$ 66 Billion In Medicare Advantage Supplemental Benefit Spending Challenged

Medicare Advantage plans offer seniors supplemental benefits such as non prescription supplements, first aid items, and gym memberships.  CMS reimburses the insurers who provide the supplemental benefits without adequate documentation:

https://www.morningstar.com/news/marketwatch/2025061682/66-billion-in-taxpayer-money-is-getting-sucked-into-this-medicare-advantage-black-hole

$66 billion in taxpayer money is getting sucked into this Medicare Advantage black hole
By Brett Arends - June 16, 2025

Even Medicare doesn't know where the money is really going

Where's DOGE when you really need it?

The Trump administration claims it is taking a chain saw to the federal budget to pay for its massive, unfunded proposed tax cuts. Congress is looking to slash safety-net programs for the poor, such as Medicaid, to try to make the math add up.

Meanwhile, a new government report has revealed that a staggering $66 billion in taxpayers' money being paid to big insurance companies is apparently going unaccounted for, or at least unmeasured, as part of the gigantic $550 billion-a-year Medicare Advantage (MA) program.

The question is whether the supposedly fearless protectors of taxpayer dollars on Capitol Hill are going to do anything about it. You might want to think twice about holding your breath.

The Medicare Payment Advisory Commission - the statutory independent body that advises Congress on the entire Medicare program - has slammed the Medicare Advantage program for a "fundamental lack of transparency" in how large portions of taxpayer money are being spent, particularly when it comes to the generous annual rebates being paid every year to the big insurance companies that operate the program.

A "lack of reliable data" means that it is "impossible to answer many important questions about how the rebates that Medicare pays to MA plans are used," MedPac reports.

"Our review of numerous data sources pertaining to MA supplemental benefits reveals a fundamental lack of transparency about how often enrollees use the benefits and plans' spending for the benefits," MedPac says in its latest report. The data available to Medicare are "insufficient for examining the use of most of these benefits," it says, while "the lack of reliable data makes it difficult to answer many important questions about how the rebates Medicare pays to MA plans are used." It is impossible for taxpayers to know even "how much plans spend on each type of benefit," which enrollees use each benefit, and how often, MedPac adds.

Or, to put it more simply: "Little is known about the extent to which MA enrollees use the many supplemental benefits available to them."

As a result, it says, "it is difficult to determine whether the benefits improve MA enrollees' health" and therefore "policymakers do not have good information about whether the spending provides good value to MA enrollees and the taxpayers who fund the program."

Those supplemental benefits are supposed to be paid for from generous "rebates" paid by U.S. taxpayers to the for-profit insurance companies that offer Medicare Advantage plans. The scale of those rebates has ballooned by more than 300% since 2018, MedPac reports.

In total those rebates will cost taxpayers an estimated $86 billion this year. The report says the lack of clarity about how those rebates are being used relates in particular to the $66 billion that the insurance companies supposedly spend on cost-sharing and providing non-Medicare services, such as dental insurance, optical insurance and things such as gym memberships.

In all, the Medicare trustees estimate that the privatized Medicare Advantage program will cost U.S. taxpayers $547 billion this year, more than three times as much as it did a decade ago.

In a statement AHIP, the national trade association for the health insurance companies, didn't address the specific claims but said: "Medicare Advantage is vital to the health and wellbeing of more than 34 million Americans, providing better quality care at a greater value than fee for service Medicare. That is why over 90% of seniors are satisfied with their coverage through Medicare Advantage."

MedPac has already disagreed with the claim that Medicare Advantage provides better value than traditional or "fee for service" Medicare. In recent reports it has estimated that Medicare Advantage actually costs the taxpayers 22% more per beneficiary than it would to provide insurance through the traditional government-run program, an excess that is likely to total $84 billion this year. (The insurance companies, naturally, disagree with this argument, and have accused MedPac of using bad math and out of date information.)

The 17 independent, nongovernment experts who oversee MedPac include senior doctors, medical researchers, and industry experts from a variety of organizations including the medical schools of Harvard, Cornell, Johns Hopkins, UCLA, University of Texas and the University of Pennsylvania, along with health insurers such as Intermountain Health and Blue Cross Blue Shield, and other organizations such as the RAND Corporation.

As the United States electorate voted last fall - as usual - for a clear policy of having their cake and eating it, Congress is now wrestling with how to add yet more massive unfunded tax cuts onto a budget that is already heavily in deficit. In this circumstance it's inevitable that some people in Congress - on both sides of the aisle - should start to wonder whether all the extra taxpayer dollars spent on Medicare Advantage offer the best possible return.

They will have to reckon with the marketing power of the big insurance companies if they ever want to challenge the program's massive cost. "The Better Medicare Alliance," a Washington, D.C.-based lobbying organization set up specifically to promote and defend Medicare Advantage, is now launching an aggressive campaign to protect the program from cuts.

BMA itself does not report its funders but lists all the major insurance companies as its "allies." It receives annual contributions from its backers of $26 million a year, and president and CEO Mary Donohue collects a salary of $842,000 a year. If she succeeds in defending the insurance companies, she will be worthy every penny.

As most of the public is only vaguely aware of the distinction between Medicare Advantage and traditional Medicare, and even less aware of the financial controversies involved, it is easy sell to argue that any "cut" to Medicare Advantage payments - for example, to the profits of the private contractors - will be a "cut" to Medicare itself.

As part of the campaign, BMA has just published the results of its latest opinion poll. They claim, predictably, that the overwhelming majority of the public support Medicare Advantage and disagree with all the criticisms. Among the most remarkable of the survey's findings is that apparently 65% of those surveyed "agree that Medicare Advantage is helping to modernize the healthcare system by including telehealth benefits, in-home care and promoting wellness to keep people as healthy as possible." Who knew?

I asked BMA if I could see the actual poll data, including, for example, how the questions were phrased. Did they agree to share the information? Have a guess.

Meanwhile, like Inspector Clouseau of the "Pink Panther" movies, Congress will no doubt look everywhere other than in Medicare Advantage for waste, fraud and abuse.

Brett Arends is a columnist for The Wall Street Journal (WSJ) and other Dow Jones publications, such as MarketWatch.  This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.