How Medicare spends your money

About 69 million Americans rely on Medicare to help them afford the care they need to get well or stay well. That's an expensive burden. If the program was a person, he'd have a giant wallet leaking money every hour of every day. 

In 2025, Medicare spent around $439 billion and $576 billion on hospital and outpatient medical care, respectively. Part D drug spending cost another $180 billion. All told, the program paid health care providers an incredible $1.2 trillion; expect $2 trillion in ten years, the government bean crunchers say.

So we've established that the Medicare program is very expensive ... but exactly where does all that money go?

Hospitals can't survive without Medicare

America's 6,000 hospitals are the single largest Medicare customer. Inpatient hospital care, plus the incidental care that comes with a hospital stay, costs Medicare about $440 billion. It's common for a three night hospital stay to cost more than $10,000, and six-figure bills aren't unusual.

Mind you, Medicare enrollees pay very little of the bill. Whether covered by Original Medicare or a Medicare Advantage plan, the patient's out of pocket costs probably won't exceed $2,000; much less if they have a Medigap supplement policy.

Inpatient hospital care is a big business because there are 12.9 million acute care hospital stays every year. Each admission lasts five nights, on average.

Thousands of doctors get billions of dollars

Medicare pays doctors, nurses and other outpatient caregivers more than $500 million a year. Yes, that's a lot of money, but keep in mind there are 1.3 million providers who accept Medicare.

Every month, Medicare pays billions of dollars to hospitals, doctors, pharmacies and more

This money is distributed roughly along the lines of the kind of providers getting the money. 

One in every three outpatient providers are primary care doctors and related vocations like physician assistants and nurse practitioners. You find them in physician offices, urgent care centers, emergency rooms and even some nursing facilities.

Another 400,000 practice specialized medicine. They see patients with diabetes, heart disease, cancer, lupus and more. This group of doctors also includes surgeons and psychiatrists. 

But the single largest group of caregivers never went to medical school. In the parlance of Medicare, they're know as "non-physician practitioners". This is a catch all that includes not only nurses but also physical therapists, speech pathologists, paramedics and so forth.

Don't overlook skilled rehab and nursing

When your hip is replaced or you make it through a stroke, there's a good chance you'll

find yourself in a special kind of nursing home. There, you'll receive skilled care to build back your strength and hopefully be well enough to go home. These are relatively short stays; most patients aren't there more than a few weeks.  

Medicare spends $30 billion every year on care delivered in skilled nursing facilities.

Skilled nursing facilities cost Medicare almost $30 billion each year. Another $17 billion covers skilled home health care services is spent on the skilled home health care that's common in the weeks after you leave the hospital or rehab facility. nursing home.

Those $47 billion of bills look intimidating, but they tend to be good for Uncle Sam's pocket book. 

Studies consistently find that lots of important care happens in the hospital when it could have been delivered (more affordably) somewhere else - like in a skilled nursing setting. Home health care and rehab also help patients avoid another expensive hospital visit.

The final year of life is an expensive one

Living to age 80 or 90 is an impressive feat. If you make it that long, you will have seen a countless number of health care providers for all sorts of care.

Sounds expensive, right?

No matter your age, your final year of life is likely to be the most expensive. Think of the friend you lost to cancer or a mother who fought so hard but couldn't bounce back from her stroke.

These final weeks of life are important but they're also very expensive.

Hospice is a Medicare program for people with a serious illness and who aren't expected to survive more than six months. Common conditions include advanced heart disease, cancer, kidney failure and sometimes even late stage Alzheimer's disease.

Hospice care focuses on helping the patient remain as comfortable as possible until their death. Pain management is a cornerstone of hospice care, but so is emotional counseling for not just the patient but his or her family, too.

In hospice, Medicare pays for almost all the care needed during these final months, including personal care items like adult diapers and grooming. All told, the bills add up to $12 billion a year. 

Although that number seems high, hospice is important for two reasons. First, it allows a patient to pass as comfortably as possible. Second, it avoids even more expensive care that might be given but is unlikely to add many (if any) extra days of life.

What about prescription medicine?

Most prescription drugs are covered under Medicare Part D, to the tune of $181 billion annually. Part D covers the outpatient prescriptions you pick up from the neighborhood pharmacy.

The majority (59%) of this spending goes to paying for the hundreds of generic medicines we take to control blood pressure, cholesterol, diabetes, arthritis and depression. The other 40% is spent on brand name drugs like Eliquis, Xarelto, Mounjaro and Humira, and other fancy pharmaceuticals advertised on television.

About the Author

Andrew Shea helps St. Louis Medicare recipients find health insurance that makes medical care easier to afford. He can be reached at (636) 495-1180.