Medicare Advantage Risk Adjustment is Failing, Costing Taxpayers Billions of Dollars

New data analysis shows stark variation in risk adjustment from abusive industry practices

WASHINGTON, Sept. 3, 2025 /PRNewswire/ -- New analysis by the Alliance of Community Health Plans (ACHP) shows that gaming within the Medicare Advantage (MA) program by large national carriers persists, wasting tens of billions of taxpayer dollars each year. The examination of risk adjustment payments found that the largest national MA insurer collected up to $785 more per beneficiary than local, nonprofit plans in 2023 alone. That difference cost Medicare more than $6 billion.

Accompanying the analysis of federal data, ACHP called on the Trump Administration to immediately adopt sweeping reforms to simplify the unnecessarily complex risk adjustment program. The changes proposed by ACHP would ease administrative burden on clinicians, reduce overpayments and make MA a more competitive marketplace focused on rewarding care rather than codes.

"Risk adjustment was a well-intentioned concept that has grown out of control and overrun with abuse. The current program presents thousands of ways for insurers and vendors to game the system, passing costs onto every Medicare consumer and American taxpayer," said ACHP President and CEO Ceci Connolly. "This is a failing system and the stark findings in our analysis prove this. We call on the Trump Administration to make long-needed changes to simplify the risk adjustment model and root out waste and abuse."

When Medicare Advantage was created in 2003, the federal government created a risk adjustment program to adequately compensate insurers for covering the sickest seniors. But as risk adjustment has expanded and become more complicated, the program now rewards aggressive coding practices – not delivery of high-quality care.

ACHP's analysis of data from the Centers for Medicare & Medicaid Services found that in 2023, the two largest MA insurers had average risk scores 19.2% and 36.2% higher than ACHP nonprofit health plans. The higher the risk score, the more money paid to the insurer.

The gap isn't a mistake; it's the result of coders capitalizing on complexities in the program for financial gain. These wide variations stifle competition and leave tens of millions of consumers nationwide disadvantaged.

It's time for change. ACHP is the only national payer organization putting forth proposals to truly transform MA and the risk adjustment program. ACHP's framework simplifies risk adjustment to focus on demographics and a small set of substantiated health conditions – instead of thousands of potential diagnoses – ensuring Medicare payments reflect true patient care costs.

Under ACHP's proposal, consumers benefit by having access to the plans that best meet their needs, rather than those with the glitziest marketing campaigns and other goodies that do not improve health. Providers benefit from less administrative burden, allowing them to focus on the patient and not paperwork. And taxpayers benefit by saving tens of billions of dollars every year in wasteful upcoding.

"This system is long overdue for improvements and meaningful reform," said Select Health president and CEO Rob Hitchcock, who also serves as chair of the ACHP Policy Committee. "We look forward to working with policymakers to simplify the process, keeping the focus on providing access to high-quality care to consumers and avoiding unnecessary and overly complex bureaucratic processes." Over the past two years, ACHP has spearheaded efforts to improve the popular Medicare Advantage program. Through its MA for Tomorrow initiative, ACHP has identified a range of commonsense proposals to secure and refine the Medicare Advantage program for future generations.

"Affordability in health care is a top voter concern and the Administration has a unique opportunity to save billions and improve America's most popular health program," said Connolly. "We look forward to working with policymakers to adopt reforms that put the emphasis on our nation's health, not excessive profits."

About ACHP 
The Alliance of Community Health Plans (ACHP) represents the nation's best local, nonprofit health plans, providing high-quality coverage to tens of millions of Americans in 40 states and D.C. ACHP is the only national organization advancing a unique partnership model of coverage and care that fosters a truly competitive market.

We believe Americans deserve the best health care in the world. Our members are on the ground in your communities, delivering innovative and competitive coverage. ACHP's model brings together clinicians and health plans to deliver value for patients, employers and taxpayers.

SOURCE Alliance of Community Health Plans