If you're enrolled in Original Medicare and you've watched your Part B premium climb year after year, you've probably chalked it up to inflation or the rising cost of healthcare. That's part of the story. But there's a second driver that almost never gets explained in plain language: the billions of dollars in excess payments flowing to Medicare Advantage insurance companies are helping push up the monthly premium that every Medicare beneficiary pays — including the roughly 35 million people who have never enrolled in a Medicare Advantage plan and never intend to.
Understanding how this works requires a brief look at how Medicare Advantage plans get paid. When you enroll in an MA plan, the federal government pays that private insurer a fixed monthly amount on your behalf. That payment is supposed to reflect how sick or healthy you are, using a formula called risk adjustment. In theory, sicker patients generate higher payments to the insurer, which is reasonable — covering a diabetic with heart disease costs more than covering a healthy retiree. In practice, insurers have learned to manipulate that formula by assigning patients more diagnosis codes, or more severe ones, than their actual health conditions justify. This practice is called upcoding, and it has become a defining financial feature of the Medicare Advantage program.
The Medicare Payment Advisory Commission, known as MedPAC, is the nonpartisan body that advises Congress on Medicare payment policy. MedPAC has estimated that Medicare Advantage plans are overpaid by approximately $83 billion over a five-year period compared to what Original Medicare would spend covering those same beneficiaries. That figure is not a projection or a worst-case scenario — it reflects the gap between what the risk-adjustment formula pays out and what the actual cost of care would be under traditional Medicare. The HHS Office of Inspector General has separately documented that a significant share of MA diagnosis codes used to generate higher payments are not supported by medical records when audited.
Here is the direct line from those overpayments to your monthly bill. Part B benefits — doctor visits, outpatient care, preventive services, durable medical equipment — are funded through the Supplemental Medical Insurance Trust Fund. Beneficiary premiums cover roughly 25% of Part B program costs; general federal revenues cover the rest. Each year, actuaries at the Centers for Medicare and Medicaid Services calculate the following year's standard Part B premium based on projected program costs. When Medicare Advantage overpayments drain the broader Medicare trust funds faster than anticipated, that excess spending is factored into the actuarial models that set your premium. The mechanism is indirect but real: more money out of Medicare's shared financial pool means higher premiums for everyone in the program, regardless of which type of coverage they hold.
According to CMS.gov data, the standard Part B premium rose from $148.50 per month in 2021 to $170.10 in 2022, then to $164.90 in 2023 after a one-year correction, before climbing again to $174.70 in 2024 and $185.00 in 2025. That is a net increase of $36.50 per month — or $438 per year — over four years. Multiple factors contribute to that trajectory, including the cost of newly approved drugs such as Leqembi for Alzheimer's disease, which CMS had to account for in its 2022 premium calculation. But MedPAC has repeatedly identified structural MA overpayments as a persistent upward force that does not correct itself without legislative or regulatory intervention.
Data Snapshot: According to CMS.gov enrollment data, Medicare Advantage covered approximately 33.8 million beneficiaries as of 2024, representing roughly 54% of all Medicare-eligible individuals — up from about 39% just five years earlier. CMS data also shows that 3,959 Medicare Advantage plans were available nationally for the 2024 plan year, giving most beneficiaries a wide menu of options. But as MA enrollment has grown, so has the total dollar value of risk-adjustment payments flowing to insurers, which means the overpayment problem has scaled proportionally. A program that overpays by a few billion dollars when it covers 20 million people overpays by far more when it covers 34 million.
The mechanics of upcoding are worth understanding because they affect how you should think about interactions with your insurer. Some Medicare Advantage plans send nurses or health risk assessment forms to enrollees' homes — not primarily to coordinate your care, but to document as many diagnosis codes as possible. A history of mild depression noted once in a chart, a borderline lab value, a resolved infection from years ago — each of these can be coded in ways that make you appear significantly sicker on paper than you are in daily life. Each additional diagnosis code can generate thousands of dollars in additional annual payment from the federal government to the insurer. The insurer profits; the Medicare trust fund loses; and eventually, every beneficiary absorbs a fraction of that cost through higher premiums.
Advocacy organizations focused on beneficiary rights have been pressing CMS and Congress to close the most glaring loophole in the current system. Under existing practice, MA insurers can conduct retrospective chart reviews to find additional diagnosis codes that increase their payments, but they face no symmetric obligation to delete codes that do not hold up to scrutiny. In other words, the audit process is one-directional: it only runs in the insurer's favor. Requiring plans to remove unsupported codes — not just add new ones — when conducting chart reviews would be a meaningful corrective step. CMS has proposed rules in this direction in recent years, but full implementation has faced legal and political resistance from the insurance industry.
None of this means you should panic about your current coverage or feel pressured to switch plans. If you are in Original Medicare and satisfied with it, the right response to this information is not to make an impulsive coverage change — it is to understand that your premium costs are being shaped by policy decisions made far above the level of your individual enrollment, and to stay engaged with what your congressional representatives are doing about Medicare payment reform. The insurance companies that operate Medicare Advantage plans are among the most active lobbying forces in Washington, and legislative reform moves slowly. But MedPAC has made specific recommendations to reduce MA benchmark payments to levels closer to what Original Medicare would spend on comparable patients, and those recommendations have gained traction in recent budget discussions.
For beneficiaries who want to protect themselves from rising out-of-pocket costs within Original Medicare, a Medigap policy — also called Medicare Supplement insurance — is the most direct tool available. Medigap Plan G is currently the most comprehensive option available to new enrollees (Plan C and Plan F, which also covered the Part B deductible, are no longer available to people who became Medicare-eligible after January 1, 2020). Plan G covers the Part A hospital deductible, which is $1,676 per benefit period in 2025, all Part A coinsurance, and all Part B coinsurance after you satisfy the annual Part B deductible of $257 in 2025. Average monthly premiums for Plan G vary considerably by state, age, and insurer — a 65-year-old in a mid-cost state might pay between $110 and $180 per month — but the predictability of your total annual costs can be especially valuable if you have chronic conditions or expect significant healthcare use. Medigap policies are accepted by any doctor or hospital that accepts Medicare, nationwide, with no network restrictions and no referral requirements.
Enrollment timing for Medigap is critical and often misunderstood. Your strongest protection is the six-month Medigap Open Enrollment Period that begins the month you turn 65 and are enrolled in Part B. During this window, insurers cannot use medical underwriting to deny you a policy or charge you more based on your health history. Once that window closes, most states allow insurers to reject your application or impose higher premiums if you have pre-existing conditions. If you are already past 65 and in Original Medicare without a Medigap policy, your options may be limited — unless you live in one of the states that have enacted a birthday rule. Those states — California, Idaho, Illinois, Kentucky, Louisiana, Maine, Maryland, Missouri, Nevada, New Jersey, New York, Oklahoma, and Oregon — give you a 30-day window each year around your birthday to switch Medigap plans without medical underwriting, which can be a valuable opportunity to find better pricing or coverage.
The Annual Enrollment Period, running October 15 through December 7 each year, is when you can move between Original Medicare and Medicare Advantage, or change MA plans, with new coverage effective January 1. If you are already in a Medicare Advantage plan and want to return to Original Medicare, you can also use the Medicare Advantage Open Enrollment Period, which runs January 1 through March 31. One important caution: if you return to Original Medicare from a Medicare Advantage plan outside of a guaranteed issue window, you may not be able to obtain a Medigap policy in most states if you cannot pass medical underwriting. That is a significant financial risk if you have serious health conditions. Before making any switch, contact your State Health Insurance Assistance Program — SHIP — which provides free, one-on-one counseling from trained volunteers who have no financial stake in what plan you choose. You can find your state's SHIP through Medicare.gov or by calling 1-800-MEDICARE.
The policy debate over Medicare Advantage overpayments will continue regardless of what any individual beneficiary decides about their own coverage. What you can do is stay informed, ask your doctor or insurer direct questions about how your diagnoses are being coded, and contact your senators and representatives to express that Medicare payment integrity matters to you. The scale of the overpayment problem — tens of billions of dollars annually — is large enough that even partial reform could meaningfully slow the growth of the Part B premium over time. That is not a guarantee, but it is a realistic possibility if enough beneficiaries make clear that they understand what is happening and expect their elected officials to act.