Medicare Advantage vs. Traditional Medicare: Follow the Money
Over half of Medicare beneficiaries have switched to Advantage plans. The data shows why that's both a win and a warning.
Key Findings
- • 54%+ of beneficiaries now enrolled in Medicare Advantage (up from 30% in 2015)
- • MA plans cost the government an estimated 6–25% more per beneficiary
- • Diagnosis upcoding by insurers may add $12–25B/year in overpayments
- • Traditional Medicare fraud is provider-side; MA fraud is insurer-side
- • OpenMedicare data covers Traditional Medicare Part B billing only
The Great Migration
Something remarkable has happened to Medicare over the past decade: more than half of all beneficiaries have abandoned Traditional Medicare in favor of private Medicare Advantage (MA) plans. In 2015, about 30% of beneficiaries were in MA. By 2025, that number exceeded 54%.
The appeal is obvious. MA plans typically offer lower premiums, dental and vision coverage, and out-of-pocket caps that Traditional Medicare lacks. For beneficiaries, it often feels like a better deal.
But from a taxpayer perspective, the picture is more complicated. And from a fraud perspective, the shift has created entirely new categories of waste and abuse.
How the Money Works: Two Different Systems
Traditional Medicare (Fee-for-Service): CMS pays providers directly for each service. A doctor bills for an office visit, a lab bills for a blood test, and CMS pays each claim individually. This is the data OpenMedicare tracks — 96 million+ claims over 10 years.
Medicare Advantage (Capitated): CMS pays private insurers (UnitedHealth, Humana, CVS/Aetna, etc.) a fixed monthly amount per enrollee. That amount is adjusted based on how sick the enrollee is — the "risk score." The insurer then manages all the beneficiary's care and keeps whatever is left over as profit.
The incentives are fundamentally different. In Traditional Medicare, providers are incentivized to do more (more services = more billing). In Medicare Advantage, insurers are incentivized to appear sicker (higher risk scores = higher capitated payments) while providing less (fewer services = more profit margin).
The Upcoding Problem
The biggest fraud issue in Medicare Advantage isn't phantom billing — it's diagnosis upcoding. Insurers have systematic incentives to add diagnoses to patient records that inflate risk scores, even when those diagnoses don't reflect the patient's actual health.
A 2024 HHS OIG report found that MA plans added unsupported diagnoses worth $12 billion in overpayments in a single year. MedPAC (the Medicare Payment Advisory Commission) has repeatedly warned Congress that MA overpayments are growing.
The DOJ has pursued False Claims Act cases against major MA insurers, including investigations into UnitedHealth Group, Kaiser Permanente, and others. The core allegation: these companies systematically inflate diagnosis codes to extract higher payments from the government.
Traditional Medicare Fraud: What Our Data Shows
On the Traditional Medicare side, fraud looks different. Our AI fraud detection model analyzes 10 years of Part B claims data to flag providers with billing patterns matching known fraudsters. The types of fraud we detect include:
- Billing for services never provided (phantom billing)
- Upcoding procedures to higher-paying codes
- Impossible billing volumes — like the providers billing for 9,862 services per day
- Wound care and drug markups — the Arizona wound care ring billed $514 million for 2,974 patients
Cost Comparison: What Taxpayers Pay
Multiple independent analyses have found that Medicare Advantage costs the federal government more per beneficiary than Traditional Medicare — even though MA was originally designed to save money through managed care efficiencies.
Cost Per Beneficiary (Estimated)
The Data Gap: Why This Matters
Here's something important to understand about OpenMedicare's data: we only track Traditional Medicare (fee-for-service) claims. Medicare Advantage claims data is held by private insurers, not published by CMS in the same way.
This means that as more beneficiaries shift to MA, the Traditional Medicare dataset we analyze represents a shrinking share of total Medicare spending. Our 1.72 million providers and $854.8 billion in payments reflect Part B fee-for-service billing only.
This data gap itself is a transparency problem. The public can see exactly how much every doctor bills Traditional Medicare, down to the procedure level. But the same transparency doesn't exist for Medicare Advantage — a system that now covers the majority of beneficiaries and spends hundreds of billions per year.
What Should Change
Several reforms have been proposed to address the imbalance:
- Risk score auditing: More aggressive audits of MA diagnosis coding to prevent inflated risk scores
- Encounter data transparency: Requiring MA plans to publish claims-level data comparable to Traditional Medicare
- Payment parity: MedPAC has recommended setting MA payments closer to fee-for-service cost levels
- Prior authorization reform: Addressing MA plan denials that delay or prevent necessary care
Bottom Line
Both Medicare systems have fraud — they just have different kinds of fraud. Traditional Medicare's fraud is visible in the data because the billing is public. Medicare Advantage's fraud is harder to detect because the financial incentives are structural and the data is less transparent.
For taxpayers, the question isn't which system is "better" — it's whether either system is adequately accountable for how it spends public money. On the Traditional Medicare side, tools like OpenMedicare are making that accountability possible. On the MA side, we're still waiting.
Frequently Asked Questions
Is Medicare Advantage cheaper than Traditional Medicare?
For beneficiaries, Medicare Advantage often has lower premiums and out-of-pocket costs. But for taxpayers, MA plans cost the government 6–25% more per beneficiary than Traditional Medicare due to risk-adjusted overpayments, according to multiple studies including MedPAC reports.
Is there more fraud in Medicare Advantage or Traditional Medicare?
Both systems have fraud, but the types differ. Traditional Medicare sees provider-side billing fraud (phantom billing, upcoding). Medicare Advantage sees insurer-side fraud through upcoding diagnoses to inflate risk-adjusted payments — a practice the DOJ has investigated at multiple major insurers.
What percentage of Medicare beneficiaries are on Medicare Advantage?
As of 2025, over 54% of Medicare beneficiaries are enrolled in Medicare Advantage plans, up from about 30% in 2015. This rapid growth has major implications for how Medicare dollars are spent.
Why does Medicare Advantage cost the government more?
Medicare Advantage plans are paid a capitated rate per enrollee based on risk scores. Insurers have financial incentives to make their enrollees appear sicker (through diagnosis upcoding), which inflates risk scores and results in higher government payments — estimated at $12–25 billion per year in overpayments.
Data Sources
- • Centers for Medicare & Medicaid Services (CMS)
- • Medicare Provider Utilization and Payment Data (2014-2023)
- • CMS National Health Expenditure Data
Note: All data is from publicly available Medicare records. OpenMedicare is an independent journalism project not affiliated with CMS.
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