Medicare's Hospital Insurance Trust Fund, which finances Part A benefits (i.e., inpatient hospital, skilled nursing facility and hospice care), is projected by the Medicare Trustees to become insolvent in 2033, the point at which incoming payroll tax revenue would cover only 89% of scheduled Part A spending.1 Using a separate set of assumptions, the Congressional Budget Office (CBO) projects insolvency seven years later in 2040.2 Notably, the Trustees have projected an insolvency date in nearly every annual report since the program's early years, starting with the 1970 report, which put the Trust Fund only two years from depletion, and the date has since been pushed back nearly 20 times – most substantially by the Affordable Care Act, which extended the projected depletion date by 12 years in a single report.3 Congress has repeatedly responded by raising the payroll tax rate or reducing Part A spending growth before a projected deadline arrived. As of 2026, the Medicare Trustees estimate that eliminating the Medicare Trust Fund's full 75-year shortfall would require increasing the 2.9% Medicare payroll tax to 3.5%, or an equivalent 12% reduction in scheduled Part A spending. Against this uncertain and ultimately unsustainable fiscal backdrop, this analysis examines the nature of Traditional Medicare utilization and spending.
Total Medicare enrollment was 67M in 2024 and is projected to reach 75M by 2029, when the last members of the Baby Boomer generation become eligible, up from 49M in 2011 when the first Baby Boomers turned 65.4 During this time, Medicare Advantage's popularity has also grown, with the number and share of eligible beneficiaries increasing from 11.5M enrollees in 2011 (26%) to 35.2M enrollees in 2026 (55%).5
Medicare spending reached 3.9% of total U.S. gross domestic product (GDP) in 2025 and is projected by the Medicare Trustees and CBO to reach approximately 5% of GDP by 2034. The Medicare Payment Advisory Commission (MedPAC) projects Medicare spending, net of economy-wide inflation, to grow 4.3% annually from 2025 to 2034.
Notably, projected growth is meaningfully different across Medicare Parts A, B and D. Part A spending, which covers inpatient hospital, skilled nursing facility and hospice care, is projected to grow 3.6%. Part B spending, which covers outpatient care, is projected to increase at a rate of 5.5% annually, although an unexplained residual factor MedPAC labels “other” accounts for 4.5 of those 5.5 percentage points of annual growth, far exceeding the contributions of pricing, enrollment or demographic mix. Part D spending, which covers prescription drugs, is projected to increase at 1.6% annually.
Changes in enrollment and spending have direct implications for the Hospital Insurance Trust Fund itself. Part A, financed through the payroll tax, has had the slowest growth trajectory of Parts A, B and D and has comprised a declining share of total Medicare spending over the past decade. In contrast, Part B, financed mainly through general revenue and beneficiary premiums, has grown more quickly (Figure 1). The relative slowdown in Part A spending has modestly eased pressure on the Trust Fund's revenue stream, but the underlying financing structure remains strained by a declining ratio of workers to beneficiaries, down from 4.5 workers per beneficiary in 1965 to fewer than three workers per beneficiary today.
Medicare's fiscal pressure is often attributed to a combination of a growing and aging beneficiary population, increasing healthcare utilization and inadequate physician supply. This analysis examines Medicare utilization data to assess the drivers of accelerating insolvency of the Medicare Trust Fund.
MedPAC's July 2026 Data Book, released July 16, 2026, was leveraged to assess changes in Medicare healthcare utilization spending.6 Per-beneficiary utilization and spending were analyzed by service type and segmented by Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS) spending.
Physician-administered Part B drugs are the fastest-growing category of Traditional Medicare per-beneficiary spending, increasing 7.8% annually from 2015 to 2023 as compared to outpatient hospital (3.3%), other (0.4%), hospice (1.3%) and durable medical equipment (0.8%). The other five categories experienced declines in per-beneficiary spending over the period, including inpatient hospital care (-1.4%), skilled nursing facilities (-2.4%), the physician fee schedule (-1.3%) and home health (-3.3%) (Figure 2).
Notably, the per-beneficiary cost of inpatient hospital admissions is growing as the number of admissions per beneficiary and the number of Traditional Medicare beneficiaries declines. IPPS payments per stay averaged $16,000 in fiscal year (FY) 2024, up 26.0% from $12,700 in 2019, even as IPPS stays per 1,000 Traditional Medicare beneficiaries declined by 15.1%, from 232 to 197, over the same period (Figure 3). Similarly, outpatient payments per Part B beneficiary increased 33.3% from $2,100 to $2,800 between 2019 and 2024, while OPPS encounters per beneficiary remained flat at 2.6.
From 2015 to 2024, OPPS spending increased from $58.0B to $74.8B. Hospital outpatient drugs have replaced procedures as the primary growth driver in outpatient Traditional Medicare spending, increasing from 16.0% ($9.3B) to 27.9% ($20.9B) of OPPS payments from 2015 to 2024. In contrast, procedures, while the largest component of Part B spending during the period, held steady at 41.0% of OPPS spending in 2015 ($23.8B) and 2024 ($30.7B) (Figure 4). By 2024, a single cancer drug – Keytruda® – accounted for 4.6% of all OPPS payments, trailing only musculoskeletal procedures such as knee and hip replacements.
Per-beneficiary utilization among Traditional Medicare beneficiaries is flat or declining across nearly every category. IPPS stays per 1,000 Traditional Medicare beneficiaries fell 3.2% annually, down 15.1% from 2019 to 2024 (from 232 to 197), while OPPS encounters per 1,000 remained flat at 2.6. In terms of spending, inpatient spending per beneficiary declined 1.4% annually 2015 to 2023 and physician fee schedule spending per beneficiary declined 1.3% annually over the same period. Despite these trends, total per-beneficiary spending has consistently grown, primarily due to drug spending. Physician-administered Part B drug spending grew 7.8% annually per beneficiary from 2015 to 2023, the fastest of any major service category, and outpatient drugs grew from 16% to 28% of OPPS payments between 2015 and 2024. In Part D, the financing structure is similarly lopsided, as the 2027 national average monthly bid amount of $296.05 substantially exceeds the $41.33 base beneficiary premium, with the balance covered by a government subsidy drawn from general revenue.7
One possible explanation for these utilization and per-beneficiary spending trends is the migration of Traditional Medicare beneficiaries to Part C Medicare Advantage plans. Part C enrollment has grown from roughly a quarter of eligible beneficiaries in the early 2010s to more than half in 2026. While some stakeholders have suggested that healthier beneficiaries are disproportionately migrating to Part C plans, that would imply that the remaining Traditional Medicare beneficiaries would skew older and sicker. If that were true, a rational person might anticipate that per-beneficiary utilization would increase, not decrease.
Similarly, although inpatient hospital payments per stay grew 26.0%, from $12,700 to $16,000, between 2019 and 2024, that increase was largely attributable to MS-DRG payment increases, not acuity, as the case mix index (CMI) for Traditional Medicare beneficiaries increased from 1.6 in 2019 to 1.8 in 2024, an increase coinciding with the adoption of AI-enabled coding during the period.8 As with utilization, an increasingly acute population of Traditional Medicare beneficiaries would logically have an increase in admissions per 1,000 beneficiaries, not a decrease of 15.1% over the same period.
A second explanation is that flat utilization reflects constrained access rather than reduced need (i.e., beneficiaries need care but cannot access a physician to provide it). If a physician shortage was a limiting factor to access, beneficiaries would be expected to report greater difficulty in getting care than people with private insurance, not an easier one. Notably, in MedPAC's 2025 survey, a higher share of Medicare beneficiaries was satisfied with their ability to find providers who accepted their insurance (97%) than privately insured adults ages 50 to 64 (93%), and a higher share were satisfied with the availability of timely appointments (88% compared with 79%).9 Additionally, Medicare Advantage has narrower provider networks than Traditional Medicare. A KFF analysis of 2022 Medicare Advantage provider directories found that Medicare Advantage enrollees had access to just 48% of the physicians available to beneficiaries in Traditional Medicare in the same market, on average.10 Even so, the Health Resources and Services Administration (HRSA) projects a shortage of 141,160 full-time-equivalent physicians by 2038, with 30 of the nation's 35 physician specialties in shortage and primary care specialties such as family medicine among those with the lowest projected supply adequacy.11
While the enrollment shift into Medicare Advantage explains the decline in the number of Traditional Medicare beneficiaries, those remaining beneficiaries are receiving fewer inpatient stays, less skilled nursing facility care and fewer physician fee schedule services while paying more, but those volume declines are not cited by beneficiaries as being attributable to a physician shortage. One outlier trend – Part B drug spending – reveals that physician-administered drug utilization is disproportionately pushing per-beneficiary spending higher year over year.
Any successful Medicare cost-containment measure depends on an accurate diagnosis of the underlying problem. Members of Congress and Trump administration officials are aligned in their criticism of hospital prices, even if commercially negotiated hospital rates do not impact Medicare spending. Notably, employers, who are more directly exposed to hospital "prices," have shown comparatively less urgency on an issue that affects their costs.
Theoretically, Congress would focus on healthcare spending underwritten by the Federal government as opposed to rates paid by private health plans. If so, Congress should consider that inpatient hospital and skilled nursing facility spending, the categories that finance the Hospital Insurance Trust Fund through the payroll tax, is the one part of Medicare where per-beneficiary utilization and aggregate payments are both easing rather than climbing. In contrast, it is Part B and Part D spending, financed by premiums and general revenue rather than payroll tax revenue, that should draw congressional scrutiny.