At what point do we acknowledge that we’re wasting money? A massive source of government waste that the Trump Administration has yet to tackle is overpayments to health insurance companies in the Medicare Advantage system.

In May, the Center for Medicare & Medicaid Services (CMS) announced a significant plan to hire thousands of auditors to rein in such waste. But recent reporting suggests these efforts have stalled. Yet, perhaps policymakers should take a step back and ask themselves if the current Medicare Advantage program is worthwhile at all if we need to hire thousands of auditors to stop insurance companies’ stealing billions of dollars every year – especially when there is already an efficient alternative: traditional Medicare.

The Medicare Advantage program funnels taxpayer money to private insurance companies to provide and manage health coverage for Medicare-eligible Americans, namely seniors. CMS pays these companies a fixed amount per enrollee based on various factors, including their risk profile (i.e. more money for a person with many health conditions). Ideally, the companies make money by spending as little money as possible while keeping patients healthy, keeping the difference between the per-enrollee payment and what they spend.

These private insurers are predominantly for profit, and they have adapted to this capitated payment model to extract as much money as possible. The insurance companies maximize profits by selecting healthier individuals who they get to spend less money on (favorable selection) while simultaneously making patients seem as sick as possible to increase the amount CMS pays them (upcoding). 

A select few companies reap the largest rewards, as 58 percent of beneficiaries are enrolled in plans controlled by just three insurers: UnitedHealth Group, Humana, and CVS (71 percent when adding Elevance Health and the Kaiser Foundation Health Plan). Ninety percent of Medicare beneficiaries lived in a county where one or two insurers provided a majority of enrollees’ health coverage in 2024.

The Medicare Payment Advisory Commission (MedPAC) – an independent legislative branch agency that informs Congress – estimates that CMS will overpay insurers by $84 billion in just 2025. A research group, the Committee for a Responsible Federal Budget, looked over the next decade and estimated around $1.2 trillion in such overpayments.

When the Senate held its confirmation hearing for now-CMS Administrator Mehmet Oz, he supported cutting these overpayments, calling companies that upcode “scoundrels.” Accordingly, in May 2025, CMS announced “a significant expansion of its auditing efforts for Medicare Advantage (MA) plans,” including increasing its team of medical coders who would help scrutinize diagnosis codes to attack the upcoding issue from just 40 to ~2,000. Applying more diagnosis codes to patients increases the payments to insurers.

Nearly four months later, it seems CMS has not made progress towards reaching this hiring goal. Bloomberg reported that a CMS spokesperson refused to acknowledge whether the agency had any hiring success, and the website that lists federal job openings has no current postings for these positions.

This news also piggybacks a recent court ruling that struck down a Biden-era rule limiting compensation for insurance brokers selling MA plans. That rule limited the usage of large “administrative” payments and volume-based bonuses for brokers steering patients to certain plans. CMS had initially taken this action to stop insurers — especially the large companies that dominate the MA program — from corrupting brokers’ integrity and leading patients towards their plans rather than the best ones for each individual’s health care needs.

The difficulty and cost of hiring 2,000 coders for a significant auditing operation, in addition to CMS’s struggles to stop the corruption of brokers, indicate a losing battle. Health insurers rake in billions of taxpayer dollars and they will seemingly exploit each and every loophole they can identify to maximize profits. The government not only has to play catch up, but regulators are hampered by various bureaucratic hurdles given that Congress has failed to pass legislation to make their jobs easier.

At the same time as the government is failing to stop insurance companies from ripping off taxpayers with MA – like a snail trying to catch up to a cheetah – the traditional Medicare program saves money and is much more efficient. MedPAC’s $84 billion estimate more specifically means that the government would spend $84 billion less in 2025 if everyone enrolled in MA were in traditional Medicare. 

Traditional Medicare Removes the Bloat

Traditional Medicare has significantly lower administrative costs than private insurance with 1.1 percent of spending in 2024 going towards administration compared to between roughly 12-18 percent for private insurers in previous years. Coincidentally, the bloated administrative spending of American health care is one of the factors contributing to why the United States spends around twice as much per person compared to other developed nations even though we have worse health outcomes.

Traditional Medicare is more closely aligned to other nations’ universal health care systems which are cheaper and produce better outcomes, such as Canada and France’s government insurance programs. Even different systems without direct government insurance like Germany rely on nonprofit insurers which the government heavily regulates. 

The United States’ system run by large, for-profit health insurance companies is highly inefficient and ineffective, costing Americans more while producing worse health outcomes. And, it still manages to leave over 27 million people without health coverage. The growth of Medicare Advantage moves the overall Medicare program farther away from comparable nations’ better systems and closer towards the costly, bloated system that most Americans under the age of 65 have to deal with. 

Unlike Medicare Advantage, traditional Medicare removes the for-profit insurance company middleman, meaning that the government need not hire thousands more workers and direct significant funding to just attempt to stop billions in exploitation. Patients also benefit, as nearly all doctors accept traditional Medicare, while people enrolled in MA plans have to deal with limited networks.

While traditional Medicare has issues, they are not inherent to the program and there are simple political remedies. For example, CMS forces insurance companies to cap out-of-pocket (OOP) expenses for patients in their plans, yet the government has not created such a cap in traditional Medicare. One estimate from Brown University researchers pegs the cost of a $1,000 annual OOP cap in 2025 at $44 billion, roughly half the amount of just estimated 2025 overpayments to MA insurers.

As the media highlight the Trump Administration’s at best slow response to trying to rein in overpayments to Medicare Advantage insurers, policymakers and the American people need to ask ourselves: does this system make sense? Does it make sense to constantly chase for-profit insurers as they continuously search for different ways to waste taxpayer money? Is it efficient to move away from the traditional Medicare model that saves money and better aligns with other countries’ systems that also save money and produce better health outcomes?

While the government should definitely go after MA overpayments, it is imperative to zoom out and recognize the current approach is like putting lipstick on a pig. You can do it, but it’s still a pig.