The Financial Model Behind Medicare Advantage

Medicare Advantage has been promoted as a cost-effective alternative to traditional Medicare, offering lower premiums and additional perks. However, the program’s financial model incentivizes insurers to prioritize profits over patient care. Operating on a capitated payment system, insurers receive fixed payments per enrollee, adjusted for risk, which encourages “upcoding” to secure higher payments and the denial of necessary care to cut costs. This model has led to poorer outcomes for enrollees, particularly those in need of more extensive care. Despite growing concerns, efforts to reform Medicare Advantage have faced strong opposition from the insurance industry, resulting in only modest changes. The need for comprehensive reform is critical, focusing on stronger oversight, stricter regulations on upcoding and care denials, and greater transparency to ensure that Medicare Advantage truly benefits seniors rather than maximizing corporate profits.