Medicare Advantage insurers are overcharging taxpayers and seniors billions of dollars. Why is anyone surprised?

By Brett Arends

Health insurers who run the Medicare Advantage program aren't happy with the latest government watchdog report

Watchdogs say Medicare Part B premiums are about $200 a year higher as a result of overcharging.

The big for-profit health insurers who run the Medicare Advantage program have lashed out at after yet another government watchdog said they are overcharging taxpayers and seniors tens of billions of dollars a year.

The Congressional Joint Committee on Taxation used "fundamentally flawed data, methodology and extrapolations" to reach such false conclusions, said AHIP, or America's Health Insurance Plans, the Washington, D.C.-based trade association and lobbying organization for the insurance providers.

The insurance lobbyist's comments were made to the Wall Street Journal after it reported on the Joint Committee on Taxation's latest analysis of Medicare Advantage. The committee said that even if you aren't on privatized Medicare Advantage, but are sticking with traditional Medicare, you are still being charged extra to subsidize Medicare Advantage insurers. Your Part B premiums are about $200 a year higher as a result, it argued.

AHIP previously offered a similar defense to the independent healthcare experts on the Medicare Payment Advisory Commission, or MedPac, when they reached a similar conclusion. MedPac is the independent statutory body that advises Congress on Medicare payment policy.

Why the Joint Committee on Taxation and MedPac should engage in such nefarious activities - deliberately and maliciously claiming that for-profit health insurers are actually trying to maximize profits in order to fatten their shareholders' returns - is a great mystery.

MedPac is set to make further revelations about Medicare Advantage in a couple of days when it publishes its next annual review. In its last review, MedPac argued that it would be about $84 billion a year cheaper to insure seniors through government-run Medicare instead of through Medicare Advantage.

According to the National Association of Insurance Commissioners, private health insurers spend about 12% of every premium dollar on overhead and profits, leaving 88% to pay actual medical expenses for the insured. Meanwhile the Medicare trustees reported that the government overall spent $12 billion on administration expenses last year out of total revenues of around $1.1 trillion, or just over 1%.

To the untrained eye, this would mean that private insurers already have a massive cost disadvantage compared to the government program, raising the obvious question of how they could possibly compete without overcharging their clients, namely the taxpayers.

The untrained observer might also wonder why private companies with shareholders wouldn't try to maximize profits by charging as much as they could.

Last year I asked AHIP for data showing why the independent watchdog critiques of Medicare Advantage were supposedly flawed. They sent me links to a number of papers. One, by a private consultancy, admitted it "was commissioned by America's Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association." Another reported that the authors of the paper "are employed by AHIP."

So let that be an end to these unfair criticisms.

-Brett Arends

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03-11-26 0942ET