The Facts About Medicare Spending
Medicare, the federal health insurance program for people ages 65 and over and younger people with long-term disabilities, plays a major role in the U.S. health care system.
Medicare provides health insurance coverage for 70 million people, 20% of the U.S. population – a share which will grow larger in the coming decades. Medicare spending comprised 14% of the federal budget in 2025 and 21% of national health care spending in 2024. Given Medicare’s essential role as a source of coverage for an aging population and the importance of sustaining the program for future generations, Medicare is often part of discussions about total federal government spending, health care spending in the U.S., and the affordability of health care costs.
An aging population leads to higher enrollment in Medicare. With the aging of the U.S. population, the number of people covered by Medicare has increased over time and will increase further in the coming decades. At the same time, the Medicare population will include a growing number of people ages 80 and older.
One in four US adults will be ages 65 and older by 2060.
Higher total Medicare spending has also been driven by growth in health care spending per Medicare beneficiary, which is influenced by increasing volume and use of services, new technologies, and rising prices.
Medicare now spends more on physician and outpatient services covered under Medicare Part B, including drugs administered by physicians, than hospital services covered under Medicare Part A, or retail prescription drugs covered under Part D.
Higher Medicare Part A spending, driven by enrollment growth and an increase in spending per beneficiary, coupled with a shortfall in revenues needed to pay for all Part A covered benefits, is projected to deplete the reserves in the Part A Trust Fund within 7 years.
Taken together the cost of Medicare Part A and B premiums and cost sharing represents roughly 18% of the average Social Security benefit in 2026, up from 14% in 2000. Most beneficiaries do not pay a Part A premium. However, beneficiaries ages 65 and older who have paid fewer than 10 years of Medicare payroll taxes and some younger beneficiaries with disabilities are required to pay a premium for Part A coverage.