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How Healthcare Prices and Utilization in the United States Compare to Peer Nations?

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How Healthcare Prices and Utilization in the United States Compare to Peer Nations?



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This updated chart collection compares indicators of health care utilization and prices in the United States and 11 similarly wealthy countries to investigate whether higher prices or higher utilization of healthcare services drives the high healthcare expenditures in the U.S. relative to peer nations.

The U.S. spends nearly twice as much on health care per person as peer nations ($13,432 vs. $7,393 per person), meanwhile health care utilization in the U.S. — from doctor visits to surgeries — is generally lower than in other wealthy countries. The evidence continues to support the finding that higher prices – as opposed to higher utilization – explain the United States’ high health spending relative to other high-income countries.

The analysis is part of the Peterson-Kaiser Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.



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5 Key Facts about Medicaid’s Share of National Health Spending

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5 Key Facts about Medicaid’s Share of National Health Spending



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Medicaid, as the primary program providing comprehensive coverage of health care and long-term services and supports to about 80 million low-income people in the United States, accounts for one-fifth of all personal health care spending in the United States and a large share of state budgets. During its 60 years since enactment, Medicaid’s share of health insurance coverage and health care spending have incrementally increased; the program has evolved over time through a series of legislative and judicial actions, within the context of broader changes in the health care landscape. Now, landmark changes to Medicaid coverage and enrollment policies are set to roll out over the next several years.

According to the Congressional Budget Office (CBO), the recently enacted reconciliation package is estimated to reduce federal Medicaid spending by $911 billion over 10 years (after accounting for interactions that produce overlapping reductions across different provisions of the law), and to increase the number of uninsured people by 10 million in 2034. The most recent projections for national health spending do not account for the changes in the law; but changes in the law are expected to have big implications for Medicaid coverage and spending that could reverse longstanding incremental trends. Policy changes in the reconciliation package that lead to more uninsured people are likely to increase out-of-pocket spending as a share of national health care spending. Shifts in spending patterns are likely to be more profound over time and beyond the ten year projection period if there are no other changes in federal laws that affect health spending.

To provide historical context for how changes to Medicaid spending may impact national health spending trends, this brief explores how Medicaid spending contributes to national health spending and how different service areas contribute to Medicaid costs. This brief uses National Health Expenditures (NHE) historic data, published annually by the Centers for Medicare & Medicaid Services, which provide estimates of national spending on health care, by payer and by type of service. The analyses in this brief focus on spending for personal health care, which excludes the costs of public health programs and payers’ administrative spending (see Methods).

1. Over time, Medicaid has covered an increasing share of the population and health care costs.

Over the past two decades, the percent of the population enrolled in Medicaid increased by more than 10 percentage points (from 12% in 2000 to 25% in 2023 by NHE enrollment estimates). During the same time, Medicaid’s share of national health spending increased by only 3 percentage points, from 16% to 19%. Medicaid spending is driven by multiple factors, including the number and mix of enrollees, their use of health care and long-term services and supports, the prices of Medicaid services, and state policy choices about benefits, provider payment rates, and other program factors. Some of the faster growth in Medicaid enrollment relative to spending is that enrollment growth over the past two decades was driven by increased enrollment stemming from the Great Recession, implementation of the Affordable Care Act (ACA) Medicaid expansion, and the COVID-19 pandemic. Each of those events spurred increased enrollment of working-age adults and their families, groups that tend to have lower per-enrollee Medicaid costs than older adults and people who come into Medicaid because they need long-term care. CBO estimates predict that changes to Medicaid enacted in the reconciliation package will result in a downward shift in future Medicaid spending and in enrollment. KFF analyses show how these recent changes to Medicaid policy are likely to reduce federal Medicaid spending and impact enrollment, with varying impacts to different states or areas.

Medicaid Covers an Increasing Share of the Population and Health Care Costs

2. Medicaid’s share of spending has grown, but remains lower than that of private insurance and Medicare.

Prior KFF analysis has shown that generally, third party payers cover a greater share of total health spending than in previous decades because more people have gained coverage, especially public coverage, and payers’ spending per enrollee has grown. The total share of national health care spending for each type of coverage reflects the number and mix of enrollees and the amount spent to cover each enrollee. The share of health care spending paid by people out-of-pocket decreased as more spending was paid by Medicare and private insurance. Out-of-pocket spending includes payments for care from people who are not insured, and payments for care from people with health coverage when coverage requires enrollees to pay some of the costs. Common types of out-of-pocket spending among people with coverage include copayments (a flat fee per service), coinsurance (a percentage of the total costs), and deductibles (an amount enrollees pay before coverage kicks in). Historically, one difference between Medicaid and other forms of health coverage was the low out-of-pocket spending. Estimated increases in the uninsured following implementation of the reconciliation package could reverse incremental declines in out-of-pocket costs.

Medicaid’s Share of Spending Has Grown, but Remains Lower Than That of Other Insurance Types

3. Over 70% of Medicaid spending pays for hospital services and long-term care.

Over the last 23 years, the largest share of Medicaid spending paid for hospital services, which accounted for 38% of Medicaid spending on average and varied between 37% and 39% during the 2000-2023 period. Medicaid mirrors broader hospital spending trends; spending on hospitals makes up the largest share of all health care spending, a trend projected to continue. During the same period, long-term care accounted for an average of 37% of Medicaid spending, although it declined somewhat from a high of 40% in 2007 to 36% in 2023. The category with the greatest relative growth was payments to providers such as physicians which increased from 11% in 2000 to 17% in 2023. The percent of spending that paid for prescription drugs decreased from 11% in 2000 to 7% in 2023, which is likely attributable to the enactment of the Medicare prescription drug benefit which took effect in 2006. Prior to that point, Medicaid paid for prescription drugs for low-income Medicare beneficiaries who were also enrolled in Medicaid (e.g., dual-eligible individuals).

Over 70% of Medicaid Spending Pays for Hospital Services and Long-Term Care

4. Medicaid pays for nearly 20% of hospital spending.

Medicaid pays for nearly 20% of hospital spending, a share that has changed little since 2000. During that time, Medicare’s share of national spending on hospital care decreased from 30% in 2000 to 25% in 2023, while the share paid by private health insurance rose from 33% to 37%. People pay a much smaller percentage of hospital spending out-of-pocket compared with other types of health care. Medicaid covered 41% of all U.S. births in 2023; births are the most common reason for a hospital inpatient stay. Medicaid financing for hospitals is complex, but Medicaid studies have shown that Affordable Care Act (ACA) Medicaid expansion is associated with improved hospital financial performance and lower likelihood of hospital closure, particularly in rural areas.

Medicaid Pays for Nearly 20% of Hospital Spending

5. Medicaid is the primary payer of long-term care, most of which is now provided in people’s homes and the community.

Medicaid continues to be the primary payer of long-term care, comprising an increasing share of all spending on long-term care. Medicaid’s share of spending on long-term care rose nine percentage points, growing from 52% in 2000 to 61% in 2023. Since 2000, Medicaid’s spending on care delivered in people’s homes and communities (e.g., home care) increased faster than spending on institutional care such as nursing facilities. In 2000, the 52% of long-care spending that was paid by Medicaid included 29% on home care and 23% on institutional care. In 2023, the 61% that was paid by Medicaid included 47% on home care and only 14% on institutional care. Prior KFF analysis has shown that in 2021, three-quarters of the 5.7 million people who used Medicaid long-term care were receiving home care, although that percentage varies across the states widely. The larger share of people receiving care in the community as opposed to in an institution reflects initiatives to make home care more widely available in recent years and to remove what has been referred to as the “institutional bias” in Medicaid. 

Medicaid is the Primary Payer of Long-Term Care, Most of Which Is Now Provided in People’s Homes and the Community

Methods

This analysis uses National Health Expenditures (NHE) historic data. Unlike other sources of information on health care spending, the NHE data use an accounting structure that captures all expenditures of health care goods and services and investment in the health care sector. Expenditures are classified into high-level service categories and by source of payment. Data sources include federal administrative data, household and individual surveys, surveys of businesses, and economic data from the Bureau of Labor Statistics and the Bureau of Economic Analysis. Medicaid spending estimates are derived from financial reporting through Form CMS-64, except for durable medical equipment estimates which are developed from person-level payment data.

See the NHE Accounts Methodology documentation for additional information including definitions, sources, and methods; CMS publishes both complete documentation and short definitions.

Enrollment: This KFF analysis uses NHE Accounts enrollment data to estimate Medicaid’s share of total health insurance enrollment (Figure 1). NHE Accounts data estimates Medicaid enrollment using the Medicaid Statistical Information System (MSIS) for years 2000-2013, and enrollment projections reported on form CMS-64 for years 2014-2023. The NHE Accounts data estimates for total health insurance enrollment include private health insurance, Medicare, Medicaid, CHIP, and the Departments of Defense and of Veterans Affairs.

Personal Health Care Services: Personal health care services in the NHE Accounts data represent aggregate revenue received by health care providers and retail providers of medical goods and services. Cost estimates for personal health care services expenditures exclude administrative costs, government public health activities, or investments in structures or equipment. KFF analyzes NHE personal health care data using service categories (i.e. “hospitals,” “providers,” or “prescription drugs,”) that align with the classification system used within the NHEA, except for Long-Term Care.

Spending by Payer: NHE Accounts data estimate spending attributable to certain payer categories. KFF uses the payer categories defined by the NHE Accounts data and defines “Other” spending (Figures 2 and 4) below. For personal health care services:

  • Medicaid spending estimates include both state and federal spending on both fee-for-service and managed care enrollees but exclude Children’s Health Insurance Programs (CHIP) spending.
  • Medicare spending estimates include Medicare Parts A, B, and C (Medicare Advantage). Medicare spending estimates also include Medicare Part D and Medicare Advantage Part D. Private supplemental Medicare insurance, i.e. Medigap and employer-sponsored Medicare Part D, is excluded from Medicare spending and included in private insurance spending.
  • Private Insurance spending estimates include premiums and benefits from traditional fully-insured health coverage whether purchased individually or through an employer, self-insured employer health benefit plans, plans purchased through the Affordable Care Act marketplaces, and indemnity plans such as those covering hospital care or long-term care. Private insurance spending estimates also include supplemental Medicare plans (e.g., Medigap).
  • Out-of-Pocket spending estimates include direct consumer spending including coinsurance, deductibles, and any other amounts not covered by insurance. Premiums are included in private insurance spending and excluded from out-of-pocket spending.
  • Other: KFF defines “Other” spendingas personal health care expenditures by the Children’s Health Insurance Program, the Indian Health Services, the Substance Abuse and Mental Health Services Administration, the Veterans Health Administration, federal spending through the Pre-Existing Conditions Insurance Plans (PCIP) or COVID-19 relief funds (e.g. the Provider Relief Fund), direct payments to the needy through general assistance programs (e.g. the State Pharmaceutical Assistance Program), certain state and local programs (e.g. temporary disability insurance or provider subsidies), and property or casualty insurance.

Spending by Service Category: KFF uses the NHE Accounts definitions for hospital care, provider care, and prescription drugs. KFF definitions for “Other” services (Figure 3) and “Long-Term Care (Figures 3 and 5) are included below.

  • Hospital Care includes all services provided by hospitals to patients. These expenditures include the services of resident physicians, inpatient pharmacy, room and board and ancillary costs, hospital-based home health care, and other services billed by hospitals. Services rendered in a hospital by a physician who bills independently are considered Provider Care.
  • Provider Care includes services provided in non-hospital clinics and practices. These include physician-operated practices, outpatient care centers, and certain federally operated clinics and clinics operated by non-physician clinicians (such as private-duty nurses, podiatrists, optometrists, chiropractors, or occupational therapists). Provider care also includes certain medical laboratory services.
  • Prescription Drugs covers “retail” sales of products available only by a prescription, such as drugs, biologics, and diagnostic products.
  • Other: KFF defines Medicaid spending on “Other” services to include personal health care expenditures not attributable to hospitals, providers, prescription drugs, nor long-term care. This includes dental care, durable medical equipment, non-durable medical equipment (e.g. diagnostic tools or wound dressings and other medical supplies), and non-prescription drugs.
  • Long-Term Care: KFF defines long-term care to include spending for nursing care and continuing care retirement communities; home health; and other health, residential, and personal care if it is paid for by Medicaid, individuals who are paying out-of-pocket, the Children’s Health Insurance Program, the Indian Health Services, the Substance Abuse and Mental Health Services Administration, the Veterans Health Administration, general assistance, other federal programs, other state and local programs, school health. See 10 Things about LTSS for more information.



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Medicare Advantage Enrollees Account for 25% of all Inpatient Hospital Days

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Medicare Advantage Enrollees Account for 25% of all Inpatient Hospital Days



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Enrollment in Medicare Advantage has grown rapidly in recent years, with more than half of all eligible Medicare beneficiaries now receiving their coverage from a private plan. Although the pace of enrollment increases slowed in 2025, the total number of Medicare Advantage enrollees still increased and the share of Medicare beneficiaries who obtain their Medicare benefits from a private plan is expected to continue to grow over the next decade. This trend has implications for beneficiaries and health care providers, including hospitals, because Medicare Advantage differs from traditional Medicare in many ways.

For hospitals and beneficiaries, one key distinction is that virtually all Medicare Advantage enrollees are in a plan that requires prior authorization for inpatient hospital stays (96%), post-acute skilled nursing facility stays (99%) and home health care (91%). Prior authorization is intended to reduce unnecessary care and lower costs, but it also imposes administrative burdens on providers, and sometimes leads to delays and barriers to care. Medicare Advantage plans also typically establish provider networks and impose higher out-of-pocket costs for out-of-network care. In light of the reported uptick in utilization among some Medicare Advantage enrollees, insurers looking to protect profits and guard against losses may seek to cut costs in ways that could impact hospitals, such as by tightening networks to direct patients to providers with lower costs. As Medicare Advantage enrollment grows, decisions made by insurers (related to networks, payment rates, prior authorization, and denials) along with decisions made by hospitals (whether to be in a Medicare Advantage network) can be expected to affect a larger share of the Medicare population.

Recently, hospitals and other providers—including in rural areas—have raised concerns about the impact of Medicare Advantage on their finances. Some hospitals have terminated contracts over payment rates, delays in payment, more restrictive coverage determinations, and denials. One issue that has drawn scrutiny from these groups has been plans’ practice of shifting hospitalized patients to “observation status,” which often means lower payments to hospitals and higher costs for patients. Additionally, one study estimated that Medicare Advantage denials of inpatient services reduced provider revenue by approximately 7%.

This data note examines the growth of Medicare Advantage as a share of hospital inpatient days between 2015 and 2023 based on cost reports submitted by hospitals to the Centers for Medicare and Medicaid Services (CMS).

Key Takeaways

  • Medicare Advantage represents a growing share of total hospital inpatient days. Medicare Advantage grew from 13% to 25% of total inpatient hospital days between 2015 and 2023, and as of 2023, half (50%) of all Medicare inpatient hospital days were attributed to Medicare Advantage enrollees.
  • Nearly four in ten hospitals had more inpatient days from Medicare Advantage enrollees than traditional Medicare enrollees in 2023. The share of hospitals with more Medicare Advantage than traditional Medicare inpatient days grew from 4% in 2015 to 38% in 2023.
  • Medicare Advantage inpatient shares have grown fastest in rural areas. The share of inpatient hospital days attributed to Medicare Advantage enrollees more than doubled in rural counties adjacent to metropolitan areas between 2015 and 2023 and nearly tripled in rural counties not adjacent to metropolitan areas.
  • Medicare Advantage inpatient shares ranged from 2% to 33% across states in 2023. Medicare Advantage inpatient shares were lowest in Alaska (2%) and Wyoming (6%) and highest in Ohio (32%) and Michigan (33%).
  • Within counties, the share of inpatient days attributed to Medicare Advantage enrollees also varied widely across hospitals in 2023. For example, in Allegheny County, PA (where Medicare Advantage penetration is relatively high), inpatient days attributed to Medicare Advantage enrollees ranged from 14% to 59% across hospitals. Similarly, in Cook County, Illinois (where Medicare Advantage penetration is relatively low), the Medicare Advantage inpatient share ranged from 2% to 38% across hospitals.

Medicare Advantage steadily increased as a share of inpatient days between 2015 and 2023, while the share attributed to traditional Medicare decreased.

The share of total inpatient days attributed to Medicare Advantage enrollees grew from 13% in 2015 to 25% in 2023 among general short-term hospitals in the U.S (see Figure 1). During this same period, the share of inpatient days attributed to traditional Medicare declined from 36% to 25%. As of 2023, half of all Medicare inpatient days were attributed to Medicare Advantage patients. The rise in the share of inpatient days attributed to Medicare Advantage enrollees coincided with an increase in Medicare Advantage enrollment as a share of all eligible Medicare beneficiaries from 32% in 2015 to 51% in 2023.

Medicare Advantage Steadily Increased as a Share of Inpatient Days Between 2015 and 2023, While the Share Attributed to Traditional Medicare Decreased

The share of hospitals with more inpatient days from Medicare Advantage than traditional Medicare increased from 4% in 2015 to 38% in 2023.

The increase in Medicare Advantage enrollment has contributed to a shift in patient mix across hospitals, affecting some more than others. The share of hospitals with more Medicare Advantage than traditional Medicare inpatient days increased from just 4% in 2015 to 38% in 2023 (Figure 2). Hospitals with a greater share of patients from Medicare Advantage than traditional Medicare may be more reliant on revenue from these plans and more affected by various plan rules and decisions, such as prior authorization requirements, denials of claims, observation stay designations, and network restrictions.

The Share of Hospitals With More Inpatient Days From Medicare Advantage Than Traditional Medicare Grew From 4% in 2015 to 38% in 2023

Among rural hospitals, the share of inpatient days for Medicare Advantage enrollees more than doubled between 2015 and 2023.

Medicare inpatient shares more than doubled (from 11% in 2015 to 26% in 2023) in rural counties that are adjacent to metropolitan areas and nearly tripled (from 7% in 2015 to 19% in 2023) in rural counties that are not adjacent to metropolitan areas (referred to here as the “most rural” counties). Medicare inpatient shares were lower in adjacent rural areas versus urban areas in 2015 (11% versus 13%) but were higher in 2023 (26% versus 25%). Although Medicare inpatient shares grew fastest in the most rural areas, they also were lower in these areas in any given year than in other areas (e.g., 19% in 2023 versus 26% in adjacent rural areas and 25% in urban areas). The majority of Medicare beneficiaries in the most rural counties receive their coverage through traditional Medicare, unlike in rural counties adjacent to metropolitan areas and urban counties, where most beneficiaries are enrolled in Medicare Advantage plans.

Some rural hospitals have raised concerns about the growth of Medicare Advantage, pointing to payment rates that are lower than rates paid by traditional Medicare and payment delays and denials. Rural hospitals often face unique financial challenges, which could make it harder to adjust to the expansion of Medicare Advantage than other hospitals. As Medicare Advantage enrollment continues to climb, and as Medicare Advantage enrollees comprise a larger share of patients, rural hospitals may face new challenges.

Among Rural Hospitals, the Share of Inpatient Days for Medicare Advantage Enrollees More Than Doubled Between 2015 and 2023

Medicare Advantage inpatient shares ranged from 2% to 33% across states in 2023.

State-level Medicare Advantage inpatient shares tracked with Medicare Advantage enrollment. Medicare Advantage inpatient shares were lowest in Alaska (2%), and Wyoming (6%), which were also the two states with the lowest Medicare Advantage penetration in 2023 (2% and 11%, respectively). Meanwhile, Medicare Advantage inpatient shares were among the highest in states like Michigan (33%) and Hawaii (29%) where penetration was at least 60% of all Medicare beneficiaries. State-level Medicare Advantage penetration is influenced by a range of factors, including insurance market dynamics, beneficiary characteristics, and the share of the state’s population living in urban or rural areas. 

Medicare Advantage Inpatient Shares Ranged From 2% to 33% Across States in 2023

Medicare Advantage comprised a higher share of inpatient days in counties with higher Medicare Advantage penetration in 2023.

Across the country, the share of Medicare beneficiaries enrolled in Medicare Advantage varies widely. As might be expected, counties with higher Medicare Advantage penetration also had higher Medicare Advantage inpatient shares than counties with lower Medicare Advantage penetration. Among counties in the top quartile of Medicare Advantage penetration, Medicare Advantage comprised 28% of inpatient days in 2023 (Figure 4), substantially greater than the 18% share among the bottom quartile of counties.

Medicare Advantage Comprised a Higher Share of Inpatient Days in Counties With Higher Medicare Advantage Penetration in 2023

The share of inpatient days attributed to Medicare Advantage enrollees varied widely across hospitals within counties in 2023.

Although the share of inpatient days attributed to Medicare Advantage tracked county-level Medicare Advantage penetration, there was large variation within counties. The figure below illustrates the range in Medicare Advantage inpatient shares for a set of counties that have several hospitals and are geographically dispersed in each quartile of Medicare Advantage penetration. For example, in Allegheny County, PA, a high-penetration county where 73% of eligible Medicare beneficiaries were enrolled in a Medicare Advantage plan in 2023, Medicare Advantage enrollees accounted for just 14% of all inpatient days in one hospital but more than half (59%) in others. Even in counties with lower than average penetration, there was substantial variation in the share of inpatient days attributed to Medicare Advantage. For instance, in Cook County, Illinois, where 42% of beneficiaries were enrolled in a Medicare Advantage plan, the Medicare Advantage inpatient share ranged from 2% to 38% across hospitals.

Differences in Medicare Advantage inpatient shares across hospitals within the same county may be due to a number of factors, including whether a given hospital is in Medicare Advantage networks, the extent to which a given hospital tends to serve people with Medicare based on the types of services and procedures it provides, and beneficiary preferences that might be based on convenience or perceived quality. As noted above, hospitals with a relatively large number of patients from Medicare Advantage may be more affected by prior authorization requirements, denials of claims, observation stay designations, and network restrictions of these plans. As Medicare Advantage enrollment continues to rise, the decisions made by Medicare Advantage plans related to reimbursement, coverage, and networks could have revenue implications for hospitals and other health care providers that can be expected to vary across counties and within local markets.

The Share of Inpatient Days Attributed to Medicare Advantage Enrollees Varied Widely Across Hospitals Within Counties in 2023

This work was supported in part by Arnold Ventures. KFF maintains full editorial control over all of its policy analysis, polling, and journalism activities.



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Tariffs Are Driving up Premiums for Small Businesses

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Tariffs Are Driving up Premiums for Small Businesses



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Small businesses may expect that the recent tariffs levied by President Trump will drive up the price of multiple imported goods from various countries. But less expected is how these trade policies may ripple through employee health benefits. Most recently, President Trump indicated that the administration will phase in tariffs on pharmaceutical imports—starting with a “small tariff,” climbing to 150% within roughly 12 to 18 months, and eventually rising to as much as 250%—as part of an effort to bring drug manufacturing back to the U.S.

Tariffs can indirectly affect health insurance premiums by increasing the cost of imported medical goods, especially prescription drugs. When pricing plans, insurers must make assumptions about future medical costs, often months in advance. In the absence of clear policy guidance, some insurers take a cautious approach by incorporating potential cost increases into their proposed rates for the upcoming plan year. Rather than waiting for final decisions, some carriers preemptively accounted for these risks to avoid underpricing. This can be particularly true when the affected drugs are brand-name or specialty medications with limited alternatives, many of which are imported. By building in assumptions about possible cost increases, tariffs can influence premiums even before any measurable price change has occurred, particularly in markets where insurers may already operate on tighter margins.

The share of total health claims attributable to pharmaceuticals varies by market segment but generally makes up between one-sixth and one-fifth of total claims after adjusting for pharmaceutical rebates.

Pharmaceuticals make up a slightly larger share of health claims for insurers covering small businesses

Pharmaceuticals comprise a slightly larger share of total health care claims in the small group market compared to the individual and large group markets. In the small group market, pharmaceuticals account for just under one-fifth of all claims (19.2%), while the share is slightly lower in the individual (18.2%) and large group (17.9%) markets.

Health insurance companies must submit their proposed premium changes for the coming year to state regulators in the spring and summer. As part of this process, some insurers in the Affordable Care Act (ACA)-compliant guaranteed-issue small group market — just as in the individual market — are explicitly citing tariffs, particularly those affecting pharmaceutical imports, as a reason for higher-than-expected premium increases. In the individual market, several insurers have included upward adjustments of about 3% in response to anticipated increases in drug costs tied to tariffs, while others acknowledge the risk but have not incorporated it into their pricing assumptions. Of the 88 small group market rate filings reviewed in detail, one-quarter (22 insurers) explicitly mentioned tariffs. Other insurers may have factored in tariff effects without stating so directly.

In several states, small group filings note that new import tariffs are expected to increase the cost of certain brand-name and specialty drugs, especially those without generic alternatives.

“IHBC is seeking an overall rate change of 18.9% in 2026, primarily due to increased costs due to inflation and tariffs.” – Independent Health Benefits Corporation (New York)

“To account for uncertainty regarding tariffs and/or the onshoring of manufacturing and their impact on total medical costs, most notably pharmaceuticals, a total claims impact of 2.9% is built into the initially submitted rate filings. This has increased our premium by roughly 2.7%.” – United Healthcare Insurance Company (Oregon)

Among small group insurers that have accounted for the potential impact of tariffs in their rate filings, the estimated premium effect ranges from 1.7% to 3.0%. Other insurers reference the possibility of tariffs but do not factor them into their pricing assumptions.

“Neighborhood did not consider the impact of tariffs during rate development as rates were created based on current law today and too much uncertainty remains of what (if any) tariffs will become final.” – Neighborhood Health Plan of Rhode Island (Rhode Island)

Because insurers in the ACA-compliant small group market must lock in premiums well ahead of the coverage year — often six to nine months in advance — they are frequently pricing against policy uncertainty. Unlike inflation or shifts in service utilization where insurers can draw on historical experience, there is little precedent for how sweeping import tariffs could affect prescription drug pricing.

Additionally, ACA-compliant small group insurers must also adhere to Medical Loss Ratio (MLR) requirements, which limit the share of premiums that can go toward administrative costs and profit. If premiums overshoot actual spending, carriers are required to issue rebates. But if they underprice premiums and tariffs drive up drug costs, insurers could face financial shortfalls.

This dynamic could translate into higher employee benefit costs for small businesses as these tariffs take effect and impact drug prices. For employers operating on narrow margins, even small premium increases can influence decisions around employer contributions, cost sharing, or continuing to offer coverage at all. While ACA’s MLR rules shield employers from some costs by requiring insurers to return excess premiums if spending falls short, these rules do not insulate businesses or workers from the upfront burden of higher premiums. With no clear precedent to guide assumptions, tariff-related uncertainty is now a factor in how some small group insurers approach rate-setting — adding a new variable to the affordability of some job-based coverage.



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Health Costs Consume a Large Portion of Income for Millions of People with Medicare

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Health Costs Consume a Large Portion of Income for Millions of People with Medicare



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Medicare and Social Security play a central role in the lives of tens of millions of older adults and people with disabilities in the U.S., in the form of health insurance from Medicare and retirement or disability income from Social Security. Yet, even with Medicare coverage, beneficiaries can face substantial out-of-pocket health care costs, which can erode the financial support provided by Social Security. Medicare Part B and D premiums and cost sharing alone account for nearly one-fourth of average monthly Social Security benefits, not taking into account other health care expenses, such as dental services, home care, or care in a nursing home, or premiums for supplemental coverage. While most Medicare beneficiaries have other sources of income in addition to Social Security, more than one third of Social Security recipients age 65 and older rely on Social Security for half or more their income. Additionally, many Medicare beneficiaries live on relatively low incomes: one in four Medicare beneficiaries had income below $21,000 per person in 2023, while half had income below $36,000 per person.

Medicare beneficiaries with low incomes and limited financial resources can get help paying for out-of-pocket costs and services not covered by Medicare if they qualify for and receive full Medicaid benefits, which covers long-term care, vision, and dental care. They can also receive help if they are enrolled in the Medicare Savings Programs, which pay for Medicare’s premiums and, in most cases, cost-sharing requirements. However, the recently enacted tax and spending bill includes provisions that are projected to result in fewer low-income Medicare beneficiaries accessing these benefits, and reduce household resources for individuals in the bottom of the income distribution, including households with Medicare beneficiaries. And even today, not all low-income Medicare beneficiaries who are eligible for these benefits are receiving them, while others may have income or assets just above the qualifying thresholds.

To document the affordability challenges posed by out-of-pocket health care costs for people with Medicare, this brief analyzes out-of-pocket health care costs as a share of Social Security income and total income, including other sources of income in addition to Social Security. Due to differences in the underlying data sources, the analysis presents average out-of-pocket spending as a share of average Social Security income on a per person basis, and a broader range of measures – average, median, 75th and 90th percentile – for out-of-pocket spending as a share of total income. (See Methods for more details and data sources).

Out-of-pocket health care spending by Medicare beneficiaries accounted for 39% of Social Security income per person in 2022, on average

In 2022, Medicare beneficiaries spent a total of $6,330 out of pocket on health care costs, on average, including premiums for Medicare and costs for Medicare-covered services and services Medicare doesn’t cover, like dental, vision, and hearing services and long-term services and supports, while average per capita income from Social Security was $16,157 (Figure 1, Appendix Table 1).

Figure 1

Medicare beneficiaries spent 11% of their total per capita income on out-of-pocket health care costs, on average, but 1 in 4 beneficiaries spent at least 21% and 1 in 10 beneficiaries spent 39% or more

Taking into account other sources of income in addition to Social Security, out-of-pocket spending on health care amounted to 11% of total per capita income for Medicare beneficiaries in 2022, on average (Figure 2). Out-of-pocket health care costs represent a smaller share of total income than Social Security income because most beneficiaries have other sources of income, such as pensions, 401ks, or income from savings. In 2022, Social Security income accounted for 29% of total income per Medicare beneficiary, on average. Out-of-pocket spending consumed a larger share of income for some Medicare beneficiaries, with one in four (15 million beneficiaries) spending 21% or more and one in 10 (6 million) spending 39% or more.

Figure 2

The health care spending burden is higher for some Medicare beneficiaries, including those with lower incomes and those ages 85 and older

On average, out-of-pocket health care costs accounted for a substantially larger share of per capita total income among Medicare beneficiaries with lower incomes than higher incomes (34% among beneficiaries with incomes of $10,000 or less vs. 7% among beneficiaries with incomes greater than $50,000) (Figure 3). While Medicare beneficiaries with lower incomes have lower out-of-pocket health care costs than higher income beneficiaries, on average, their out-of-pocket costs account for a larger share of their lower incomes. Assistance from Medicaid and the Medicare Savings Program can help limit out-of-pocket spending for Medicare beneficiaries with the lowest incomes, but not all low-income beneficiaries qualify for or receive help from these programs. Without some form of financial assistance, lower-income beneficiaries may be more likely to forego needed care since they are less likely than higher-income beneficiaries to be able to afford services with high cost-sharing requirements or services not covered by Medicare, like dental services or long-term services and supports.

Medicare beneficiaries ages 85 and older spent a larger share of their income on out-of-pocket health care costs than younger beneficiaries (22% vs. 9% among beneficiaries ages 65-74), on average. Medicare beneficiaries ages 85 and older have much higher average out-of-pocket health care costs than those ages 65-74, largely due to higher out-of-pocket spending on long-term care, which accounts for more than half of total out-of-pocket spending on all services for those ages 85 and older. Beneficiaries in the oldest age cohort also have lower per capita total income than younger aged beneficiaries, on average, likely due in part to lower income from earnings after retirement. (For details on additional demographic groups, see Appendix Table 1 and Table 2).

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Methods

Data on out-of-pocket health care spending is from the Centers for Medicare & Medicaid Services (CMS) Medicare Current Beneficiary Survey, 2022 Cost Supplement File (the most recent year of data available). The sample includes 59.9 million people with Medicare in 2022 (weighted), including beneficiaries in traditional Medicare and Medicare Advantage and those living in the community and in facilities, excluding beneficiaries who were enrolled in Part A only or Part B only for most of their Medicare enrollment in 2022 and beneficiaries who had Medicare as a secondary payer.

The Cost Supplement File links Medicare claims to survey information reported directly by beneficiaries. The file collects out-of-pocket information on inpatient and outpatient hospital care, physician and other medical provider services, home health services, durable medical equipment, long-term and skilled nursing facility services, hospice services, dental services, hearing services, vision services, and prescription drugs.

Survey-reported out-of-pocket payments are those payments made by the beneficiary or their family, including direct cash payments and Social Security or Supplemental Security Income (SSI) checks paid directly to nursing homes. Out-of-pocket spending on premiums is derived from administrative data on Medicare Part A, Part B, Part C (Medicare Advantage), and Part D premiums paid by each sample person along with survey-reported estimates of premium spending for other types of health insurance beneficiaries may have (including Medigap, employer-sponsored insurance, and other public and private sources).

Starting in 2019, the MCBS introduced an imputation method that uses Medicare Advantage encounter data to improve estimation of medical events and costs for Medicare Advantage enrollees and account for unreported Medicare Advantage utilization. Because data for Medicare Advantage enrollees is imputed, estimates of total average out-of-pocket spending in this analysis may be conservative.

Income data are based on both beneficiaries’ self-reported income in the MCBS and estimates from the Urban Institute’s Dynamic Simulation of Income Model (DYNASIM4). DYNASIM4 is a dynamic microsimulation model that projects the population and analyzes the long-term distributional consequences of retirement and aging issues. DYNASIM4 takes into account income from all sources, including Social Security, wages, pensions, and asset income including withdrawals from IRAs. The simulation is aligned to the 2024 Social Security Trustees’ intermediate cost economic and demographic projections.  DYNASIM4 generates average and percentiles of per capita Social Security and total income for specific demographic groups. It calculates average per capita Social Security and total income for married couples by dividing income for the couple by two. KFF adjusts beneficiaries’ self-reported income in the MCBS with estimates from DYNASIM to adjust for under-reporting of income from certain sources.

For average out-of-pocket spending as a share of average per capita Social Security and average per capita total income, this analysis uses average per capita out-of-pocket spending from the MCBS and average per capita Social Security and total income from DYNASIM. Percentile values of out-of-pocket spending as a share of total income (median, 75th, and 90th) are calculated from MCBS data on out-of-pocket spending and DYNASIM-adjusted income values in the MCBS.

This work was supported in part by AARP Public Policy Institute. KFF maintains full editorial control over all of its policy analysis, polling, and journalism activities.

Nancy Ochieng, Juliette Cubanski, and Tricia Neuman are with KFF. Anthony Damico is an independent consultant.

Appendix Tables

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How Recent Manufacturer Savings Programs May Impact Individual Out-of-Pocket Spending on Asthma and COPD Inhalers

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How Recent Manufacturer Savings Programs May Impact Individual Out-of-Pocket Spending on Asthma and COPD Inhalers



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A new analysis shows that individuals with employer insurance could save 41% on their out-of-pocket spending for asthma and COPD inhalers through manufacturer savings. In response to a U.S. Senate investigation into inhaler costs, 3 drug makers voluntarily capped out-of-pocket costs on their brand-name asthma and COPD inhalers.

Among the asthma and COPD inhalers covered under the voluntary out-of-pocket spending caps, over half may have patient savings of $19 or less per 30-day supply.

The full analysis and other data on health costs are available on the Peterson-KFF Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.



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How Recent Manufacturer Savings Programs May Impact Individual Out-of-Pocket Spending on Asthma and COPD Inhalers

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How Recent Manufacturer Savings Programs May Impact Individual Out-of-Pocket Spending on Asthma and COPD Inhalers



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A new analysis shows that individuals with employer insurance could save 41% on their out-of-pocket spending for asthma and COPD inhalers through manufacturer savings. In response to a U.S. Senate investigation into inhaler costs, 3 drug makers voluntarily capped out-of-pocket costs on their brand-name asthma and COPD inhalers.

Among the asthma and COPD inhalers covered under the voluntary out-of-pocket spending caps, over half may have patient savings of $19 or less per 30-day supply.

The full analysis and other data on health costs are available on the Peterson-KFF Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.



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How Much and Why ACA Marketplace Premiums Are Going Up in 2026

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How Much and Why ACA Marketplace Premiums Are Going Up in 2026



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A new analysis of initial rate filings for Affordable Care Act (ACA) Marketplace plans submitted by 312 insurers in all 50 states and the District of Columbia finds the median proposed increase for 2026 is 18%, more than double last year’s 7% median proposed increase. The proposed rates are preliminary and could change before being finalized in late summer.

In addition to rising cost and utilization of services, insurers cited the expiration of enhanced premium tax credits as a significant factor in their rate hikes for next year. The analysis includes a data table showing proposed premium increases by state and by insurers.

The full analysis and other data on health costs are available on the Peterson-KFF Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.



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How Much and Why ACA Marketplace Premiums Are Going Up in 2026

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How Much and Why ACA Marketplace Premiums Are Going Up in 2026



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A new analysis of initial rate filings for Affordable Care Act (ACA) Marketplace plans submitted by 312 insurers in all 50 states and the District of Columbia finds the median proposed increase for 2026 is 18%, more than double last year’s 7% median proposed increase. The proposed rates are preliminary and could change before being finalized in late summer.

In addition to rising cost and utilization of services, insurers cited the expiration of enhanced premium tax credits as a significant factor in their rate hikes for next year. The analysis includes a data table showing proposed premium increases by state and by insurers.

The full analysis and other data on health costs are available on the Peterson-KFF Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.



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How Much is Health Spending Expected to Grow?

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How Much is Health Spending Expected to Grow?



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This updated chart collection explores how health spending is expected to grow in coming years, based on National Health Expenditure (NHE) projections from federal actuaries.

Health spending is projected to reach $5.6 trillion in 2025, with hospitals making up the largest share of spending ($1.8 trillion). By 2033, health spending is expected to hit $8.6 trillion.

These projections do not account for recent regulatory changes under the Trump Administration, nor do they account for recent legislative changes in the tax and budget law (formerly “the One Big, Beautiful Bill Act”), which the Congressional Budget Office (CBO) expects to decrease spending on Medicaid and the Affordable Care Act (ACA) Marketplaces by over a trillion dollars through 2034.

The analysis can be found on the Peterson-KFF Health System Tracker, an information hub dedicated to monitoring and assessing the performance of the U.S. health system.



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