Demetrios L. Kouzoukas is the Director of Paragon Health Institute’s Medicare Initiative. From 2017 to 2021, Kouzoukas served as the Chief Executive of the Medicare program at the Centers for Medicare and Medicaid Services (CMS).
Jackson Hammond is a Senior Policy Analyst at Paragon Health Institute. He has been active in the federal and state health policy space since 2017.
Prior to joining Paragon, Jackson was a health care policy analyst for American Action Forum (AAF). While at AAF, his work focused on payer issues including private insurance, Medicare, and Medicare Advantage. Furthermore, Jackson wrote extensively about the 340B Program and contributed to AAF’s research on a variety of drug pricing issues.
Congress’s bicameral Joint Economic Committee (JEC) released a report on March 10 suggesting that the same enrollee in Medicare Advantage (MA) costs 20 percent more than if they were enrolled in Medicare Fee-for-Service (FFS) and increases Part B premiums for FFS enrollees. The JEC’s estimate relies on a 2025 Medicare Payment Advisory Commission (MedPAC) estimate. These comparisons are inherently difficult because MA and FFS differ in benefits, populations, and incentives. However, there are serious concerns that MedPAC’s analysis, which forms the basis of the JEC’s report, relies on old data, apples-to-oranges comparisons, and increasingly disputed assumptions while also ignoring evidence that MA reduces overall Medicare spending. Other data and studies that address these concerns demonstrate that policymakers should carefully evaluate claims that taxpayers pay more for MA enrollees than for FFS enrollees as well as claims that taxpayers pay more for MA enrollees than Congress intended—and that MA increases Part B premiums.
MedPAC’s March 2026 report estimates that payments for an enrollee in MA are 14 percent more than if the same enrollee was in FFS. This is a decrease from their 2025 estimate of MA payments being 20 percent higher, on which the JEC report was based. MedPAC’s new 14 percent estimate is based on two primary adjustments: favorable selection (11 percent) and coding intensity differences (4 percent). MedPAC estimates that MA payments are 99 percent of FFS spending before adjusting for coding intensity and favorable selection.
MedPAC notes that the 14 percent estimate does not represent profits for MA plans—which are required to spend at least 85 percent of revenue on enrollee benefits and have other limits on their margins—and that it is largely provided to seniors in supplemental benefits that are not offered in FFS, including reduced cost sharing, vision and dental coverage, and gym memberships.
Medicare Advantage assigns a “risk score” to each enrollee based on demographics and diagnoses. Risk adjustment increases the payment for MA enrollees with higher risk scores and decreases payments for those with lower risk scores, thereby creating incentives for plans not to avoid enrollees based on their health status and to help the sickest enrollees manage their care at the lowest cost. This also means that MA plans have a stronger incentive to document diagnoses than providers in FFS. The general difference between the risk scores in MA and FFS is known as coding intensity, and Congress mandates a reduction to payment for MA enrollees to account for this.
CMS recently fully implemented a revised risk adjustment model (known as “v28”) to reduce the impact of certain diagnoses CMS found to be more likely to be coded as a result of subjectivity or other factors. Recent research co-authored by CMS officials found that after applying the changes under the new v28coding model to historical 2022 data, the coding intensity—pegged by MedPAC at 10 percent—would have been between 1.5 and 2.0 percent. While CMS uses a slightly different calculation method than MedPAC, their findings indicate that coding intensity is smaller than MedPAC’s most recent estimate. MedPAC itself has recognized the impact of v28 was greater than it anticipated and made retroactive revisions in its latest report to its 2024 and 2025 coding intensity estimates, while indicating that additional future revisions may be coming.
MedPAC’s 11 percent estimate for favorable selection—the claim that MA attracts healthier enrollees, even within each risk adjustment category of diseases and conditions—has been criticized as having material methodological flaws and inherent population biases. These include concerns that MedPAC’s analysis focuses too narrowly on “switchers” (enrollees who move from FFS to MA), a sample that excludes over 75 percent of total MA enrollees and therefore ignores evidence that selection differences flatten over time. The debate over favorable selection within MedPAC itself identified that the maximum out-of-pocket (MOOP) protection in MA would actually increase FFS spending by 2.8 percent, suggesting that MA may even experience negative selection.
Paragon has previously pointed to how the lesser financial incentive to completely code diagnoses in FFS results in systematically under-reported risk scores, creating an inherent selection illusion when compared to the thorough documentation required in MA. Paragon has also noted how the MedPAC estimate does not account for the extent to which lower spending in MA is attributable to plan-driven care management that FFS lacks. MedPAC’s most recent selection analysis found that there was no adverse selection for End Stage Renal Disease patients, who, logically, would be extremely incentivized to enroll in Medicare Advantage because dialysis costs would quickly allow them to meet their MOOP, a feature that does not exist in FFS.
The JEC and MedPAC reports do not address the spillover effect, where increased MA penetration improves provider efficiency outside MA and lowers FFS spending. Research has demonstrated a 9 percent reduction in FFS spending for every 10 percentage point increase in MA penetration. CMS explicitly acknowledges and credits this phenomenon in analyzing the impact of the Medicare Shared Savings Program but not with respect to Medicare Advantage.
In accordance with the statute, CMS’ methodology for determining how much to pay for each MA enrollee is based on the cost of an equivalently healthy FFS enrollee. But in doing so, CMS also includes costs of enrollees who cannot enroll in MA because they only have Part A or only Part B. Enrollees with only Part A or only Part B have lower Medicare costs. That makes payments for MA enrollees lower than they would be if they were based only on the population that is eligible for MA.
MedPAC has recommended that CMS calculate payment for MA enrollees “using FFS spending data only for beneficiaries enrolled in both Part A and Part B of Medicare,” explaining this would “result in greater payment equity among MA plans and between MA and FFS Medicare.” However, MedPAC’s method to account for this issue in its MA versus FFS spending comparisons is a complex attempt to reflect the extent to which these enrollees are healthier than the average FFS enrollee and include them in the spending data.
It is not clear if MedPAC considers the extent to which these enrollees may have seemingly lower costs simply because they lack a part of Medicare and are therefore less likely to have Medicare record their illnesses. Put differently, for example, an enrollee with only Part A—which covers inpatient care—may appear to be cheaper merely because Medicare does not capture diagnoses that would normally be identified in an outpatient visit covered by Part B.
In contrast, a straightforward method to accomplish the goal MedPAC articulates would be to eliminate the costs of beneficiaries with only Part A or Part B from the payment calculations altogether, as those beneficiaries, irrespective of their relative health or any other factor, are simply ineligible for MA. An analysis by the actuarial firm Wakely (funded by the health insurance trade association) using this method estimated that changing the current CMS practice to bring FFS and MA into alignment would increase payments for MA enrollees by 5.9 percent.
Current cost comparisons fail to account for the government’s own administrative overhead required to operate the FFS program—costs that are not captured in the FFS claims-based calculations used to pay MA plans. MedPAC’s calculations do not account for billions in spending for CMS staff, Social Security Administration premium collection, and oversight and enforcement efforts at the Department of Justice and the Department of Health and Human Services and its Office of Inspector General. Estimates from the 2025 Medicare Trustees Report indicate that administrative costs for Parts A and B are $12.6 billion, roughly 1 percent of total program outlays in 2025.
The entire Medicare program needs reform to provide better value for enrollees and taxpayers. In considering the program’s costs, policymakers should take into account these five considerations with regards to claims that taxpayers pay more for MA enrollees than FFS enrollees or claims that taxpayers pay more for MA enrollees than Congress intended. Paragon has proposed changes to MA and FFS that, when taken all together, address JEC’s concerns and help accomplish the policy goal of having MA deliver better care for less cost than FFS.
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