The Medicare Payment Advisory Commission estimates that Medicare will spend 14% more for people enrolled in Medicare Advantage in 2026 than it would have spent if those beneficiaries were in traditional fee-for-service Medicare. The projected difference is $76 billion.
That is a large and policy-relevant estimate, but it needs the right label. It is not a reported cash surplus held by insurers, and it is not a finding that every dollar was obtained improperly. MedPAC calculated the difference after estimating the effects of favorable selection and diagnostic coding intensity.
MedPAC is an independent congressional agency that analyzes Medicare and advises Congress. Its March 2026 status report describes enrollment, plan availability, payments, coding and selection. Congress and the administration decide whether to adopt its recommendations.
Two Adjustments Drive the Estimate
Medicare Advantage plans receive monthly payments adjusted for each enrollee's expected health costs. More documented diagnoses can increase a risk score and therefore a plan's payment. MedPAC has found that diagnosis coding is more intensive in Medicare Advantage than in traditional Medicare, even after accounting for demographic and eligibility differences.
The second factor is favorable selection. MedPAC uses that term for differences not fully captured by risk scores when people whose scores overpredict their spending enroll in Medicare Advantage more often than people whose scores underpredict it. The commission estimated what the same beneficiaries would have cost under fee-for-service Medicare and adjusted for both effects.
These are modeled counterfactuals, not line items visible on an insurer's balance sheet. MedPAC's estimate depends on data, risk adjustment and assumptions about the comparison population. That makes methodological scrutiny appropriate; it does not make the payment question disappear.
Industry Critics Challenge the Comparison
The Healthcare Leadership Council and other industry-aligned groups argue that MedPAC's approach uses incomplete or outdated data and does not adequately value care management or supplemental benefits. Former health secretaries Donna Shalala and Tommy Thompson made that case in a STAT opinion article, pointing to changes in MedPAC's estimate as evidence of uncertainty.
The commission's figure did fall from the prior year's estimate after updated data and a revised risk model. That is not proof that either figure is exact. It does show why the $76 billion should be reported as MedPAC's current estimate rather than an audited total.
Medicare Advantage plans can offer benefits not generally included in traditional Medicare, such as some dental, vision or hearing coverage, and may reduce cost sharing for enrollees. Federal rebates finance many supplemental benefits. Those features help explain the program's popularity, but they do not answer whether the benchmark and risk-adjustment formulas pay plans efficiently.
Scale Raises the Stakes for Both Sides
KFF reported that Medicare Advantage payments for Part A and Part B services reached $534 billion in 2025, nearly triple their 2016 level. More than half of eligible Medicare beneficiaries are now in private plans. Changes to payment policy can therefore affect federal spending, plan bids, premiums and supplemental benefits across a large population.
That scale is a reason for careful transition rules, not a reason to treat enrollees as leverage in a political fight. A lower benchmark does not automatically specify which benefits a plan would change. Insurers make those choices within federal rules, and effects can differ by county and plan.
It is also inaccurate to equate coding intensity with fraud in every case. Risk adjustment is designed to pay more for people expected to need more care. The policy problem is whether diagnoses and the model produce payments that systematically exceed the cost of comparable beneficiaries, not whether documenting any additional condition is illegitimate.
The Debate Needs an Auditable Baseline
MedPAC's estimate identifies a fiscal problem that lawmakers cannot dismiss merely because the methodology is contested. At the same time, debate should separate projected excess payments, improper payments, plan profits and the value of supplemental benefits. Those are related but different measures.
A credible reform process would publish the data and assumptions needed to reproduce selection and coding estimates, test alternative methods and show how proposed changes affect beneficiaries as well as federal spending. It would also evaluate quality and access without assuming that higher payment proves better care or that lower spending proves harm.
The $76 billion figure is strongest as a challenge to the payment formula, not as a slogan about corporate guilt. If industry critics believe the counterfactual is wrong, they should provide a transparent alternative that Congress can test. If policymakers accept MedPAC's analysis, they should change the formula while tracking benefits and access. Protecting either an estimate or an industry from verification would leave taxpayers and beneficiaries with the same unanswered question.