Medicare Advantage is the privatized alternative to traditional Medicare. Instead of the federal government paying physicians and hospitals directly, the government pays a private insurer a monthly premium per enrollee, and the insurer manages the care. It was introduced on the premise that private insurers, operating with market incentives, would deliver Medicare benefits more efficiently than the government could.
More than half of all Medicare beneficiaries — 34.1 million Americans as of 2025 — are now enrolled in Medicare Advantage plans. The program has grown steadily for two decades, supported by both parties, marketed aggressively by insurers, and promoted as offering additional benefits beyond traditional Medicare.
The evidence on how the program has actually performed — examined by the government’s own nonpartisan watchdog, by the Department of Justice, and by academic researchers — presents a substantially more complicated picture.
The Overpayment: $84 Billion in a Single Year
The Medicare Payment Advisory Commission — MedPAC — is the nonpartisan federal body that advises Congress on Medicare policy. It is not an advocacy organization. It is the government’s own analytical arm for Medicare program oversight.
In its March 2025 report, MedPAC found that the federal government paid $84 billion more for Medicare Advantage enrollees in 2025 than it would have cost to cover the same beneficiaries under traditional Medicare. Eighty-four billion dollars. In a single year. In excess of what the same coverage would have cost under the public program the private plans were designed to improve upon.
This figure is the result of several mechanisms, the most significant of which is a practice called upcoding.
Upcoding: The Mechanism of the Overpayment
Medicare Advantage payment rates are risk-adjusted — insurers receive higher payments for sicker enrollees, on the theory that they face higher costs for those patients. The adjustment is based on diagnosis codes submitted by the insurer to CMS, the Centers for Medicare and Medicaid Services.
Upcoding is the practice of adding diagnosis codes to a patient’s medical record that make the patient appear sicker — and therefore generate higher risk-adjusted payments — than the patient’s actual condition or treatment record supports. The codes are added. The payment is received. The patient may never receive treatment for the coded condition. The government pays for a level of illness that does not exist.
The Department of Justice has described the practice in filings as adding unsupported diagnosis codes to patient records to secure higher payments even when enrollees do not receive treatment for those conditions. This is not a technical accounting dispute. It is, as the DOJ’s filings characterize it, fraud.
The Kaiser Permanente Settlement
In the largest Medicare Advantage fraud settlement in history, Kaiser Permanente agreed to pay $556 million to settle Department of Justice allegations that it had billed the government for medical conditions patients did not have.
The settlement resolved whistleblower lawsuits — filed by former Kaiser employees — accusing the insurer of conducting a years-long scheme of overstating patient illness to illegally boost revenue from Medicare Advantage contracts. Kaiser did not admit wrongdoing as part of the settlement, which is standard practice in civil settlements of this kind.
The $556 million figure represents one settlement, with one insurer, for one period of conduct that whistleblowers brought to the government’s attention. It does not represent the full scope of upcoding across the Medicare Advantage program, which MedPAC’s aggregate analysis suggests is substantially larger.
The DOJ Criminal Case Against UnitedHealth Group
While the Kaiser settlement was a civil resolution, the Department of Justice has an open criminal case against UnitedHealth Group for conduct related to Medicare fraud. UnitedHealth Group posted $447.6 billion in revenue in 2025, making it among the largest corporations in the United States by revenue. It is the largest health insurer in the country.
The criminal nature of the DOJ’s case against UnitedHealth Group — as opposed to a civil settlement — represents a significant escalation in the government’s characterization of Medicare Advantage fraud. Civil cases result in financial penalties. Criminal cases can result in corporate fines, loss of government contracts, and in some circumstances individual prosecution.
At the same time as the DOJ criminal case was proceeding, the Trump administration proposed increasing Medicare Advantage reimbursement rates to insurers by approximately $13 billion. The simultaneous prosecution of the largest Medicare Advantage insurer for fraud and the proposal to increase payments to Medicare Advantage insurers represents a policy contradiction that congressional oversight has noted without resolving.
The Congressional Hearing: A Rare Moment of Bipartisan Agreement
In April 2026, Representative Alexandria Ocasio-Cortez questioned Robert F. Kennedy Jr. — the Secretary of Health and Human Services — at a congressional budget hearing about Medicare Advantage practices. Kennedy, whose political identity is not associated with progressive healthcare positions, agreed with Ocasio-Cortez that health insurance companies are, in his characterization, lying and defrauding the American public through their Medicare Advantage billing practices.
The exchange produced a documented moment of bipartisan agreement — between a progressive Democrat and a Trump cabinet official — that Medicare Advantage fraud is real, significant, and ongoing. The administration’s simultaneous proposal to increase Medicare Advantage payments by $13 billion proceeded regardless.
Ocasio-Cortez’s characterization of the practice from the congressional floor: insurers are upcoding, telling Medicare that patients are sicker than they are to receive higher payments, while simultaneously lowering reimbursement rates to providers and increasing claim denials.
The Cost to Medicare Beneficiaries
The $84 billion annual overpayment does not stay in an abstract government ledger. It has direct financial consequences for Medicare beneficiaries, including those enrolled in traditional Medicare who have never chosen a Medicare Advantage plan.
The standard monthly Medicare Part B premium — which all Medicare beneficiaries pay regardless of whether they are in traditional Medicare or Medicare Advantage — is set annually based in part on projected Medicare program costs. As Medicare Advantage overpayments increase total program costs, Part B premiums rise for all beneficiaries.
The standard monthly Medicare Part B premium rose from $185 in 2025 to $203 in 2026. The MedPAC analysis identifies Medicare Advantage overpayments as a contributing factor to that increase. Seniors who have remained in traditional Medicare — who have not chosen a private Medicare Advantage plan — are paying higher premiums in part to subsidize the overpayments to private insurers.
The Public Reaction to Industry Practices
In late 2024, the killing of a major health insurance CEO generated a public reaction that was notable for its character. Social media responses included widespread dark humor, open expressions of sympathy, and accounts from individuals who had been denied coverage for cancer treatment, insulin, mental health care, and surgical procedures. The reaction was not uniformly condemnatory in the way such an event might typically be expected to produce.
This reaction is documented as a social phenomenon and is included here as data — evidence about the depth and breadth of public grievance toward health insurance industry practices that had accumulated over years of claim denials, prior authorization obstacles, surprise bills, and coverage disputes. It is not presented as an endorsement or a celebration of the event. It is presented as a documented cultural response that reflects the state of public opinion toward the industry.
The America’s Plan version of this series excludes further detail on this event. It is noted here solely as documented context for the public environment in which the Medicare Advantage fraud findings have emerged.
The Central Irony
The political argument most frequently deployed against single-payer healthcare is that government-administered healthcare is inefficient, wasteful, and prone to fraud. Medicare Advantage was introduced and has been expanded on the premise that private insurers could administer Medicare benefits more efficiently than the government.
The evidence from MedPAC, the Department of Justice, and congressional oversight presents the following documented picture: private insurers administering Medicare benefits through the Medicare Advantage program have overbilled the government by $84 billion in a single year. The largest such insurer in the country faces criminal prosecution for that overbilling. The second-largest has paid $556 million to settle civil fraud allegations. And the government has proposed paying these insurers an additional $13 billion while the fraud prosecutions proceed.
The argument that government cannot efficiently administer healthcare is being made by the same entities that have extracted $84 billion in a single year from the government program they were hired to administer more efficiently. Whether this constitutes an argument for or against expanded government administration of healthcare is a question readers can evaluate against the evidence presented throughout this series.
Sources
Medicare Payment Advisory Commission: March 2025 Report to Congress, Medicare Advantage overpayment analysis.
Department of Justice: Kaiser Permanente Medicare Advantage fraud settlement, $556 million.
Department of Justice: UnitedHealth Group criminal case filings, Medicare fraud.
Senate Finance Committee: Medicare Advantage oversight report, lobbying and billing practices.
Centers for Medicare and Medicaid Services: Medicare Part B premium announcement, 2026.
Congressional testimony: AOC questioning of RFK Jr., April 2026 budget hearing.
KFF: Medicare Advantage enrollment data, program overview.
MedPAC: Medicare Advantage risk adjustment and upcoding analysis.
CBO: Medicare Advantage payment rate proposals.
The Complete Single Payer Healthcare Series
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