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Federal budget · FY2024

Where does Medicare spending go?

$874 billionin FY2024 · 12.9% of all federal spending

Medicare spending was about $874 billion in FY2024 — roughly 13% of all federal outlays. The program covers about 67 million Americans (people 65+ and certain younger people with disabilities or end-stage renal disease) and is organized into three main parts: Part A covers hospital care, Part B covers physician and outpatient services, and Part D covers prescription drugs. Part C (Medicare Advantage) is a private-plan alternative funded through Parts A and B rather than a separate funding stream.

Only Part A — the Hospital Insurance Trust Fund — is funded by the 1.45% FICA Medicare payroll tax (matched 1.45% by your employer for 2.9% total). That's about $420 billion of the total. Parts B and D are funded mostly by general federal revenues (around 75%) plus beneficiary premiums (around 25%). When you pay your Medicare payroll tax, it goes specifically to Part A; the rest of Medicare is paid for by everyone's income tax and by retirees' monthly premiums.

Important caveat on the numbers below: budget-function outlays are reported NET of beneficiary premiums and other offsetting receipts. Gross Medicare spending by part is higher than what's shown here. CMS reports gross 2024 spending of roughly Part A $422B, Part B $553B, and Part D $146B (about $1.12T total). The federal government's net outlay is lower (~$874B) because the ~$240B of premiums beneficiaries pay for Parts B and D get netted out on the spending side. The Part B and Part D rows below show the net federal share, not the gross program cost — that's why the numbers may look smaller than figures you'd find on CMS or USAFacts.

Private plan sponsors deliver large shares of Parts C and D. UnitedHealth Group is the single largest recipient of federal Medicare dollars (Medicare Advantage + Part D plus Optum services). Humana, CVS Aetna, and Elevance Health are the other major Medicare Advantage and Part D plan sponsors. Traditional Medicare (fee-for-service) payments flow directly to hospitals, physicians, and outpatient providers — HCA, Tenet, and Community Health are among the largest hospital-chain recipients of Part A inpatient fee-for-service dollars.

Where the money goes inside medicare

Agency- and program-level breakdown for FY2024.

  • Medicare Part A — Hospital Insurance$422 billion

    Inpatient hospital stays, skilled nursing facility care, hospice, and some home health. The piece your 1.45% Medicare payroll tax funds directly via the HI Trust Fund.

  • Medicare Part B — Physician & Outpatient$380 billion

    Doctor visits, outpatient hospital services, durable medical equipment, preventive care, ambulance, mental health. Funded ~75% by general revenues and ~25% by beneficiary premiums.

  • Medicare Part D — Prescription Drug Benefit$144 billion

    Prescription drug coverage delivered by private plan sponsors (Aetna, CVS Caremark, Humana, UnitedHealth, etc.). Funded by general revenues + beneficiary premiums; some drug prices now negotiated under the IRA.

  • CMS administrative + program integrity$8 billion

    Centers for Medicare & Medicaid Services operations to run the Medicare program — claims processing, fraud prevention, enrollment systems.

  • Less: beneficiary premium offsets$-80 billion

    Premium revenues collected from Medicare beneficiaries (Parts B and D) that offset gross spending. Shown as a negative line because they reduce net federal outlays.

Top recipients — who actually got the money

Largest contractors, grantees, and direct payees within medicare. The remainder covers personnel, facilities, and the long tail of smaller recipients.

  • UnitedHealth Group (Medicare Advantage + Part D)$130 billion

    Largest Medicare Advantage insurer in the US (~30% market share) and a top-3 Part D plan sponsor. Payments flow through UnitedHealthcare and the Optum subsidiary.

  • Hospitals + physicians (Part B fee-for-service)$200 billion

    Traditional Medicare payments to individual hospitals, physicians, outpatient clinics, durable medical equipment suppliers, and ambulance services. HCA, Tenet, CommonSpirit, and Community Health are among the largest hospital chain recipients.

  • Humana$60 billion

    #2 Medicare Advantage insurer (~17% market share). Also a top-3 Part D plan sponsor. Medicare is essentially Humana's entire business.

  • Pharma manufacturers (via Part D)$60 billion

    Drug companies (Pfizer, Merck, BMS, AbbVie, Lilly, Novartis, Novo Nordisk) paid through Part D plan sponsors. Top-spend drugs now subject to IRA price negotiation, with first negotiated prices taking effect in 2026.

  • CVS Health (Aetna + Caremark)$50 billion

    Aetna runs Medicare Advantage plans; CVS Caremark is a top-3 Part D pharmacy benefit manager. Combined, CVS is one of the largest single Medicare payment recipients.

  • Elevance Health (Anthem BCBS plans)$35 billion

    Blue Cross Blue Shield plans in 14 states with major Medicare Advantage enrollment and Part D market share.

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