Medicare Spending Trends and Opportunities

A new KFF brief examines key trends shaping the Medicare spending landscape, including shifting demographics, enrollment patterns, and payment policies.

Population Growth

One driver in higher Medicare spending is the increase in the number of people enrolled in Medicare. The share of the US population ages 65 and older is projected to grow from 17% in 2020 to nearly 25% in 2060. As a result, Medicare enrollment will also rise—from 63 million to 91 million—raising program spending.

Medicare enrollment will rise from 63 million to 91 million people, raising program spending.

People are also living longer when they reach Medicare age. People ages 80 and older will account for 34% of the 65 and older population in 2060, up from 23% in 2020; the share of those in their 90s and above will grow from 4% to 9%. This is also expected to increase costs, as Medicare per person spending rises with age.

Health Care Costs and Per-Beneficiary Spending

In addition to population changes, the KFF report details how higher 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.”

While per-person costs have typically grown more slowly in Medicare than in private insurance, this dynamic is on the verge of change.

Between 2000 and 2025, spending on Medicare benefit payments grew from $200 billion to $988 billion and is on track to reach $2 trillion in 2036. Medicare spending per person has also risen over time, from $5,800 in 2000 to $18,900 in 2025. While per-person costs have typically grown more slowly than in private insurance—3.1% vs 4.3% over the past 25 years, for example—this dynamic is on the verge of change. Between now and 2034, growth in Medicare spending per person is projected to outpace private health insurance (6.0% vs. 4.9%), “reflecting the aging of the population during this period, among other factors.”

Medicare Program Spending

In another historical shift, Medicare now spends more on Part B (physician and outpatient services) than on Part A (hospital services).  

In terms of total Medicare spending, over the past ten years Part A allocations shrank by nearly 6% (from 42.5% to 36.7%) while Part B spending rose, from 43.5% to 48.2%. By 2035, Part A and Part B are expected to account for 34.4% and 51.8% of the program, respectively. KFF explains this trend is “due in part to changes in practice patterns that have shifted some services from inpatient to outpatient settings, as well as increases in spending on services covered under Part B, such as high-cost physician administered drugs.”

Percentage-wise, spending on Part D prescription drug benefits is expected to remain steady at around 15%, where it has been since the program began in 2006.

In dollar terms, spending under Part A, Part B, and Part D will all increase in the coming decade. 

Spending on Medicare Advantage

The increase in MA spending is a significant trend and cost. In 2025, payments to MA plans ate up more than half of all Medicare program spending—up from 32% in 2015. If this trajectory continues as expected, MA will account for nearly two-thirds of all Medicare dollars in 2035.

This cost growth is driven partly by enrollment changes. Over the last decade, the share of Medicare beneficiaries enrolled in MA more than doubled (from 25% to 54%).

However, it is also significantly attributable to Medicare payment policy. Medicare pays MA plans more per enrollee than the same beneficiaries would cost under Original Medicare. As KFF explains, this is “due to factors such as higher coding intensity and favorable selection…” In 2026 alone, Medicare payments to MA plans will be roughly 114% of what Original Medicare would have spent on the same beneficiary.

In 2026, Medicare payments to MA plans will be roughly 114% of what Original Medicare would have spent on the same beneficiary.

In addition to inflating Medicare costs, MA overpayments worsen affordability for current and future Medicare enrollees. They increase premiums for everyone, not just people with MA. In 2025, MA overpayments drove up Part B premiums by $212 per person, for a total of $13.4 billion. Taxpayers are also affected. Medicare enrollees pay about 85% of the added premium costs, with the remainder falling on people paying federal (9%) and state (6%) taxes.

Beneficiary Out-of-Pocket Costs

Growth in out-of-pocket spending is a concerning consequence of higher Medicare spending writ large. KFF notes these “increases have contributed to higher Medicare premiums and deductibles for beneficiaries.”

Between 2000 and 2026, Medicare Part B premiums more than quadrupled (from $546 to $2,435 per year), the annual Part B deductible nearly tripled (from $100 to $283), and the annual Part A deductible more than doubled (from $776 to $1,736).

Half of all Medicare beneficiaries live on $43,200 or less per year, and one quarter have less than $18,950 in savings.

Higher costs can have an outsized effect, as many beneficiaries rely on fixed or limited incomes that cannot keep pace: Half of all beneficiaries, nearly 33 million people, live on $43,200 or less per year, and one quarter have less than $18,950 in savings. If costs continue to climb as anticipated, more people could be forced to make impossible choices, like paying their doctor or paying their rent.

Conclusion

Population changes, rising health care costs, MA overpayment, and other trends are shifting Medicare spending, squeezing the program and beneficiaries.

At Medicare Rights, we urge policymakers to maximize the program’s efficacy and sustainability in a responsible, measured way. This includes commonsense efforts to lower enrollee out-of-pocket costs, fill gaps in coverage, and ease access to low-income assistance programs.

We also support reforms to improve MA payment accuracy. Despite promises that MA would save Medicare money, it never has. The current system rewards insurers with greater profits but penalizes all beneficiaries through higher Part B premiums and taxpayers through increased costs. Absent corrections that center beneficiary needs, these impacts will only deepen.