American taxpayers are being ripped off. Billions of dollars are wasted in government programs. However, a scam behind much of this plunder – Medicare Advantage overpayments to insurance companies – is not currently on the legislative radar, even though addressing it could prevent cuts to Medicaid.

The Republican majority in the House of Representatives passed a budget resolution directing Congress to find $2 trillion in spending to cut over ten years, or roughly $200 billion per year. Significant media attention has focused on the fact that this would mathematically have to come from slashing Medicaid. However, this is not necessarily true if the Trump Administration and the Department of Government Efficiency (DOGE) want to truly curtail waste, fraud, and abuse.

The House resolution directs the Energy & Commerce Committee to find $880 billions in cuts to the programs under its jurisdiction. This translates to about $88 billion per year. To reach this figure, the committee would have to cut funding from either Medicaid or Medicare, as other smaller programs under its jurisdiction are not sufficient to meet the target set by the resolution.

Republicans have expressed a significant interest in cutting back on Medicaid compared to Medicare, putting forth proposals such as instituting work requirements for people to get coverage – even though most beneficiaries currently do work – or changing the funding mechanism to block grants. As Medicaid is administered by the states, the federal government presently subsidizes state Medicaid spending by matching expenditures at different rates, with states with lower per capita income receiving a higher match but no less than 50% – meaning that the federal government covers at least half the cost.

Cuts to the Medicaid program will undoubtedly reduce the number of people who can get coverage. A Center for Budget and Policy Priorities analysis found that recent Republican proposals to cut Medicaid could force up to 36 million people to lose their health coverage. This figure is almost certainly higher than the number of people who would lose their coverage if all $88 billion were cut from Medicaid, as it represents around 15% of federal spending on the program. But it demonstrates the severe consequences of cuts.

On the other hand, Republicans have not put forth serious proposals to cut Medicare likely due to its universal nature and higher popularity (although both Medicaid and Medicare are popular). All Americans who reach the age of 65 will eventually qualify for coverage, while Medicaid is primarily for the poor.

Yet, there is a way for Congress to meet the $88 billion yearly mark for cuts without actually hurting spending on health care: eliminate Medicare Advantage (MA) overpayments to insurance companies. Traditional Medicare is government-run insurance that provides fee-for-service (FFS) coverage, meaning Medicare pays providers for services provided.

Medicare Advantage is taxpayer-funded private insurance, where dollars for the Medicare program are given to insurance companies to manage the care of beneficiaries. Unlike FFS, the Centers for Medicare & Medicaid Services (CMS) gives lump sum or capitated payments to MA insurers per covered person/beneficiary. The amount of money that CMS gives to the insurer depends on a variety of factors including how sick the patient is and their geographical location. These companies ultimately make more money by spending as little as possible per patient so that they can keep the difference between what they get from taxpayers and what they provide in coverage.

Insurance companies have exploited the MA program for years, reaping billions from taxpayers in overpayments while earning significantly more profits per person in MA compared to their standard private insurance plans for individuals. Figures for overpayments are staggering, as different estimates have found that in single-year periods, insurance companies have been overpaid anywhere between $80-$140 billion. Eliminating these overpayments could cover most (or potentially more than) the required $88 billion in cuts per year over 10 years.

MA insurers reap these overpayments via different methods. One of the primary mechanisms to steal from taxpayers is the practice of upcoding, where insurance companies push clinicians to diagnose patients with more conditions than necessary or that they treat so that they can get larger capitation payments from CMS. Insurers also use favorable selection – the practice of choosing to cover healthier patients. Overall, overpayments have meant that the MA program has never saved taxpayers money compared to Traditional Medicare, and consistently increased federal spending to line insurance company pockets.

One of the primary challenges to tackling the issue of MA overpayments is the significant political influence of health insurance companies in Congress. A combination of campaign contributions to candidates through political action committees (PACs) and other affiliates along with lobbying expenditures affords the insurance industry significant access to the halls of Congress. Lobbyists in turn flood offices with their priorities and information that backs their agenda. A 2024 Kaiser Family Foundation investigation specifically revealed a significant lobbying campaign by MA insurance companies to stop Congress from shutting off the valve of overpayments.

President Trump has stated that his efforts along with those of DOGE and House Republicans is to eliminate corruption, waste, fraud, and abuse. If this is indeed their goal, the Energy & Commerce Committee can easily identify overpayments to insurance companies within the MA program as waste arising out of corruption. Eliminating these overpayments does not reduce the amount of money insurers need to provide coverage for Medicare Advantage beneficiaries and can protect Medicaid from cuts. The choice is clear: cut overpayments to exploitative insurance companies, not critical coverage for hard working Americans.