Costs & IRMAA
Medicare Spent 76 Billion Dollars More on Advantage Enrollees Than It Would Have in Original Medicare
A KFF analysis of the 2026 Medicare Trustees Report finds that overpayments to Medicare Advantage plans cost the program an estimated 76 billion dollars in 2026, while Part D drug spending is on track to nearly double by 2035 driven by GLP-1 drugs and high-cost specialty medicines.
By the Goodsurance editorial teamJuly 7, 2026
Medicare paid an estimated 76 billion dollars more for Medicare Advantage enrollees in 2026 than it would have if the same people had remained in original fee-for-service Medicare, according to a KFF analysis of the 2026 Medicare Trustees Report published June 24, 2026. The excess reflects a 14 percent per-enrollee payment premium that the Trustees attribute largely to higher coding intensity and favorable selection, meaning Medicare Advantage plans tend to attract enrollees who are healthier than average but are coded as having higher health needs.
On the prescription drug side, the Trustees project Part D spending will nearly double, rising from 181 billion dollars in 2025 to an estimated 346 billion dollars by 2035, an average annual increase of 6.7 percent. That is faster than the 4.8 percent annual growth the Trustees projected a year earlier for a comparable period.
Medicare paid 76 billion dollars extra in 2026 because of how it pays Advantage plans. Drug spending is projected to nearly double by 2035.
Three factors are driving the steeper Part D trajectory: rising use of GLP-1 drugs for obesity and diabetes alongside other high-cost specialty medicines; the pharmacy price concessions policy, which lowers patients' out-of-pocket costs at the pharmacy counter but reduces rebate revenue to plans and increases the federal share of drug expenses; and a 2025 budget reconciliation provision that exempted more orphan drugs from the Medicare drug price negotiation program.
The Part A Hospital Insurance trust fund depletion date remains projected for the second quarter of 2033, unchanged from the prior year's estimate. Together, these findings reflect a Medicare program facing growing financial pressure from both its managed care payment structure and an accelerating drug cost trajectory.
In plain words
A government report studied by health researchers found that Medicare paid 76 billion dollars more in 2026 because of how Medicare Advantage plans are paid. These plans get more money per person than regular Medicare would cost for the same person. On top of that, the cost of Medicare drug coverage is expected to nearly double by 2035. The main reasons are expensive new medicines like GLP-1 drugs for weight loss and diabetes, and some law changes that limit how many drugs can have their prices negotiated. The fund that pays for hospital care is still expected to run low in 2033 if Congress does not act.
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Source: KFF
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