The Trump administration’s Fiscal Year 2026 budget calls for up to $880 billion in cuts to Medicare and Medicaid over the next 10 years to help fund massive tax cuts for the rich. While the administration says it is targeting only “wasteful” and “woke” initiatives, these cuts will affect the millions of low-income, senior and disabled Americans who rely on Medicare and Medicaid for their health care.
If the government were actually serious about targeting waste, rather than pushing costs onto low-income, senior and disabled Americans, they would be looking at the healthcare industry itself.
In a recent report, the Committee for a Responsible Federal Budget estimates that Medicare Advantage will be overpaid by $1.2 trillion by the federal government between 2025 and 2034. Medicare Advantage plans are private, for-profit health insurance plans that Washington pays to manage Medicare. They are being aggressively being pushed on seniors as an alternative to traditional Medicare. Since their inception during the Clinton administration, these plans have grown to cover more than half of the 68.5 million people currently enrolled in Medicare.
While the privatization of Medicare has taken place with very little public debate, overpayments have soared, amounting to a massive government subsidy. CRFB notes that there are two key business practices that private insurers use to defraud or over-bill Medicare: coding intensity and favorable selection.
The Centers for Medicare & Medicaid Services pays Medicare Advantage a certain amount per enrollee. The sicker the individual, the more the government pays. Coding intensity refers to coding more disease diagnoses for Medicare Advantage patients in order to make them appear sicker to take advantage of higher payments from the government. In 2020 alone, Medicare Advantage defrauded or over-billed Medicare by an estimated $25 billion by saying beneficiaries were much sicker than they actually were.
Favorable selection refers to enrolling healthier patients so that the plan spends less per beneficiary. Medicare Advantage also spends less per beneficiary by denying care and essential medications to those who need them, and for mandatory pre-authorizations, according to a recent federal study, placing seniors at risk of being denied medically necessary care. These practices are no secret, yet the federal government continues to fund Medicare Advantage.
‘One of the biggest scams we’ve seen’
A recent New York Times expose of Medicare Advantage entitled The Cash Monster Was Insatiable: How Insurers Exploited Medicare for Billions found that, “Most large insurers in the program have been accused in court of fraud,” yet they blatantly continue these practices. The article notes that UnitedHealth Group, for example, the country’s largest private insurer, has been accused of fraud by whistle blowers and the U.S. government, and of over-billing according to the Inspector General. UnitedHealth has the largest share of Medicare Advantage patients, with 27.1% of the market.
Former Cigna executive Wendell Potter describes Medicare Advantage as “one of the biggest scams that we’ve seen in this country” in a video released by More Perfect Union. The video describes fraudulent coding intensity, also known as upcoding, where insurers fabricate diagnoses, programmers scan charts for big-money codes, nurses are tasked with racking up codes on home visits and doctors receive bonuses for packing charts.
These plans also make money by denying legitimate claims. A recent federal study, conducted by the Inspector General’s office for the Department of Health & Human Services, reviewed thousands of medical claims denied by Medicare Advantage plans. About 13% of the claims rejected by the Advantage plans on pre-authorization grounds would have been covered under traditional, federally administered Medicare, the Health &Human Services IG found. The IG also discovered that 18% of the rejected claims were inappropriately denied for payment after the fact.
The Trump administration not only remains mum about these shameful practices used to fatten the bottom line, it has also fired the HHS inspector general, the top watchdog for health case oversight in the department which brought these practices to light.
Medicare spends 22% more for private managers
These tactics pad the insurers’ bottom lines while threatening the solvency of the Medicare Hospital Insurance Fund. In 2024, KFF reported that the fund was projected to be depleted in 2036. They note that with rising enrollment in Medicare Advantage, payments to Medicare Advantage plans are rising, which affects the balance of the fund.
In its March 2024 report to Congress, MedPAC estimated that Medicare would spend 22% more per Medicare Advantage enrollee than for similar traditional Medicare enrollees, costing the fund an additional $83 billion for the year. This figure will only increase as more people enroll in Medicare Advantage.
If the Trump administration wants to cut waste from the health care system, an obvious step would be to abolish Medicare Advantage. Instead, his administration is promoting it. The Trump administration’s new head of the Centers for Medicare & Medicaid Services, and therefore the top insurance regular in the country, is Mehmet Oz, a major proponent of Medicare Advantage. He has released several videos on YouTube promoting the program and written an op-ed with the CEO of the insurance giant Kaiser Permanente calling for “Medicare Advantage for All.”
UnitedHealth’s record profits are not enough for stockholders
And what of UnitedHealth, the nation’s largest private insurer? Approximately 77% of the company’s health plan revenues now come from tax-payer funded programs including Medicare Advantage and Medicaid, with 8.2 million enrolled in the company’s Medicare Advantage plans.
Despite the company reporting record profits of $9.1 billion in the first quarter of 2025, the company’s earnings came in under analysts’ expectations, causing the stock to fall by approximately 20%. The billionaire class was punishing the company for paying out more in care than expected. The company blamed the new Medicare Advantage enrollees, that they had acquired from their competitors implying that those competitors had not sufficiently upcoded these enrollees to make adequate profits before leaving the market.
This is what happens health care is for profit, and when the biggest stockholders in managed care are Wall Street financial institutions. UnitedHealth is owned by some of the largest and most voracious of the Wall Street asset managers who demand a constant maximization of profits. Vanguard owns 9.0% of UnitedHealth shares, followed by BlackRock with 8.0%, and Fidelity with 5.2%. No other shareholder holds more than 5% of the company.
Hospitals are in on it, too
It is not just insurance companies who are playing the system to make money. The Lever reports that nonprofit hospital chains are buying up billions of dollars in real estate, taking advantage of their charitable status to avoid paying real estate taxes rather than spending the money on charity care. Not only does this mean that hospitals are spending less of their tax breaks to provide care for low-income seniors and others relying on charity care, it also reduces the property tax base that funds vital services such as schools and emergency departments.
In a survey of more than 1,800 hospitals, the Lown Institute reported that 54% received more in tax breaks than they spent on meaningful community investments, leading to what they called a fair share deficit. This deficit amounted to $11.5 billion per year. Twelve hospitals had fair share deficits of more than $100 million. Many of these hospitals made close to $1 billion in profits and owned billions in tax-exempt property.
Instead of pretending to cut waste, while driving up corporate profits and cutting essential services, we need a health care system that prioritizes human needs over corporate greed. We need a socialist heathcare system that makes health care a human right, by abolishing private health care companies that leech off the sick, and by ensuring that hospitals serve the needs of their communities by providing free, quality care to all.