Medicare spends 14% more on Medicare Advantage (MA) enrollees than if they were to be enrolled in Medicare Fee-for-Service (FFS), equating to roughly $76 billion in additional spending estimated for 2026, according to the latest report from the Medicare Payment Advisory Commission (MedPAC).
Medicare spent $537 billion on MA plans in 2025, not including prescription drug plan payments; Medicare’s payments to MA plans are projected to be $615 billion. That’s $16,242 per beneficiary this year, which includes about $2,660 in rebate payments per enrollee, the report noted.
Such rebates happen when plans bid below Medicare’s benchmark and need to be used to provide supplemental benefits and financial protections not widely available in traditional Medicare – the average rebate amount has more than doubled since 2018, MedPAC’s report stated.
To alleviate overspending, the commission has suggested Congress and the Centers for Medicare and Medicaid Services (CMS) make several reforms to MA, including changes to reduce coding imbalances, replacing the quality bonus program, creating fairer payment benchmarks, and improving the completeness of encounter data used for payment calculations.
“In addition, because of Medicare’s fiscal situation, the growth in subsidization of supplemental benefits should be considered with attention to their value,” MedPAC reported.
The MA quality bonus program will increase MA payments by $16 billion in 2026, MedPAC estimated in its report. About 64% of MA enrollees are expected to be in a plan that receives a quality bonus increase to its benchmark.
“The commission continues to be concerned that the MA quality bonus program and star-rating system are not adequate to assess the quality of care that MA enrollees can expect to receive and to evaluate alternatives for assessing beneficiary access to care, quality and experience in MA,” MedPAC representatives said in their report.
The jump in spending is due in part to coding intensity – MA plans document more diagnoses for their enrollees, which in turn increases risk scores and payments. This adds 4% to payments compared to FFS Medicare beneficiaries with similar ailments.
Still, the payment difference is smaller than previous years since the implementation of the V28 risk adjustment model, which aims to reduce coding-related payment differences, according to MedPAC.
Another factor in more spending is due to what the commission calls “favorable selection,” in which enrollees have lower medical costs than predicted, raising payments by about 11% above comparable Medicare FFS spending.
One more side effect of higher MA spending bleeds into Medicare Part B premiums, which will be about $11 billion higher in 2026 than they would otherwise be. MA spending increases the costs for taxpayers and Medicare beneficiaries overall, they said.
MedPAC discussed MA coverage for beneficiaries with end-stage renal disease (ESRD) as part of the report, adding that financial outcomes for MA plans and dialysis providers improved as more patients with ESRD enrolled in MA.
Payments to MA plans grew faster than the plans’ medical costs for ESRD patients between 2018 and 2023, MedPAC said, and by 2023 payments exceeded costs by 12% on average. Most MA plans charge the maximum 20% coinsurance for dialysis, which affected about 90% of ESRD enrollees.
MA plans pay higher prices for dialysis services than FFS Medicare with payments averaging 22% above FFS rates in 2022.
Participation in MA remains strong, MedPAC added, but there are still significant differences in enrollment levels and types of plans, depending on region.
Last year, MA offered 5,492 plan options from 164 organizations, MedPAC found, representing about 34.9 million beneficiaries, and 55% of people with both Medicare Part A and B. In 2026, the average beneficiary can choose between 39 plans offered by about eight MA organizations (MAOs), and plan availability continues to grow, MedPAC said.
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