient, but determining the “correct” adjustment percentage remains contentious.

Favorable Selection and Healthier Populations

Favorable selection accounts for approximately $57 billion in overpayments in 2026. Despite similar risk scores, MA enrollees consistently spend less on healthcare than traditional Medicare beneficiaries, suggesting they’re healthier than their risk scores indicate.

Several mechanisms drive favorable selection. Prior authorization requirements and narrower provider networks may discourage sicker beneficiaries from enrolling or may reduce utilization once enrolled. MA plans also invest heavily in targeted marketing toward healthier populations and design benefits to attract lower-cost enrollees—for example, gym memberships appeal to relatively healthy seniors while doing little for frail, homebound beneficiaries.

MedPAC’s analysis adjusts for measurable health differences, but critics argue the methodology can’t fully capture the complexity of who chooses MA versus traditional Medicare. More than 40% of MA enrollees join MA plans directly upon Medicare eligibility, bypassing traditional Medicare entirely. If these direct-to-MA enrollees have different cost patterns than the “switchers” MedPAC studies, the overpayment estimates could be either too high or too low.

The Industry Pushback

The MA industry vigorously disputes MedPAC’s overpayment estimates. The Better Medicare Alliance, America’s Health Insurance Plans (AHIP), and the Healthcare Leadership Council have all published analyses challenging MedPAC’s methodology.

Industry arguments focus on three main points. First, MA provides additional value—care coordination, disease management programs, 24/7 nurse hotlines, and wellness benefits—that traditional Medicare doesn’t offer. Comparing costs without accounting for this additional value creates an incomplete picture.

Second, MedPAC’s reliance on “switcher” data creates a biased sample that doesn’t represent the full MA population, particularly the growing share who join MA directly upon eligibility. Third, D-SNPs incur significant care coordination costs mandated by CMS that traditional Medicare doesn’t provide, making direct cost comparisons misleading.

However, these industry critiques don’t directly rebut MedPAC’s core finding: the federal government pays MA plans substantially more than it would pay traditional Medicare for clinically similar beneficiaries. Whether that additional payment purchases sufficient additional value for beneficiaries and taxpayers remains the central policy debate.

Impact on Patient Outcomes and Access

Prior Authorization: 50 Million Requests Annually

Medicare Advantage insurers processed nearly 50 million prior authorization determinations in 2023, averaging 1.8 requests per enrollee. This represents a steady increase from 37 million requests in 2021 as MA enrollment has grown. By comparison, traditional Medicare processed fewer than 400,000 prior authorization reviews in fiscal year 2023—about 0.01 per beneficiary—reflecting traditional Medicare’s limited use of prior authorization for only a narrow set of services like certain durable medical equipment and home health services.

An AMA survey found that practices complete an average of 39 prior authorization requests per physician per week. For physician groups treating substantial numbers of MA patients, this administrative burden is significant. 94% of physicians reported that prior authorization leads to delays in patients accessing necessary care, and 24% reported that prior authorization has led to a serious adverse event for a patient in their care.

The sheer volume creates friction in the healthcare delivery system, even when requests are ultimately approved. Providers must staff dedicated personnel to manage prior authorization, track submissions, follow up on pending requests, and handle appeals—costs that don’t exist in traditional Medicare’s simpler administrative model.

Denial Rates and the Appeal Reality

In 2023, MA plans denied 6.4% of all prior authorization requests—3.2 million denials. While this represents a decrease from the 7.4% denial rate in 2022, it still means millions of provider-ordered services require additional steps before proceeding.

Denial rates vary substantially across insurers. In 2023, Centene denied 13.6% of prior authorization requests while Anthem denied just 4.2%. CVS Health denied 11%, Humana denied 3.5%, and UnitedHealthcare denied 5.9%. These differences reflect varying approaches to medical necessity determination, network management strategies, and benefit design.

Only 11.7% of denied prior authorization requests were appealed in 2023. This low appeal rate likely reflects multiple factors: beneficiaries may not understand their appeal rights, may lack the time or capacity to navigate the appeals process, or may simply pay out-of-pocket or forego the service rather than fight the denial.

However, among denials that were appealed, 81.7% were fully or partially overturned in 2023. This high overturn rate is striking and troubling. It suggests either that MA plans are inappropriately denying care that clearly meets medical necessity standards, or that only the strongest cases proceed to appeal while weaker cases are abandoned. An HHS Office of Inspector General review found that 13% of prior authorization denials by MA plans would have been approved under traditional Medicare coverage rules, and 18% of payment denials met both Medicare coverage rules and MA billing rules yet were still denied.

Post-Acute Care Access Restrictions

A 2024 Senate Permanent Subcommittee on Investigations report found that MA plans deny prior authorization requests for post-acute care at dramatically higher rates than their overall denial rates. In 2022, UnitedHealthcare and CVS denied post-acute care requests at approximately three times their overall denial rates, while Humana’s post-acute care denial rate was more than 16 times higher than its overall denial rate.

This creates particular challenges for hospitals discharging Medicare Advantage patients who need skilled nursing, inpatient rehabilitation, or long-term acute care. Discharge planning teams must navigate plan-specific criteria, obtain prior authorization before transfer, and manage denials that delay transitions of care. When MA plans deny post-acute care that traditional Medicare would cover, hospitals face pressure to keep patients in acute beds longer than medically necessary or to discharge patients without adequate follow-up care.

Examples from the OIG review included MA plans requiring X-rays before approving more advanced imaging like MRIs, and using clinical criteria not contained in Medicare coverage rules to deny services that would have been covered in traditional Medicare. These denials potentially delay necessary diagnoses and treatment, particularly for time-sensitive conditions.

Impact on Healthcare Compliance and Operations

Star Ratings Pressure and Quality Bonuses

CMS’s Five-Star Quality Rating System drives substantial financial stakes. Plans achieving 4 stars or higher receive quality bonus payments that increase their benchmarks, allowing higher bids or more generous benefits. In 2024, quality bonuses totaled at least $12.8 billion.

However, Star ratings have been declining. In 2024, only 31 plans earned 5 stars, down from 57 in 2023 and 74 in 2022. The average Star rating fell from 4.14 in 2023 to 4.04 in 2024 when weighted by membership. Kaiser Permanente, historically a 5-star plan, dropped to 4 stars. This widespread decline reflects both increased performance pressure and changes to the rating methodology that have made high ratings harder to achieve.

MedPAC has criticized the Star rating system as “not a good basis for judging quality,” noting that the measures don’t necessarily correlate with better patient outcomes and that the quality bonus payments contribute to overpayments without clear evidence of proportional quality improvement. Nevertheless, the Star rating system remains central to MA plan operations, driving investments in member engagement, medication adherence programs, and health assessments designed to improve measured performance.

Plans dedicate substantial resources to maximizing Star ratings. This includes member outreach campaigns to complete Health Risk Assessments, medication adherence programs targeting Star-measured drugs, care management interventions for members with care gaps, and strategic provider contracting based on quality performance. These activities may genuinely improve care, but they’re fundamentally motivated by financial incentives rather than pure clinical necessity.

Broker Compensation Changes

CMS attempted to standardize and tighten broker commission limits in the 2025 MA final rule to reduce steering of beneficiaries toward plans that pay higher commissions rather than plans that best meet beneficiaries’ needs. This rule faced legal challenges and implementation has been delayed, but the underlying issue remains: broker incentives don’t always align with beneficiary interests.

In response to ongoing margin pressure, many MA plans have begun reducing or eliminating commissions on new products that may be unprofitable. Plans retain these products to avoid disrupting existing membership, but they don’t pay brokers to actively sell them to new enrollees. This creates a de facto tiering of products: heavily commissioned plans that brokers actively market versus low-commission or zero-commission plans that beneficiaries must proactively seek out.

For health systems with provider-sponsored health plans (PSHPs), this dynamic creates competitive disadvantages. PSHPs, which are predominantly nonprofit plans aligned with health systems, captured only a small fraction of 2024’s MA growth despite theoretical advantages in plan-provider integration. Research shows that 62% of primary care physicians recommend specific health plan products to their patients, and approximately half of patients follow that advice. Yet PSHPs continue to lose market share, suggesting that broker incentives and marketing budgets matter more than physician recommendations in driving enrollment decisions.

Network Adequacy Requirements

CMS’s 2024 final rule strengthened network adequacy standards and transparency requirements. Plans must demonstrate adequate provider networks before the start of the plan year and maintain updated provider directories that accurately reflect which providers are accepting new patients.

This creates both compliance obligations and strategic considerations. MA plans must contract with sufficient specialists in each required category, maintain adequate geographic distribution, and ensure appointment wait times meet CMS standards. However, plans also benefit from selectively narrow networks that channel members toward high-performing, cost-effective providers.

The tension between network breadth and managed care discipline remains central to MA operations. Broader networks may attract more enrollees and reduce access complaints, but they dilute the plan’s ability to steer utilization and negotiate favorable rates. Narrower networks enable tighter cost management but risk beneficiary complaints, network adequacy violations, and Star rating penalties for member experience measures.

For providers, MA network participation has become essential as MA penetration exceeds 50%. Being out-of-network for major MA plans increasingly means being effectively inaccessible to more than half of Medicare beneficiaries in many markets. This gives MA plans substantial negotiating leverage, particularly in less competitive markets where one or two plans dominate.

Common Misconceptions About Medicare Advantage

“MA Is Always Cheaper for the Government”

This is demonstrably false based on current payment structures. MedPAC’s analysis shows Medicare pays MA plans 22% more than it would spend covering the same beneficiaries in traditional Medicare. The Congressional Budget Office projects this will cost taxpayers an additional $1.2 trillion through 2035.

The misconception stems from MA’s origins in the 1990s when the program was sold as a way to harness private sector efficiency to reduce Medicare costs. In practice, payment policies—including quality bonuses, risk adjustment, and insufficient coding intensity adjustments—have created a system where MA costs more, not less.

MA industry advocates argue that cost comparisons should account for additional value: out-of-pocket limits, supplemental benefits, care coordination, and disease management programs that traditional Medicare doesn’t provide. This is a reasonable point for evaluating overall value, but it doesn’t change the underlying cost reality: MA currently costs the federal government substantially more per beneficiary than traditional Medicare.

“MA Plans Have Better Quality”

The evidence is mixed and often contradictory. MA plans point to their Star ratings, supplemental benefits, and care coordination programs as evidence of superior quality. However, MedPAC notes that the Star rating system doesn’t reliably measure clinical outcomes and is susceptible to gaming through selective enrollment and aggressive member engagement campaigns.

Studies comparing MA to traditional Medicare outcomes show inconsistent results. Some research finds MA enrollees receive more preventive care and have better medication adherence. Other studies find no significant differences in mortality, hospital readmissions, or emergency department use. The HHS Office of Inspector General’s finding that 13% of MA prior authorization denials would have been approved under traditional Medicare raises concerns about access to medically necessary care.

The quality debate often conflates different dimensions: access to supplemental benefits versus access to medically necessary services, process measures versus health outcomes, and member satisfaction versus clinical effectiveness. MA likely performs better on some dimensions (financial protection through out-of-pocket limits, access to dental and vision care) while potentially performing worse on others (prior authorization barriers to specialty care, restricted access to post-acute services, narrow networks limiting provider choice).

“Prior Authorization Only Affects a Small Number of Services”

99% of Medicare Advantage enrollees are in plans with prior authorization requirements for at least some services. MA plans processed 50 million prior authorization determinations in 2023—an average of 1.8 per enrollee. For context, traditional Medicare processed only 400,000 prior authorization reviews for its entire population of approximately 29 million beneficiaries.

While not every enrollee personally experiences a prior authorization delay or denial, the system’s pervasiveness affects care delivery broadly. Physicians spend an average of 13 hours per week on prior authorization across all payers. This doesn’t include just the minority of patients facing denials—it includes every request submitted, whether ultimately approved or denied.

The impact extends beyond the headline denial rate. Even approved prior authorizations create delays while awaiting determination, impose administrative costs on providers, and introduce friction into the care delivery process. The 81.7% overturn rate on appeals suggests that many denials were questionable from the outset, meaning patients and providers expended time and effort navigating appeals for services that were always medically necessary.

Traditional Medicare vs. Medicare Advantage: The 2026 Reality

Coverage Differences

Traditional Medicare provides:

• Nationwide provider network (any provider accepting Medicare)
• No prior authorization for most services
• No out-of-pocket maximum on Part A and Part B spending
• Standardized cost-sharing (20% coinsurance for Part B)
• No coverage for dental, vision, or hearing (except medically necessary)
• Separate Part D prescription drug coverage (optional)
• Supplemental Medigap coverage available (at additional premium)

Medicare Advantage provides:

• Restricted provider networks (HMO, PPO, PFFS structures)
• Prior authorization requirements for many services (99% of plans)
• Out-of-pocket maximum ($9,350 cap for in-network services in 2025)
• Varying cost-sharing by plan (often lower copays for primary care)
• Typically includes dental, vision, and hearing coverage
• Integrated Part D prescription drug coverage in most plans
• Additional supplemental benefits (gym memberships, OTC allowances, meal delivery)
• No Medigap allowed (prohibited by law)

Feature	Traditional Medicare	Medicare Advantage (Part C)
Provider Network	Nationwide: Any provider in the U.S. accepting Medicare.	Restricted: Limited to HMO, PPO, or PFFS networks.
Prior Authorization	Generally not required for most services.	Required for many services (99% of plans).
Out-of-Pocket Max	None. No cap on Part A and B spending.	Mandatory Cap: Max $9,350 (2025) for in-network.
Cost Sharing	Standardized (e.g., 20% coinsurance for Part B).	Varies by plan; often lower copays for primary care.
Drug Coverage	Requires separate Part D plan.	Usually integrated into the plan.
Extra Benefits	None (no dental, vision, or hearing).	Includes dental, vision, hearing, gyms, and OTC.
Medigap Eligibility	Yes: Can buy supplemental insurance.	No: Prohibited by law.
Premiums	Part B premium ($185/mo in 2026) + Part D/Medigap.	Often $0 (beyond the standard Part B premium).
Administrative Ease	High (simple billing, no network hurdles).	Lower (requires managing networks and approvals).

Cost Structure Comparison

For beneficiaries, MA often appears less expensive. 75% of enrollees in individual MA plans pay no premium beyond the standard Medicare Part B premium ($185 per month in 2026). Average out-of-pocket limits in MA plans were $4,882 for in-network services in 2024. Traditional Medicare has no Part A and B out-of-pocket limit, making it potentially catastrophic for high utilizers who don’t purchase supplemental Medigap coverage.

However, this favorable cost structure for enrollees comes at taxpayer expense. The federal government pays MA plans an average of 22% more per beneficiary than traditional Medicare would cost. This subsidy enables MA plans to offer generous benefits at low or zero premiums, but it increases overall Medicare program costs and accelerates Medicare Hospital Insurance trust fund insolvency.

For providers, the cost equation differs. Traditional Medicare pays predictable, transparent rates set by CMS fee schedules. MA plans negotiate rates individually, often paying below Medicare rates in competitive markets, and impose prior authorization and other administrative requirements that increase provider costs. Some providers, particularly in specialties facing high prior authorization burdens, are choosing to opt out of MA networks despite the loss of access to more than half of Medicare beneficiaries in many markets.

Access and Administrative Burden

Traditional Medicare offers essentially unlimited access: beneficiaries can see any provider accepting Medicare anywhere in the country without prior authorization or network restrictions. This matters particularly for beneficiaries who winter in different states, travel frequently, or need specialty care at major academic medical centers.

MA access depends on networks and prior authorization. Beneficiaries must generally use in-network providers (except in emergencies) and obtain prior authorization for many services. Out-of-area coverage is typically limited to emergencies and urgently needed care. This creates challenges for beneficiaries with complex conditions requiring subspecialty expertise, particularly when the best providers are out-of-network or located outside the plan’s service area.

Administrative burden falls differently on the two systems. For beneficiaries, traditional Medicare is administratively simple: show your Medicare card, pay your cost-sharing, traditional Medicare handles the rest. MA requires understanding network restrictions, obtaining prior authorizations, and potentially appealing denials.

For providers, traditional Medicare involves straightforward billing against published fee schedules. MA involves negotiating contracts with multiple plans, learning each plan’s prior authorization requirements, tracking network status, and managing denials and appeals. The AMA estimates physicians complete 39 prior authorization requests per week—much of this driven by MA and commercial insurance rather than traditional Medicare.

The Next 12–36 Months: What’s Coming

CBO Projects 64% Penetration by 2034

If current trends continue, nearly two-thirds of Medicare beneficiaries will be enrolled in MA plans within a decade. This represents a fundamental transformation of Medicare from a primarily public program into a predominantly privatized system operating through managed care.

However, several factors could slow or reverse this growth trajectory. Payment pressures are mounting: CMS is phasing in risk adjustment model changes that reduce overpayments, MedPAC is advocating for more aggressive coding intensity adjustments, and bipartisan congressional scrutiny of MA overpayments is increasing. If payment rates decline meaningfully, plans may reduce benefit generosity, exit less profitable markets, or restrict enrollment—all of which could dampen growth.

Demographic factors continue favoring MA growth. Approximately 10,000 baby boomers turn 65 daily, a pattern that will continue through 2030. More than 40% of new Medicare eligibles now join MA directly rather than starting in traditional Medicare, suggesting generational acceptance of managed care that wasn’t present in earlier cohorts. This direct-to-MA enrollment pattern, if it continues, will sustain growth even if switching from traditional Medicare to MA slows.

Regulatory Pressure on Overpayments

Multiple federal bodies are now focused on MA overpayments. MedPAC publishes annual overpayment estimates and advocates for payment reforms. The HHS Office of Inspector General conducts audits of MA plan practices and recommends policy changes. Congressional committees particularly the Senate Permanent Subcommittee on Investigations have held hearings and published reports documenting inappropriate denials and excessive coding.

The political dynamics are complex. MA enjoys strong beneficiary satisfaction enrollees appreciate low premiums, out-of-pocket limits, and supplemental benefits. This creates political resistance to major payment cuts that might reduce benefit generosity. However, fiscal pressures are mounting. The Medicare Hospital Insurance trust fund faces insolvency projections, and MA overpayments represent a significant contributor. The Committee for a Responsible Federal Budget estimates that MA overpayments will extract $520 billion from the HI trust fund through 2035.

Potential regulatory changes include:

• More aggressive coding intensity adjustments above the current 5.9% statutory minimum
• Reformed risk adjustment models that better account for favorable selection
• Restrictions on supplemental benefits that primarily attract healthy enrollees
• Enhanced prior authorization oversight and denial reporting requirements
• Reduced or reformed quality bonus payments
• Benchmark adjustments in overpaid counties

Market Consolidation Among Top Payers

Market concentration continues increasing. UnitedHealth Group, Humana, and CVS (Aetna) collectively enrolled 794,000 new members in 2024 out of 1.3 million total market growth more than 60% of all new enrollment. Looking at full-year 2024 data, Humana lost 259,000 members and Centene lost 87,000 members, while the top three national plans captured essentially all growth.

This concentration creates both opportunities and risks. For large national plans, scale enables investments in care management infrastructure, data analytics, provider contracting leverage, and Star rating improvement programs. For smaller regional plans, Blues plans, and provider-sponsored health plans, competing becomes increasingly difficult without comparable scale advantages.

Provider-sponsored health plans continue losing market share despite theoretical advantages in plan-provider integration. In 2024, PSHPs (predominantly nonprofit plans aligned with health systems) failed to capture meaningful growth. This suggests that distribution advantages—large broker networks, national brand recognition, and aggressive marketing budgets—matter more than care integration in driving enrollment.

The consolidation trend will likely continue absent significant regulatory intervention. MA plans benefit from network effects and scale economies that favor large, established players. This raises questions about long-term market structure: will MA evolve into an oligopoly dominated by three or four national plans, or will niche players find sustainable positions serving specific geographies or populations?

Practical Takeaways for U.S. Healthcare Leaders

For Health System Executives:

1. Develop MA-specific strategies – With MA exceeding 50% penetration in most markets, you cannot treat MA as an afterthought in strategic planning. Network contracting, care delivery models, and financial projections must explicitly account for MA’s distinct characteristics.
2. Invest in prior authorization management – The administrative burden of 50 million annual prior authorization requests is real and growing. Dedicated staff, workflow optimization, and potentially technology solutions are necessary to manage this efficiently.
3. Understand payment mechanics – Risk adjustment and coding matter enormously to MA plan financial performance. Health systems with value-based contracts or risk-sharing arrangements must understand HCC coding, documentation requirements, and risk score management.
4. Monitor post-acute care denials – If you operate skilled nursing facilities, inpatient rehab, or LTACHs, pay close attention to denial rates by plan. Denials that are three to sixteen times higher than overall rates create real financial and operational challenges.

For Payer Leaders:

5. Prepare for payment pressure – The $76 billion overpayment estimate and $1.2 trillion ten-year projection are not going away. Regulatory changes targeting overpayments are likely within the next 12-36 months. Bid strategies must account for potential benchmark reductions and tighter coding intensity adjustments.
6. Balance growth and margin – The era of unlimited benefit reinvestment to drive membership growth is ending. Financial sustainability requires more intentional ROI analysis on supplemental benefits and member retention strategies.
7. Navigate Star rating volatility – With ratings declining broadly and 5-star plans dropping from 74 in 2022 to 31 in 2024, maintaining high ratings will become harder and more expensive. Evaluate whether maximum Star pursuit remains cost-effective or whether a 4-star strategy provides better financial returns.

For Policy-Aware Operators:

8. Track regulatory developments – CMS rulemaking, MedPAC recommendations, and congressional investigations will drive significant changes. Prior authorization reforms, network adequacy standards, and payment methodology changes will all affect operations.
9. Document defensive positions – When prior authorization denials occur for services that meet Medicare coverage rules, maintain careful documentation. The 81.7% appeal overturn rate suggests opportunities to challenge inappropriate denials systematically.
10. Consider traditional Medicare’s advantage – Traditional Medicare’s administrative simplicity—no prior authorization, nationwide network, predictable payment—has value that isn’t fully reflected in enrollment trends. For some patient populations and provider types, traditional Medicare may offer better alignment despite MA’s financial generosity.

Medicare Advantage has become the dominant form of Medicare coverage, enrolling 54% of eligible beneficiaries and projected to reach 64% by 2034. This shift represents a fundamental restructuring of Medicare from a public fee-for-service program into a predominantly private managed care system.

However, this transformation comes with substantial costs and tradeoffs. Federal overpayments totaling $76 billion in 2026 projected to reach $1.2 trillion through 2035 raise serious questions about value and sustainability. Prior authorization burdens affecting 50 million requests annually, denial rates that disproportionately impact post-acute care, and coding practices that inflate risk scores without corresponding service delivery all warrant scrutiny.

For healthcare leaders, the strategic imperative is clear: you must understand Medicare Advantage deeply – its payment mechanics, operational requirements, regulatory trajectory, and market dynamics. This is no longer optional as MA transitions from an alternative program to the primary form of Medicare coverage. Success in this environment requires adapting care delivery, contracting strategies, and operational capabilities to MA’s fundamentally different structure while maintaining sustainable economics in an environment of increasing payment pressure and regulatory scrutiny.

The next 12-36 months will be defining. Payment reforms targeting over-payments, enhanced scrutiny of prior authorization practices, and continuing market consolidation will reshape the MA landscape. Organizations that anticipate these changes and position strategically will thrive; those that treat MA as simply “more Medicare” will face growing challenges.