Report: $1.3 trillion in Medicare Advantage waste could fund Obamacare subsidy extension

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(The Center Square) – The federal government will spend more than $1.3 trillion over the next decade on Medicare Advantage that won’t go toward patient care, a new report says.

The Proactive Strategies Group analysis outlines how Congress could target wasteful spending as part of a broader health care deal. It says reforms would not cut appropriate medical benefits, but instead eliminate improper payments, inflated bonuses, and self-dealing between insurers and affiliated providers.

“The government spends $1 trillion over a decade that doesn’t even go toward patient medical care. Clearly, there’s money if Congress wants to address wasteful Medicare spending,” said Mark Merritt, health policy expert and CEO of Proactive Strategies Group.

The report found $400 billion in potential savings by ending improper payments to insurers, $387 billion from curbing non-medical spending, and over $200 billion by stopping self-dealing.

Other potential reforms include eliminating duplicate payments for veterans who receive most of their care at VA facilities, cracking down on upcoding of diagnoses, and ending billions of dollars in quality bonus payments that critics say do not improve patient outcomes.

Republicans are divided on whether to extend Obamacare subsidies.

Without action, the subsidies will expire at the end of the year. In 2025, the federal government is expected to spend about $91 billion on subsidies that help 24.3 million Americans afford coverage, according to the Centers for Medicare and Medicaid Services.

The Freedom Caucus opposes extending the subsidies. U.S. Rep. Andy Harris, R-Maryland, the group’s chair, said he “absolutely” wants that funding to end. However, some Republicans back an extension.

For example, Sen. Lisa Murkowski, R-Alaska, supports extending the subsidies.

“I think you’re going to have a fair share of back and forth from those who say, ‘It came about in a law that we didn’t like, and we need to get rid of them, we shouldn’t have subsidies,’” Murkowski told The Northern Journal in January. “But you tell me any place, any place in the country, where your healthcare costs or insurance are going down and making things easier for families. If it’s happening, I’m sure not hearing it.”

While Medicare Advantage has typically had strong GOP support, reports of waste have drawn attention.

MedPAC, a federal advisory body, said Medicare Advantage plans are paid 122% of what traditional Medicare would spend, costing $83 billion in 2024. It found that diagnosis upcoding added about $50 billion annually, and quality bonus payments added $15 billion annually without delivering results.

MedPAC concluded in a report to Congress that beneficiaries should not have to finance that waste through Part B premiums.

Supporters of reform argue that cutting waste could help Republicans strike a deal with President Donald Trump on extending Obamacare subsidies while reducing federal spending.