Medicare: Expenditures - World Health Systems Facts

Overview
Eligibility
Enrollment
Coverage

“Medicare spending (which accounted for 21 percent of total national health care expenditures) reached $1.0 trillion in 2023—an increase of 8.1 percent, following 6.4 percent growth in 2022 (exhibit 3). This faster growth was driven by a turnaround in traditional fee-for-service spending growth from a decline of 1.4 percent in 2022 to an increase of 1.7 percent in 2023 (data not shown). Medicare Advantage private plan spending continued to experience rapid growth (increasing 14.7 percent in 2023, after 15.7 percent growth in 2022) and accounted for 52 percent of total Medicare expenditures in 2023 (up from a 39 percent share in 2019) (data not shown).

“Total Medicare enrollment grew 2.1 percent in 2023, a slight acceleration from 2022, when enrollment increased 1.9 percent (exhibit 2). Fee-for-service enrollment (52 percent of total enrollment) declined for the fifth year in a row, falling 2.8 percent in 2023 after a decline of 3.0 percent in 2022 (data not shown). However, Medicare Advantage enrollment (a 48 percent share) continued to experience strong growth in 2023, but at a slightly slower rate, increasing 7.9 percent after growth of 8.5 percent in 2022 (data not shown). Total Medicare per enrollee spending grew 5.9 percent in 2023, a faster rate than the increase of 4.4 percent in 2022 (exhibit 2).

“Medicare spending on goods and services experienced faster growth in 2023, increasing 8.6 percent after growth of 5.4 percent in 2022.¹² Faster growth in expenditures for hospital care and retail prescription drugs in 2023 contributed to this upward trend, as Medicare hospital spending grew 6.0 percent (compared with 1.5 percent in 2022) and retail prescription drug expenditures grew 12.2 percent (compared with 9.0 percent in 2022).¹² An increase in outpatient hospital use, along with increases in both inpatient and outpatient prices, drove the acceleration in Medicare hospital spending in 2023.¹⁶ For Medicare retail prescription drug expenditures, which consist mainly of spending for Part D prescription drugs, the acceleration was partially attributable to a rapid increase in the use of brand-name antidiabetic drugs. Furthermore, the initial impacts of the Inflation Reduction Act that increased the generosity of the benefit and expanded Medicare’s financial responsibility, such as cost-sharing limits on insulins and vaccines, contributed to the acceleration.¹⁶“

Source: Anne B. Martin, Micah Hartman, Benjamin Washington, Aaron Catlin, and The National Health Expenditure Accounts Team, National Health Expenditures In 2023: Faster Growth As Insurance Coverage And Utilization Increased, Health Affairs (2025), published ahead of print Dec. 18, 2024, doi.org/10.1377/hlthaff.2024.01375.

“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 March 17, 2025 by Doug McVay, Editor.