After stealing hundreds of billions of dollars from taxpayers, insurance companies in the Medicare Advantage program are going to face significant government action. And significant government action, in this case, means that the federal government is going to award an estimated $13 billion to the insurers in bonus payments.

These bonuses are not officially a direct reward for insurance companies exploiting taxpayers, but they are emblematic of a completely broken system.

Quality bonuses in the Medicare Advantage program are meant to reward insurers for providing high-quality plans to seniors and others who qualify for Medicare. The Centers for Medicare & Medicaid Services (CMS) maintains a five-star quality rating system, and the agency awards bonuses for plans that earn at least four out of five stars. As currently structured, this system was created by the Affordable Care Act in 2012.

For 2026, the stars themselves are meant to reflect 43 or 33 measures of clinical quality, patient experience, and administrative performance (there are more measures if the Medicare Advantage plan includes a prescription drug benefit).

However, the Medicare Payment Advisory Commission (MedPAC) has repeatedly over the years lambasted the quality star program—even calling for its abolishment—due to it being inaccurate, unreliable, and significantly increasing government spending. For example, in March 2026, MedPAC summarized in their report:

An excessive number of measures are assessed, and many administrative and process measures are not reflective of the quality of care and/or experience that plan enrollees can expect to receive.

MedPAC is not alone as several published analyses found that the measures underlying the star ratings do not adequately and meaningfully separate the quality of different plans, and the creation of the quality star system did not improve key quality measures of plans.

To highlight some examples of glaring issues with the quality bonus program: CMS awards bonus payments at the contract level, and insurers can include several, even hundreds, of plans in a single contract. This effectively means, as MedPAC has noted, that the star rating for an entire contract can bear little to no resemblance to patients’ experiences with their specific plans. Additionally, the government has allowed insurers to combine contracts in a manner that inflates their star rating and enables them to rake in higher bonus payments.

Additionally, the measures of “quality” are curious when zooming out to the larger view of what constitutes successful health care coverage. Quality measures include but are not limited to whether patients get their annual flu vaccine, whether they are screened for breast or colorectal cancer, and how much they adhere to taking specific prescribed medications (ex: statins). Another measure is whether they received advice from a doctor in the past year on starting, increasing, or maintaining their level of exercise.

These measures do not directly account for widely known quality issues with Medicare Advantage and private insurance in the United States more generally. Unlike traditional Medicare, private plans operate in restricted networks, meaning that patients have much less choice in what doctors they can see. Many providers have stopped accepting Medicare Advantage plans due to lower reimbursements and the administrative hassle of dealing with private insurers. Administrative bloat is a feature of private insurance in the United States, as both publicly-administered Medicare and Medicaid have far lower administrative costs than their private counterparts.

Insurance companies use prior authorization to delay and deny important care, to the extent that 93 percent of 1,000 surveyed physicians in 2024 reported that prior authorizations delayed access to necessary care always (15 percent), often (42 percent), or sometimes (36 percent). Additionally, 82 percent of physicians reported abandoning recommended care always (2 percent), often (20 percent), or sometimes (60 percent).

Also, there is little to no evidence that Medicare Advantage plans use the quality bonus payments to improve their coverage. This reality is not surprising. MA plans are significantly more profitable for insurance companies than their other types of offerings; yet, insurers have repeatedly threatened to, and have actually, cut benefits and plan offerings when the government has moved to rein in overpayments.

Overpayments are a massive issue in the Medicare Advantage program, with MedPAC estimating $76 billion in taxpayer money unnecessarily going to insurance companies in 2026. This follows $84 billion in estimated overpayments in 2025, and MedPAC additionally estimated nearly half a trillion in overpayments for the period from 2020 to 2026.

These overpayments are a result of intentional strategies by insurance companies to rip off taxpayers. Insurers make patients seem sicker than they actually are — a practice called upcoding — which results in the government giving them higher payments for each seemingly sicker patient. At the same time, these companies engage in favorable selection: the practice of intentionally choosing healthier patients that will require less money to cover. Insurers profit in Medicare Advantage by getting as much money per patient as possible from taxpayers and then spending as little as possible in covering care.

When patients need to utilize health care services more, or the government potentially reins in overpayments to the extent that profits are reduced, insurance companies can and have responded by eliminating plans and decreasing the quality of others by offering fewer, worse benefits.

Simultaneously, the insurance lobby has been very effective in stopping Congress and the Trump administration from legislatively ending or even just limiting the tens of billions of dollars in annual waste, fraud, and abuse. Congress has never voted on existing bipartisan legislation to address upcoding, and this bill was excluded from the One Big Beautiful Bill in 2025 even though it was introduced by Republican Senator Bill Cassidy. When CMS proposed to only increase the payment rate to insurers by 0.09 percent given the massive overpayments, insurance lobbyists got the Department of Health and Human Services (HHS) to reverse course, increasing the payment rate by 2.48 percent. In Congressional testimony, HHS Secretary Robert Kennedy, Jr. publicly admitted to such industry influence.

This industry lobbying campaign succeeded even though both Secretary Kennedy and CMS administrator Dr. Mehmet Oz have castigated the practice of upcoding, with Oz even calling companies that upcode “scoundrels.” A clear indication as to why this campaign succeeded is that seven of the largest insurance companies that offer MA plans spent more than $330 million lobbying between 2020 and 2024. Public reporting has revealed that this lobbying barrage included a focus on preventing the government from cutting overpayments.

Given the reality of industry control of the federal government, it comes as no surprise that CMS will hand an estimated $13.4 billion in quality bonuses to Medicare Advantage plans in 2026, meaning that the government will have given industry $50.7 billion in such bonuses from just 2023 to 2026.

Ultimately, bipartisan members of Congress, MedPAC, the HHS Secretary, the head of CMS, and independent researchers across the political spectrum have all recognized the massive waste, fraud, and abuse in the Medicare Advantage program. The only powerful actor in support of the current system is the insurance industry itself. Yet, “somehow” policymakers have not fundamentally changed any aspect of the Medicare Advantage program that would do away with billions in stolen taxpayer dollars.