OPINION:
The federal government is failing to increase Medicare Advantage payments, yet health care costs aren’t slowing.
The gap will leave more than 35 million seniors paying more for health care, without addressing the underlying drivers of health care prices rising faster than inflation.
The Trump administration should honor its commitments to seniors while addressing the structural causes of runaway health care costs.
The Centers for Medicare & Medicaid Services is issuing a nearly flat advanced rate notice of 0.09% for Medicare Advantage plans in 2027. However, CMS’s own analysis projected that national health care spending climbed 7.2% in 2024 and an estimated 7.1% in 2025.
The difference doesn’t just vanish. When payments rise more slowly than costs, someone absorbs the gap, and that someone is Medicare Advantage plans and seniors enrolled in them.
When health care costs outpace CMS contributions, insurers must respond. They can reduce supplemental benefits, increase premiums or out-of-pocket costs, narrow their provider networks or exit high-cost areas entirely, particularly rural communities.
For many seniors, this could mean losing dental, vision or hearing coverage not provided by traditional Medicare.
Seniors enrolled in Medicare Advantage rely on promises made when they chose their plans. In fact, 95% of enrollees choose the same plan from year to year.
Reducing effective funding means higher costs or fewer benefits for people who often live on fixed incomes and limited financial flexibility. More than one-third of Medicare Advantage enrollees have annual incomes below $25,000. When seniors can’t afford unexpected expenses, the financial burden often falls on their caregivers, straining the entire family.
For seniors living primarily on Social Security, even modest cost increases matter.
Instead of shortchanging seniors, the solution is to reduce the underlying cost of health care.
Congress has tools to help on both the insurance and provider sides of the market. Legislators could direct Medicare Advantage payments to beneficiaries rather than insurers, allowing seniors to choose plans that best meet their needs.
When funding follows patients rather than automatically flowing to plan administrators, insurers must compete based on the value of their services.
Competition could be strengthened even more by allowing health insurance to be sold across state lines. Insurance companies in high-cost states would face pressure from lower-cost competitors, while plans in lower-cost states would need to maintain attractive networks and services to compete with higher-cost insurers. Greater competition improves both.
Lawmakers also should strengthen hospital transparency requirements. Federal rules require hospitals to publish transparent prices for many services. Currently, hospitals largely ignore the requirement; fewer than a quarter comply.
This leaves patients in the dark about what services will cost them, especially since patients often pay a higher price through their insurance than they would without it. The price of hospital services has grown three times faster than inflation, and in some cases by 280% since 2000.
Hospitals should be held accountable as a major driver of rising health care costs in America.
The opportunities to save seniors (and everyone else) money on health care don’t end there. Drug spending is another driver of rising costs. America trails Europe in adopting lower-cost biosimilars, the “generic” version of complex biologic drugs such as insulin and many cancer treatments.
Fewer biosimilars have been approved, and even fewer have been granted interchangeable status by the Food and Drug Administration compared with European health authorities. Streamlining approval standards and removing unnecessary regulatory hurdles would increase competition and reduce the prices of some of the most expensive medicines.
Each of these reforms would lower health care costs for Medicare Advantage patients, and many would reduce costs for patients nationwide. Reducing the cost of care makes Medicare of all kinds more affordable for taxpayers while preserving the benefits seniors were promised and on which they depend.
Controlling spending should mean addressing the structural drivers of inflation, not shifting costs onto the very people Medicare is meant to protect. The Trump administration has an opportunity to adjust the rates for Medicare Advantage plans for 2027 to reflect the needs of our nation’s seniors and their families.
• Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization that advocates for consumers through evidence-based analysis and data.
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