How Medicare Recipients End Up Paying More Thanks To Medicare Advantage

In 2026, Americans who use Medicare Part B to pay for their doctor's visits are expected to see their premiums increase by nearly 12% to $206.20 a month, according to a Medicare Trustees report. Yet while the government-run health program's premiums are expected to go up, premiums for subsidized private health insurance plans under Medicare Part C, also known as Medicare Advantage, are expected to go down — from an average of $16.40 a month in 2025 to $14 a month in 2026, per an announcement from the Centers for Medicare & Medicaid Services (CMS).

The cost of Medicare Part B has jumped because premiums are being pushed by rising payments to Medicare Advantage plans, according to a March 2025 report from the Medicare Payment Advisory Commission (MedPAC), a non-partisan healthcare advocacy group. Per this report, Medicare will spend about 20% more on Medicare Advantage enrollees than those using regular Medicare in 2025, an amount equivalent to $84 billion.

But that's not all. According to another report from the Center of American Progress (CAP), insurance companies used upcoding (making their policy holders appear sicker than they really are for more compensation) and selection bias (private companies gearing plans and coverage toward healthier patients) to obtain between $83 billion and $127 billion in Medicare Advantage overpayments in 2024 alone. Without reform, CAP added, Medicare risks allocating up to $2 trillion in overpayments to insurance companies in the next decade.

First enacted in 1966, Medicare now provides healthcare for Americans aged 65 and over as well as people with disabilities, end-stage renal disease, and Lou Gehrig's disease. The original version includes Medicare Part A, which covers hospital stays without a premium, and Part B for outpatient care. Since 2003, Medicare Part D has offered subsidized drug insurance plans for a monthly premium. This averaged $38.31 in 2025, which CMS projected will decrease to an average of $34.50 a month in 2026.

Private companies have participated in Medicare since the program started through Medigap supplemental insurance plans. These covered expenses the government didn't pay for — such as extended hospital stays, which Medicare won't cover forever. But Medicare Advantage is a whole other ballgame. It was created in 1997 to be a free-market alternative to Medicare Part A and Part B and, for those who want drug coverage added to their Medicare Advantage plans, Part D as well. Aside from lower premiums, Medicare Advantage plans sometimes include vision, dental, and perks such as gym memberships. But there are major disadvantages to Medicare Advantage. Whereas virtually all doctors and hospitals in the U.S. accept original Medicare, Medicare Advantage plans restrict their patients to hospitals within their network. They also require prior authorizations for treatment, which, per MedPac, can take an average of 14 hours a week for clinicians to obtain on behalf of their patients.

Insurance companies are also cutting back on where they provide Medicare coverage in order to control costs. For example, United Healthcare and Blue Cross Blue Shield are ditching Medicare Advantage coverage in numerous locations, as are Humana and Aetna. As a result, 900,000 fewer people are projected to enroll in Medicare Advantage plans in 2026, according to the Healthcare Financial Management Association. While this still means there will be 34 million people signed up for Medicare Advantage plans in 2026, or roughly 48% of Medicare's enrollments, this would mark the first time there's been such a drop since at least 2007. 

Even as the One Big Beautiful Bill Act budget will lead to nearly $500 billion being cut from Medicare between 2027 and 2034, the Trump Administration plans to allow an additional $25 billion to flow toward private insurance companies participating in Medicare Advantage by raising benchmark rates by nearly 5.1%. At the same time, however, CMS has announced that it will enact new rules geared to prevent private insurance companies from upcoding, frequently audit insurers, and claw back any overpayments.