MW UnitedHealth Medicare Advantage bombshell exposes $83 billion in government waste

By Brett Arends

Will Musk and Trump dare to take it on?

A chainsaw-wielding Elon Musk and his budget-cutting "DOGE" gang say that so far they've cut $55 billion from the federal budget.

But they could hike that by another 150% at one stroke by ending the massive overpayments made to the privatized Medicare Advantage program.

That's not me talking: Those are the figures from the Medicare Payment Advisory Commission, the independent panel of experts that advises the federal government on Medicare costs.

"Medicare spends an estimated 22 percent more for MA enrollees than it would spend if those beneficiaries were enrolled in [fee-for-service] Medicare, a difference that translates into a projected $83 billion in 2024," MedPac revealed in its 2024 report to Congress.

MA refers to Medicare Advantage, the $455 billion program under which taxpayers cut in private health insurers as middlemen instead of insuring people directly. Fee-for-service Medicare is also known as original Medicare.

The excess cost of insuring senior citizens through private insurance companies was in the news again on Friday, with the Wall Street Journal reporting that healthcare giant UnitedHealth Group $(UNH)$ was under investigation by the U.S. Department of Justice over its Medicare Advantage billing practices.

Read: UnitedHealth now has to fight the government on another front. The stock is sinking.

UnitedHealth, whose stock tanked nearly 10% on the news, furiously denounced the report as "misinformation" and as part of a "year-long campaign" to defend "legacy" government-run Medicare. "We are not aware of the 'launch' of any 'new' activity as reported by the Journal," the company said in a statement. "Any suggestion that our practices are fraudulent is outrageous and false."

The Wall Street Journal is owned by News Corp, which also owns Dow Jones, the parent of MarketWatch.

At the heart of the dispute is the argument that private Medicare Advantage insurers such as UnitedHealth engage in what is known as "upcoding." This is another way of saying that they maximize Medicare the payments they receive by reporting every medical condition each beneficiary has, whether or not that condition requires any treatment.

The industry says it abides by the rules. Then again, it would be a surprise if for-profit companies chose to underbill their richest client. MedPac didn't say the industry was doing anything illegal or even wrong by charging the taxpayers an extra $83 billion. It just noted the amount.

And private health insurers have to find a way to maximize profits while competing with original Medicare and spending 12 cents of every dollar on overhead.

The massive amount of savings to be found in Medicare Advantage probably represents the single biggest "quick win" available anywhere in the federal budget. It dwarfs any of the items appearing on what DOGE presents as its "wall of savings" - many of which run only to millions, not even billions, of dollars.

While many of DOGE's examples of waste have made for entertaining or shocking headlines, they don't even amount to a rounding error in the $7 trillion - that's $7,000,000,000,000 - federal budget.

We will have to wait to see how many of these apparent savings show up in the bottom line, anyway. Figures on the political right, from Trump supporter Steve Bannon to Sen. Rand Paul of Kentucky, a libertarian member of the Republican Party, have raised questions about how much money taxpayers will really save.

The interesting question is whether Musk, DOGE and President Donald Trump are going to have the courage of their budget-cutting convictions and tackle the massive overspending in Medicare Advantage. It's not a slam dunk. Medicare Advantage is popular with politicians on both sides of the aisle in Washington, D.C. Many of them benefit from generous campaign contributions from the insurance companies featherbedded at the taxpayers' expense.

Amazingly - or not - the ultraconservative Heritage Foundation, in its supposedly budget-busting Project 2025 blueprint published last year, actually called for Medicare Advantage to become the default Medicare option.

Based on MedPac's most recent numbers, replacing original Medicare with the privatized program would simply double the total amount of waste to $170 billion a year. (You have to wonder how many other programs would need to end up on Musk's so-called wall of savings to pay for this massive boondoggle for the insurance industry.)

But this is what you get when your decisions are based on tribalism, theory or ideology instead of on simple facts and logic. To be fair, Project 2025 also says it wants to "reform" Medicare Advantage, though whether that ends up saving money would be another matter.

Neither the Heritage Foundation nor the Trump White House could be immediately reached for comment.

-Brett Arends

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February 21, 2025 14:47 ET (19:47 GMT)

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