Medicare provides health insurance coverage for more than 65 million people, nearly 20% of the U.S population – a share which will grow larger in the coming decades. In 2021, Medicare spending comprised 13% of the federal budget and 21% of national health care spending. 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.
The population of the United States ages 65 and older is projected to grow from 17% in 2020 (56 million people) to nearly a quarter of the nation’s total population in 2060 (95 million people).
The share of older adults who are in their 80s, 90s, and older will also grow. People ages 80 and older will account for more than one-third of people 65 and older in 2060, up from one-quarter in 2020. People ages 90 and older will account for 10% of people 65 and older in 2060, up from 5% in 2020.
An aging population means more people will be enrolled in the Medicare program. The number of Medicare beneficiaries is projected to grow from around 63 million people in 2020 to just over 93 million people in 2060. These totals include younger adults who qualify for Medicare because of a long-term disability.
Growth in total Medicare spending has been driven in part by an increase in the number of people enrolled in Medicare. Growth in health care spending per Medicare beneficiary has also contributed to higher total spending. The growth in health care spending is influenced by increasing volume and use of services, new technologies, and rising prices. Looking to the future, these factors will continue to play a role in Medicare spending growth.
In 2022, Medicare benefit payments totaled $744 billion, up from just under $200 billion in 2000 (these amounts net out premiums and other offsetting receipts). In percentage terms, this translates to an average annual growth rate of 6.3% over these years.
Medicare spending per person has also grown, increasing from $5,800 to $15,700 between 2000 and 2022 – or 4.6% average annual growth over the 22-year period. The influx of the Baby Boomer generation added many relatively younger, healthier people to the Medicare population beginning in 2011.
Looking to the future, net Medicare outlays are projected to increase from $744 billion in 2022 to nearly $1.7 trillion in 2023, due to growth in the Medicare population and increases in health care costs.
The growth in health care spending, which affects Medicare and other public and private payers of health care, including employers and individuals, is influenced by increasing volume and use of services, new technologies, and rising prices.
The aging of the population has important implications for future Medicare spending. On a per person basis, Medicare spending is lower for beneficiaries in their 60s and 70s and then rises with age, peaking among beneficiaries in their mid-to-late 90s.
With more and more adults living into their 80s and beyond, the aging of the population will contribute to higher per beneficiary and total Medicare spending.