Medicare: Expenditures - World Health Systems Facts

“Medicare spending, which accounted for 21 percent of total national health care expenditures, reached $1.1 trillion in 2024, an increase of 7.8 percent after 9.0 percent growth in 2023 (exhibit 5). Although Medicare Advantage private plan spending slowed in 2024 (from 16.1 percent in 2023 to 9.0 percent in 2024) because of policy changes lowering benchmark payment rates, Medicare fee-for-service spending experienced faster growth in 2024, increasing 6.4 percent after growth of 2.0 percent in 2023 (data not shown).

“Total Medicare enrollment grew 2.2 percent to 66.6 million in 2024, increasing at the same rate of growth as in 2023 (exhibit 3). Although experiencing faster spending growth in 2024, fee-for-service enrollment continued to decline (for the sixth year in a row), falling 1.4 percent. Medicare Advantage enrollment, in contrast, increased 6.1 percent in 2024 (compared with growth of 7.9 percent in 2023) to reach 33.4 million beneficiaries, or 50 percent of all Medicare enrollees (data not shown). Per enrollee, total Medicare spending grew 5.4 percent in 2024, a slower rate of growth than the increase of 6.7 percent in 2023 (exhibit 3), as a result of slower growth in Medicare Advantage spending.

“Overall Medicare spending on goods and services experienced slightly slower growth in 2024, increasing 8.6 percent after growth of 9.4 percent in 2023.¹³ Although much of the slowdown in total Medicare expenditure growth among services was due to payment rate changes associated with Medicare Advantage, fee-for-service spending among services generally accelerated, particularly for hospital care and physician and clinical services. Fee-for-service Medicare hospital spending increased 4.1 percent in 2024 (compared with 1.3 percent in 2023), as both inpatient and outpatient volume and intensity of services increased faster in 2024.¹⁸ Fee-for-service spending for physician and clinical services, which includes Part B physician-administered drugs, increased 5.7 percent in 2024 (compared with 3.8 percent growth in 2023), partially as a result of a large increase in spending for skin substitutes, which are used for wound care, that was driven by increased utilization and higher prices (data not shown).¹⁸

“Medicare spending for retail prescription drugs, which consists mainly of spending for Part D prescription drugs, increased 12.9 percent in 2024 after 11.9 percent growth in 2023 (data not shown). Part D benefit redesign provisions associated with the IRA contributed to elevated rates of growth for prescription drug spending in 2023 and 2024, as benefit expansion increased Medicare’s financial responsibility.¹¹ In addition, rapid increases in the demand for brand-name antidiabetic drugs in both years continued to affect Medicare drug spending growth.¹⁹“

Source: Hartman M, Martin AB, Lassman D, Catlin A; National Health Expenditure Accounts Team. National Health Care Spending Increased 7.2 Percent In 2024 As Utilization Remained Elevated. Health Aff (Millwood). Published online January 14, 2026. doi:10.1377/hlthaff.2025.01683

“In this national study of the impact of favorable selection in MA on benchmark payments between 2017 and 2020, we report three main findings. First, favorable selection into MA led to underpayments for counties with lower MA penetration and overpayments to counties with higher MA penetration. Second, the distribution of MA beneficiaries shifted toward counties with greater MA penetration between the baseline and payment periods. Third, this dynamic led to large overpayments to MA plans, averaging $9.3 billion per year between 2017 and 2020.

“In recent years, numerous researchers and stakeholders have questioned whether the structure of MA leads to plan overpayment. This critique has tended to focus on risk upcoding, with estimates suggesting that upcoding erroneously increases plan payments by 6–20 percent, totaling more than $20 billion annually.³^,¹³

“Less work has explored how benchmark setting itself may lead to overpayment to plans. Research on benchmarks has found that limited plan competition in many markets allows plans to bid above their costs, resulting in higher costs to Medicare.¹⁴^,¹⁵ MedPAC recently discussed how increasing MA penetration may undermine benchmark setting, noting that “over the long term, using [traditional Medicare] spending as the basis for benchmarks will result in biased benchmarks if the share of [traditional Medicare] enrollees in a county becomes too small.”⁵ In a subsequent analysis, MedPAC estimated that favorable selection into MA inflated MA payments by approximately 11 percent for a specific cohort of beneficiaries in 2019.¹⁶ A similar white paper found that beneficiaries who switched from traditional Medicare into MA tended to have lower spending for the same level of risk, distorting benchmarks and leading to billions in annual overpayments to MA plans.¹⁷“

Source: Andrew M. Ryan, Zoey Chopra, David J. Meyers, Erin C. Fuse Brown, Roslyn C. Murray, and Travis C. Williams. Favorable Selection In Medicare Advantage Is Linked To Inflated Benchmarks And Billions In Overpayments To Plans. Health Affairs 2023 42:9, 1190-1197.

“In 2023, Medicare covered 66.7 million people: 59.1 million aged 65 and older, and 7.6 million disabled. About 48 percent of these beneficiaries have chosen to enroll in Part C private health plans that contract with Medicare to provide Part A and Part B health services. Total expenditures in 2023 were $1,037.0 billion, and total income was $1,024.6 billion, which consisted of $1,014.6 billion in non-interest income and $10.0 billion in interest earnings. Assets held in special issue U.S. Treasury securities decreased by $12.4 billion to $396.7 billion, consistent with the estimate in last year’s report.”

Source: The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2024 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds, June 6, 2024.

“For fee-for-service Medicare, the largest category of Part A expenditures is inpatient hospital services, while the largest Part B expenditure category is physician services. Payments to private health plans for providing Part A and Part B services represented roughly 52 percent of total A and B benefit outlays in 2023.”

“Part B outlays were 1.8 percent of GDP in 2023, and the Board projects that they will grow to about 3.6 percent by 2098 under current law. The long-range projections as a percent of GDP are lower than those projected last year through 2056 and higher thereafter because of lower projected spending for outpatient hospital and home health agency services and updated GDP projections. (Part B costs in 2098 would be 4.8 percent under the illustrative alternative scenario.)

“The Board estimates that Part D outlays will increase from 0.5 percent of GDP in 2023 to about 0.7 percent by 2098. While the expenditure share of GDP in 2098 is similar to the share in last year’s report, the revisions vary over the projection period, reflecting (i) several years of faster drug spending growth, resulting from higher projected utilization estimates, followed by a period of slightly slower drug spending growth; (ii) higher enrollment; and (iii) updated GDP throughout the projection period.”

Medicare: Expenditures - US Healthcare - National Policies - World Health Systems Facts

World Health Systems Facts is a project of the Real Reporting Foundation. We provide reliable statistics and other data from authoritative sources regarding health systems and policies in the US and sixteen other nations.

Page last updated February 13, 2026 by Doug McVay, Editor.