Health Care Spending 

and the 

Medicare Program

iii

The MedPAC Data Book provides information on national health care and Medicare spending as 

well as Medicare beneficiary demographics, dual-eligible beneficiaries, quality of care in the 

Medicare program, and Medicare beneficiary and other payer liability. It also examines provider 

settings—such as hospitals and post-acute care—and presents data on Medicare spending, 

beneficiaries’ access to care in the setting (measured by the number of beneficiaries using the 

service, number of providers, volume of services, length of stay, or through direct surveys), and 

the sector’s Medicare profit margins, if applicable. In addition, it covers the Medicare Advantage 

program and prescription drug coverage for Medicare beneficiaries, including Part D.

MedPAC began producing its annual Data Book at the suggestion of congressional staff. Some 

of the information it contains is derived from MedPAC’s March and June reports to the 

Congress; other information is unique to the Data Book. The information is presented in tables 

and figures with brief discussions. 

We produce a limited number of printed copies of this report. It is, however, available through 

the MedPAC website: www.medpac.gov. 

Changes in aggregate spending for the fee-for-service sectors presented in this Data Book partly 

reflect the shift in Medicare enrollment from the traditional fee-for-service program to Medicare 

Advantage. Fee-for-service spending per capita may present a more complete picture of spending 

changes.

v

............................................................................................................................

1-1 Medicare was the largest single purchaser of personal health care, 2019...........................................

1-2 Medicare’s share of spending on personal health care varied by type of service, 2019 ....................

1-3 Health care spending has consumed an increasing share of the country’s GDP...............................

1-4 Trustees project Medicare spending to continue to increase as a share of GDP ...............................

1-5 Trustees and CBO project Medicare spending to exceed $1 trillion by 2022...................................

1-6 Factors contributing to Medicare’s projected spending growth from 2020 to 2029 

(not including general economy-wide inflation)............................................................................

1-7 Health care spending per enrollee grew faster for those who were privately insured than for 

beneficiaries in traditional FFS Medicare, 2014–2018...................................................................

1-8 Medicare enrollment is rising while the number of workers per HI beneficiary is declining .........

1-9 General revenues have overtaken Medicare payroll taxes as the largest source

of Medicare funding ................................................................................................................

1-10 Increases in payroll tax or decreases in Part A spending needed to maintain 

HI Trust Fund solvency for certain amounts of time...................................................................

1-11 Medicare Part A and Part B benefits and cost sharing per FFS beneficiary, 2019.........................

1-12 Medicare spending is concentrated in certain services and has shifted over time..........................

1-13 Aggregate Medicare spending for FFS beneficiaries, by sector, 2010–2019 ................................

1-14 FFS program spending was highly concentrated in a small group of beneficiaries, 2018 ..............

2-1 Aged beneficiaries accounted for the greatest share of the Medicare population 

and program spending, 2018 .....................................................................................................

2-2 Beneficiaries younger than 65 accounted for a disproportionate share of Medicare 

spending, 2018 .........................................................................................................................

2-3 Beneficiaries who reported being in poor health accounted for a disproportionate share of

Medicare spending, 2018 .....................................................................................................................

2-4 Enrollment in the Medicare program is projected to grow rapidly through 2030 ..........................

2-5 Characteristics of the Medicare population, 2018.......................................................................

3-1 Sources of supplemental coverage among noninstitutionalized Medicare beneficiaries, 2018.......

3-2 Sources of supplemental coverage among noninstitutionalized Medicare beneficiaries, by 

beneficiaries’ characteristics, 2018 ............................................................................................
vi

3-3 Covered benefits and enrollment in standardized Medigap plans, 2019 .......................................

3-4 Total spending on health care services for noninstitutionalized FFS Medicare 

beneficiaries, by source of payment, 2018..................................................................................

3-5 Per capita total spending on health care services among noninstitutionalized 

FFS beneficiaries, by source of payment, 2018 ..........................................................................

3-6 Geographic variation in use of services has decreased among FFS Medicare 

beneficiaries, 2008–2018 ..........................................................................................................

4-1 Dual-eligible beneficiaries accounted for a disproportionate share of Medicare spending, 2018 ...

4-2 Dual-eligible beneficiaries were more likely than non-dual-eligible beneficiaries to be 

under age 65 and have a disability, 2018....................................................................................

4-3 Dual-eligible beneficiaries were more likely than non-dual-eligible beneficiaries to report 

being in poor health, 2018.........................................................................................................

4-4 Demographic differences between dual-eligible beneficiaries and non-dual-eligible 

beneficiaries, 2018....................................................................................................................

4-5 Differences in Medicare spending and service use between dual-eligible beneficiaries 

and non-dual-eligible beneficiaries, 2018...................................................................................

4-6 Both Medicare and total spending were concentrated among dual-eligible beneficiaries, 2018.....

5-1 Most Medicare beneficiaries are in managed care plans or are assigned to accountable care 

organizations, 2021...................................................................................................................

5-2 The number of beneficiaries assigned to MSSP ACOs grew rapidly through 2018 and 

then leveled off.........................................................................................................................

5-3 Distribution of clinicians participating in the Medicare Shared Savings Program, by type of 

provider, 2019..........................................................................................................................

5-4 Bundled Payments for Care Improvement Advanced is Medicare’s largest 

episode-based payment model, 2021 .........................................................................................

5-5 Share of BPCI Advanced participants accepting financial responsibility for each 

clinical episode group, 2021......................................................................................................

5-6 2,625 practices are testing the Comprehensive Primary Care Plus model, 2021 ...........................

5-7 About 70 percent of the clinicians who qualified for a 5 percent A–APM bonus in 2021 

were in the Medicare Shared Savings Program ..........................................................................

6-1 Urban IPPS hospitals comprised half of short-term acute care hospitals but accounted for

over 85 percent of all-payer and Medicare FFS inpatient stays in 2019 .......................................

6-2 Fewer general short-term acute care hospitals closed in 2020 and openings increased..................

6-3 Aggregate occupancy rate at short-term acute care hospitals increased, 2015–2019 .....................
vii

6-4 All-payer inpatient visits per capita decreased while outpatient visits per capita 

increased, 2015–2019 ...............................................................................................................

6-5 IPPS hospitals’ aggregate total and operating all-payer margins reached record highs in 2019 .....

6-6 Urban IPPS hospitals continued to have a higher aggregate total all-payer margin than 

rural IPPS hospitals, 2015–2019................................................................................................

6-7 IPPS hospitals, including those that treat a disproportionate share of low-income 

patients, reached record highs in aggregate total all-payer margin, 2019......................................

6-8 For-profit IPPS hospitals’ aggregate total all-payer margin reached an all-time high in 2019 .......

6-9 IPPS hospitals under low fiscal pressure continued to have a higher aggregate total 

all-payer margin than those under higher fiscal pressure, 2015–2019 ..........................................

6-10 IPPS hospitals’ aggregate overall Medicare margin remained negative, but increased in 2019 .....

6-11 Rural IPPS hospitals continued to have a higher aggregate overall Medicare margin than 

urban IPPS hospitals, 2015–2019 ..............................................................................................

6-12 IPPS hospitals that treat a disproportionate share of low-income patients or are 

teaching hospitals continued to have higher aggregate overall Medicare margins than 

other hospitals, 2015–2019 .......................................................................................................

6-13 For-profit IPPS hospitals continued to have a higher aggregate overall Medicare margin than 

nonprofit IPPS hospitals and increased to a positive margin in 2019 ...........................................

6-14 IPPS hospitals under high fiscal pressure continued to have a higher aggregate overall 

Medicare margin than those under medium and low fiscal pressure, 2015–2019..........................

6-15 Financial pressure led to lower hospital costs per discharge in 2019............................................

6-16 Medicare FFS payments for inpatient services were the largest component of payments 

to IPPS hospitals but not to CAHs, 2015–2019 ..........................................................................

6-17 About 15 percent of IPPS payments were from adjustments and additional payments, 2019 ........

6-18 Medicare’s uncompensated care payments to IPPS hospitals have increased from a relative 

low in 2017 ..............................................................................................................................

6-19 Medicare FFS inpatient stays per capita decreased, 2015–2019...................................................

6-20 Four major diagnostic categories accounted for over half of all Medicare FFS inpatient 

stays at short-term acute care hospitals, 2015–2019....................................................................

6-21 Share of one-day stays among Medicare FFS beneficiaries at short-term acute care hospitals 

increased, 2015–2019 ...............................................................................................................

6-22 Number of Medicare FFS outpatient observation visits per capita remained relatively 

steady, and nearly half were longer than 24 hours, 2015–2019....................................................

6-23 Medicare FFS payments to inpatient psychiatric facilities decreased in 2019...............................

6-24 The share of for-profit Medicare-certified inpatient psychiatric facilities increased, 2012–2019 ...

6-25 Almost three-quarters of Medicare FFS beneficiaries’ stays at IPFs were for psychosis, 2019......

6-26 The majority of Medicare FFS beneficiaries who received IPF services were under the 

age of 65, 2019.........................................................................................................................

7-1 Medicare spending per fee-for-service beneficiary on services in the fee schedule for 

physicians and other health professionals, 2009–2019................................................................

7-2 Physician fee schedule–allowed charges by type of service, 2019...............................................

7-3 Total encounters per FFS beneficiary increased and mix of clinicians furnishing them 

changed from 2014 to 2019.......................................................................................................
viii

7-4 Medicare beneficiaries’ ability to get timely appointments with physicians was comparable 

with that of privately insured individuals, 2017–2020.................................................................

7-5 Medicare and privately insured patients reported more difficulty finding a new primary care 

provider than a new specialist, 2017–2020.................................................................................

7-6 Slightly higher shares of non-White patients reported delays getting appointments 

compared with White patients, regardless of insurance type, 2020 ..............................................

7-7 Slightly higher shares of non-White patients reported difficulties finding a new specialist 

compared with White patients, but these differences were not statistically significant, 2020.........

7-8 Changes in physicians’ professional liability insurance premiums, 2013–2020............................

7-9 Spending on hospital outpatient services covered under the outpatient PPS, 2010–2020 ..............

7-10 Most hospitals provide outpatient services.................................................................................

7-11 Payments and volume of services under the Medicare hospital outpatient PPS, by type 

of service, 2019 ........................................................................................................................

7-12 Hospital outpatient services with the highest Medicare expenditures, 2019 .................................

7-13 Separately payable drugs have increased as a share of total spending in the outpatient 

prospective payment system, 2014–2019...................................................................................

7-14 Number of Medicare-certified ASCs increased by 11 percent, 2013–2019 ..................................

7-15 Between 33 and 70 low-value services were provided per 100 FFS beneficiaries in 2018; 

Medicare spent between $2.4 billion and $6.9 billion on these services .....................................

7-16 Imaging and cancer screening accounted for most of the volume of low-value care in 2018.........

7-17 Cardiovascular testing and procedures, other surgical procedures, and imaging accounted 

for most of spending on low-value care in 2018 ......................................................................

8-1 The number of post-acute care providers decreased slightly in 2020 .........................................

8-2 Medicare fee-for-service spending for post-acute care was relatively stable

from 2010 to 2019 ..................................................................................................................

8-3 Freestanding SNFs and for-profit SNFs accounted for the majority of facilities, Medicare 

stays, and Medicare spending in 2019......................................................................................

8-4 SNF admissions and stays continued to decline in 2019 ...........................................................

8-5 Freestanding SNF Medicare margins remained high in 2019 ....................................................

8-6 Cost and payment differences explain variation in Medicare margins for freestanding 

SNFs in 2019 .........................................................................................................................

8-7 SNFs’ quality measures improved slightly between 2015 and 2019 ..........................................

8-8 Trends in the provision of home health care.............................................................................

8-9 Most home health episodes are not preceded by hospitalization or PAC stay.............................

8-10 Medicare margins for freestanding home health agencies, 2018 and 2019 .................................
ix

8-11 Since 2015, home health agencies have reported a modest improvement in the rate of 

successful discharge from home health care to the community, but the rate of hospitalization 

has increased..........................................................................................................................

8-12 Number of FFS IRF cases increased in 2019............................................................................

8-13 Most common types of FFS inpatient rehabilitation facility cases, 2019....................................

8-14 Inpatient rehabilitation facilities’ Medicare margins by type of facility, 2010–2019...................

8-15 Low standardized costs led to high margins for both hospital-based and freestanding 

IRFs, 2019 .............................................................................................................................

8-16 Risk-adjusted quality indicators for IRFs held steady or improved slightly from 2015 to 2019...

8-17 Twenty-five MS–LTC–DRGs accounted for more than 70 percent of LTCH discharges 

in 2019...................................................................................................................................

8-18 Total Medicare FFS LTCH cases decreased by over 10 percent, and cases meeting the 

LTCH-qualifying criteria decreased by 2 percent from 2016 and 2019......................................

8-19 The aggregate LTCH Medicare margin decreased in 2019........................................................

9-1 Enrollment in MA plans, 2003–2021.......................................................................................

9-2 MA plans available to almost all Medicare beneficiaries, 2013–2021........................................

9-3 Average monthly rebate dollars, by plan type, 2016–2021........................................................

9-4 Changes in enrollment vary among major plan types................................................................

9-5 MA and cost plan enrollment by state and type of plan, 2021 ...................................................

9-6 MA plan benchmarks, bids, and Medicare program payments relative to FFS spending, 2021........

9-7 Enrollment in employer group MA plans, 2008–2021 ..............................................................

9-8 Number of special needs plan enrollees, 2012–2021.................................................................

9-9 Number of SNPs and SNP enrollment rose from 2020 to 2021 .................................................

9-10 The share of Medicare beneficiaries in private plans does not differ substantially in 

medically underserved areas compared with other areas, but is lower in rural areas, 2021..........

9-11 MA enrollment patterns do not differ by medically underserved area designation but do 

vary based on urban influence designation, 2021......................................................................

9-12 MA plans are available to nearly all beneficiaries in medically underserved and rural 

areas, 2021.............................................................................................................................

9-13 Most Medicare beneficiaries have access to a considerable number of MA plans, but rural 

beneficiaries and beneficiaries in counties composed entirely of MUAs typically have fewer 

plans from which to choose, 2021 ...........................................................................................

9-14 Twenty most common condition categories among MA beneficiaries, as defined in 

the CMS–HCC model, 2019 ...................................................................................................

9-15 MA enrollment patterns, by age, Medicaid dual-eligible status, and ESRD status, June 2020.....
x

10-1 Medicare spending for Part B drugs furnished by physicians, hospital outpatient 

departments, and suppliers, 2005–2019 ...................................................................................

10-2 Change in Medicare payments and utilization for separately payable Part B drugs, 

2009–2019 .............................................................................................................................

10-3 Top 10 Part B drugs paid based on ASP, by type of provider, 2018 and 2019............................

10-4 Growth in ASP for the 20 highest expenditure Part B drugs, 2005–2021...................................

10-5 Trends in Medicare Part B payment rates for originator biologics and their 

biosimilar products.................................................................................................................

10-6 Price indexes for Medicare Part B drugs, 2005–2019 ...............................................................

10-7 In 2021, approximately 88 percent of Medicare beneficiaries are enrolled in Part D plans 

or have other sources of creditable drug coverage ....................................................................

10-8 Changes in parameters of the Part D defined standard benefit over time....................................

10-9 Characteristics of stand-alone Medicare PDPs .........................................................................

10-10 Characteristics of MA–PDs.....................................................................................................

10-11 Change in average Part D premiums, 2017–2021.....................................................................

10-12 More premium-free PDPs for LIS enrollees in 2021.................................................................

10-13 In 2021, about one in two listed drugs are subject to some utilization management....................

10-14 Characteristics of Part D enrollees, 2019..................................................................................

10-15 Part D enrollment trends, 2007–2019.......................................................................................

10-16 Part D enrollment by region, 2019...........................................................................................

10-17 Components of Part D spending growth...................................................................................

10-18 The majority of Part D spending was incurred by just over one-fifth of all Part D

enrollees, 2019 .......................................................................................................................

10-19 Characteristics of Part D enrollees, by benefit phase reached, 2019...........................................

10-20 Part D spending and use per enrollee, 2019..............................................................................

10-21 Trends in Part D spending and use per enrollee per month, 2007–2019.....................................

10-22 Top 15 therapeutic classes of drugs covered under Part D, by spending and volume, 2019.........

10-23 Part D patterns of prescribing by provider type, 2018...............................................................

10-24 Part D patterns of prescribing for selected specialties, 2018......................................................

10-25 Price growth for Part D–covered drugs, 2006–2019 .................................................................

10-26 Comparison of price growth for Part B and Part D biologics, 2006–2019..................................

11-1 Number of dialysis facilities is growing, and most facilities are for profit and freestanding.............

11-2 Medicare spending for outpatient dialysis services furnished by freestanding and hospital-based 

dialysis facilities, 2018 and 2019 .......................................................................................................

11-3 The ESRD population is growing, and most patients with ESRD undergo dialysis..........................

11-4 Asian Americans and Hispanics are among the fastest growing segments of the 

ESRD population ...............................................................................................................................

11-5 Characteristics of Medicare fee-for-service dialysis patients, 2019...................................................

11-6 Aggregate margins varied by type of freestanding dialysis facility, 2019 .........................................

11-7 Dialysis quality of care: Some measures show progress, others need improvement, 2013–2018 .....
xi

11-8 Hospice spending and use increased in 2019.....................................................................................

11-9 Hospice use increased across beneficiary groups from 2010 to 2019................................................

11-10 Number of Medicare-participating hospices has increased due to growth in for-profit hospices......

11-11 Hospice cases by diagnosis, 2019 ......................................................................................................

11-12 Hospice average length of stay among decedents increased slightly in 2019....................................

11-13 Hospice length of stay among decedents, by beneficiary and hospice characteristics, 2019.............

11-14 More than half of Medicare hospice spending in 2019 was for patients with stays exceeding

180 days.............................................................................................................................................

11-15 Hospice aggregate Medicare margins, 2014–2018 ............................................................................

11-16 Medicare margins were higher among hospices with more long stays, 2018....................................

11-17 Hospices that exceeded Medicare’s annual payment cap, 2014–2018 ..............................................

11-18 Hospice live-discharge rates, 2017–2019...........................................................................................

11-19 Medicare spending for clinical laboratory services, 2005–2019........................................................

1

A Data Book: Health care spending and the Medicare program, July 2021 3

Chart 1-1. Medicare was the largest single purchaser of 

personal health care, 2019

Note: CHIP (Children’s Health Insurance Program), DoD (Department of Defense), VA (Department of Veterans Affairs). 

“Personal health care” is a subset of national health expenditures. It includes spending for all medical goods and services 

that are provided for the treatment of an individual and excludes other spending, such as government administration, the 

net cost of health insurance, public health, and investment. “Out-of-pocket” spending includes cost sharing for both 

privately and publicly insured individuals. Premiums are included in the shares of each program (e.g., Medicare, private 

health insurance) rather than in the share of the “out-of-pocket” category. “Other third-party payers” includes worksite 

health care, other private revenues, Indian Health Service, workers’ compensation, general assistance, maternal and child 

health, vocational rehabilitation, other federal programs, the Substance Abuse and Mental Health Services Administration, 

other state and local programs, and school health. 

Source: CMS Office of the Actuary, National Health Expenditure Accounts, “Table 6: Personal Health Care Expenditures; Levels, 

Percent Change, and Percent Distribution, by Source of Funds: Selected Calendar Years 1970–2019,” released 

December 2020.

• Medicare is the largest single purchaser of health care in the U.S. (Although the share of 

spending accounted for by private health insurance is greater than Medicare’s share, private 

health insurance is not a single purchaser of health care; rather, it includes many private 

plans, including managed care, self-insured health plans, and indemnity plans.) Of the $3.2

trillion spent on personal health care in 2019, Medicare accounted for 23 percent, or $743

billion. This amount includes spending on direct patient care and excludes certain 

administrative and business costs.

• Private health insurance plans financed 33 percent of personal health care spending, and 

consumer out-of-pocket spending (not including premiums) amounted to 13 percent of the 

total.

• In this chart, enrollees’ premium contributions are included in the spending category of their 

insurance type.

Medicare

23%

Medicaid

Private health 17%

insurance

33%

Out of pocket

13%

CHIP, DoD, and VA

4%

Total = $3.2 trillion

Other third-party 

payers

10%
4 National health care and Medicare spending

Chart 1-2. Medicare’s share of spending on personal health 

care varied by type of service, 2019

Note: CHIP (Children’s Health Insurance Program). “Personal health care” is a subset of national health expenditures. It 

includes spending for all medical goods and services that are provided for the treatment of an individual and excludes 

other spending such as government administration, the net cost of health insurance, public health, and investment.

“Other” includes private health insurance, out-of-pocket spending, and other private and public spending. Other service 

categories included in personal health care that are not shown here are other professional services; dental services; other 

health, residential, and personal care; and other nondurable medical equipment. Bars may not total 100 percent because 

of rounding.

Source: CMS Office of the Actuary, National Health Expenditure Accounts, historical data released December 2020.

• While Medicare’s share of total personal health care spending was 23 percent in 2019 (see 

Chart 1-1), its share of spending by type of service varied, from 17 percent of spending on 

durable medical equipment to 39 percent of spending on home health care.

• Medicare’s share of spending on nursing care facilities and continuing care retirement 

communities was smaller than Medicaid’s share. Medicare pays for nursing home services

only for Medicare beneficiaries who require skilled nursing or rehabilitation services, 

whereas Medicaid pays for custodial care (assistance with activities of daily living) provided 

in nursing homes for people with limited income and assets.

26 25

39

22 17

28

18

11

32

29

15

9

56

64

29

48

68 63

0

10

20

30

40

50

60

70

80

90

100

Hospital Clinician Home health Nursing care

facilities and

continuing

care retirement

communities

Durable

medical

equipment

Retail

prescription

drugs

Share of spending (in percent)

Medicare Medicaid and CHIP Other
A Data Book: Health care spending and the Medicare program, July 2021 5

Chart 1-3. Health care spending has consumed an increasing

share of the country’s GDP

Note: GDP (gross domestic product). The potential effects of the coronavirus pandemic are not reflected in these projections. 

Source: CMS Office of the Actuary, National Health Expenditure Accounts, historical data released December 2020 and 

projections released April 2020.

• In 2019, total health care spending made up 17.7 percent of the country’s GDP. Private 

health insurance spending constituted 5.6 percent of GDP spending, Medicare constituted 

3.7 percent, and Medicaid constituted 2.9 percent. 

• Health care spending as a share of GDP more than doubled from 1975 to 2019, increasing 

from 7.9 percent to 17.7 percent. Over this period, spending on private health insurance,

Medicare, and Medicaid grew even faster: Each more than tripled as a share of GDP. 

Spending on private health insurance increased from 1.8 percent to 5.6 percent of GDP,

Medicare increased from 1.0 percent to 3.7 percent of GDP, and Medicaid increased from 

0.8 percent to 2.9 percent of GDP.

0

5

10

15

20

25

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Share of GDP (in percent)

Calendar year

Total health care spending

Private health insurance spending

Medicare spending

Medicaid spending

Historical Projected
6 National health care and Medicare spending

Chart 1-4. Trustees project Medicare spending to continue to 

increase as a share of GDP

Note: GDP (gross domestic product). The Part D benefit began in 2006. Shares for 2025 and later are projections based on the 

Trustees’ intermediate set of assumptions. The potential effects of the coronavirus pandemic are not reflected in these 

projections. 

Source: The annual report of the Boards of Trustees of the Medicare trust funds 2020.

• Over time, Medicare spending has accounted for an increasing share of GDP. From 1 percent 

in 1975, it is projected to reach 6 percent of GDP in 2045.

• The Medicare Trustees project that spending will rise from 3.6 percent of GDP in 2015 to 5.7

percent of GDP by 2035, largely because of rapid growth in the number of beneficiaries, and 

then to 6.5 percent of GDP by 2075, with growth in spending per beneficiary becoming the 

greater factor in the later years of the forecast. The rapid growth in the number of 

beneficiaries began in 2011 and will continue through 2030 as members of the baby-boom 

generation reach age 65 and become eligible to enroll in Medicare.

• In the later decades of the Trustees’ forecast, Medicare spending is projected to continue 

rising as a share of GDP, but at a slower pace than in the past. 

• Drug costs are projected to grow faster than Part A and Part B expenditures and to account 

for 14 percent of Medicare expenditures by 2085.

1.0

1.7

2.4 2.6

3.6

4.5

5.7

6.0 6.1 6.3 6.5 6.5

0

1

2

3

4

5

6

7

1975 1985 1995 2005 2015 2025 2035 2045 2055 2065 2075 2085

Share of GDP (in percent)

Calendar year

Part D

Part B

Part A
A Data Book: Health care spending and the Medicare program, July 2021 7

Chart 1-5. Trustees and CBO project Medicare spending to 

exceed $1 trillion by 2022 

Note: CBO (Congressional Budget Office). The potential effects of the coronavirus pandemic are not reflected in these 

projections. All data are nominal, mandatory outlays (benefit payments plus mandatory administrative expenses) by fiscal

year.

Source: Congressional Budget Office’s March 2020 baseline spending projections for Medicare; the annual report of the Boards of 

Trustees of the Medicare trust funds 2020.

• Medicare spending has more than doubled since 2005, increasing from $337 billion to $782 

billion by 2019. (These data are by fiscal year and include benefit payments and mandatory 

administrative expenses. They do not reflect the potential effects of the coronavirus

pandemic.)

• The Medicare Trustees and CBO both project that spending for Medicare between 2019 and 

2029 will grow at an average annual rate of 6.8 percent. Medicare spending will reach $1 

trillion in 2022 under both sets of projections.

• Forecasts of future Medicare spending are inherently uncertain, and differences can stem 

from different assumptions about the economy that in turn affect annual updates to provider 

payments and the number of workers paying Medicare payroll taxes. In addition, forecasts 

can assume different amounts of growth in the volume and intensity of services delivered to 

Medicare beneficiaries, among other factors.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2005 2010 2015 2020 2025

Dollars (in billions)

Fiscal year

Trustees

CBO

Actual Projected
8 National health care and Medicare spending

Chart 1-6. Factors contributing to Medicare’s projected 

spending growth from 2020 to 2029 

(not including general economy-wide inflation)

Average annual percent change in:

Medicare 

part

Medicare 

prices

Number of 

beneficiaries

Beneficiary 

demographic 

mix

Volume and 

intensity of 

services used

Medicare’s 

projected 

spending

Part A 0.2% 2.3% 0.1% 1.2% 3.8%

Part B –0.7 2.3 0.0 4.0 5.7

Part D –0.4 2.6 –0.1 1.8 3.9

Total* –0.3 N/A** 0.0 2.6 4.7

Note: N/A (not available). Includes Medicare Advantage enrollees. Price increases reflect Medicare’s annual updates to 

payment rates (not including inflation, as measured by the consumer price index), multifactor productivity reductions, and 

any other reductions required by law or regulation (including a statutorily required 2 percent sequester to Medicare benefit 

payments, which was scheduled to increase to 4 percent for a six-month period in 2029 at the time these projections were 

developed, but has since been delayed). Part A prices are expected to rise faster than economy-wide inflation in the 

2020s in part due to statutorily required increases. Specifically, in each of fiscal years 2020 through 2023, there is a 

statutory 0.5 percent increase in inpatient operating payments due to unwinding a temporary reduction in payments that 

was put in place to recoup past overpayments resulting from changes in providers’ documentation and coding. Volume 

and intensity together are the residual after the other three factors shown in the table (Medicare price increases, the 

increase in the number of beneficiaries, and changes in beneficiary demographic mix) are removed. Much of the 1.2 

percent projected increase in Part A volume and intensity may be due to increased coding of hospital severity of illness, 

which may reflect real changes in patients’ needs and/or coding changes; we do not expect the 1.2 percent to reflect 

increases in volume per capita given that the number of discharges per beneficiary has declined for several decades and 

fell by 6.1 percent from 2015 to 2019. The “Medicare’s projected spending” column is the product of the other columns in 

the table. Any potential effects of the coronavirus pandemic are not reflected in these projections.

*The “Total” row is the sum of the other rows of the table, each weighted by its Part’s share of total Medicare spending in 

2019 (as measured by shares of gross domestic product). 

**We are unable to calculate the total contribution of the increasing number of beneficiaries to projected spending growth 

because there is beneficiary overlap in enrollment in Part A, Part B, and Part D. 

Source: MedPAC analysis of data from the annual report of the Boards of Trustees of the Medicare trust funds 2020.

• Medicare’s spending is projected to grow 4.7 percent per year, on average, between 2020 

and 2029 (not including growth due to general economy-wide inflation).

• Medicare’s projected spending growth is driven by growth in the number of beneficiaries 

(expected to increase by a little more than 2 percent per year over this period) and growth in 

the volume and intensity of services delivered per beneficiary (expected to rise by 2.6 

percent per year).

• Unlike in the private health care sector, price growth is not expected to drive Medicare’s 

increased spending because Medicare is able to unilaterally set prices for many health care 

providers.
A Data Book: Health care spending and the Medicare program, July 2021 9

Chart 1-7. Health care spending per enrollee grew faster for 

those who were privately insured than for 

beneficiaries in traditional FFS Medicare, 2014–2018

Note: FFS (fee-for-service). The figure shows cumulative spending growth since 2014. It reflects payments to providers from 

health insurers and patients (i.e., cost sharing) but not payments from other sources (e.g., workers’ compensation or auto 

insurance). Spending on retail prescription drugs is not available for those who are privately insured, so it is excluded from 

both lines in this graph. Spending on out-of-network services for those who are privately insured is not available and thus 

not included in this graph. “Private insurance” reflects spending contributed by national and regional plans and third-party 

administrators nationwide for adults ages 18 to 64 in self-insured plans (i.e., employer self-funded plans) and fully insured

plans, including individual and group plans, marketplace plans, and Medicare Advantage plans for non-elderly disabled 

individuals. The figure reflects spending for individuals with full-year insurance coverage (including individuals with $0 of 

health care spending).

Source: MedPAC analysis of Medicare's Master Beneficiary Summary File; FAIR Health analysis of its National Private Insurance 

Claims database (which reflects 150 million covered lives) for the subset of enrollees ages 18 to 64.

• Between 2014 and 2018, total health care spending per enrollee (including cost sharing) 

grew 24 percent for those who were privately insured, compared with 10 percent for 

beneficiaries in traditional fee-for-service Medicare.

• Increased prices were largely responsible for spending growth in the private sector. One key 

driver of the private sector’s higher prices has been provider market power. Hospitals and 

physician groups have increasingly consolidated, in part to gain leverage over insurers in 

negotiating higher payment rates. By 2017, 57 percent of hospital markets were so 

concentrated that one health system produced a majority of hospital discharges (data not 

shown). Studies have found that prices paid by private payers tend to increase as provider 

consolidation increases.

0

5

10

15

20

25

30

2014 2015 2016 2017 2018

Private insurance, in network, excluding prescription drugs

FFS Medicare, excluding prescription drugs

Cumulative spending growth 

since 2014 (in percent)

24%

10%
10 National health care and Medicare spending

Chart 1-8. Medicare enrollment is rising while the number of 

workers per HI beneficiary is declining

 Medicare HI enrollment Workers per HI beneficiary

Note: HI (Hospital Insurance). Hospital Insurance is also known as Medicare Part A. The potential effects of the coronavirus

pandemic are not included in these projections.

Source: The annual report of the Boards of Trustees of the Medicare trust funds 2020.

• As the baby-boom generation ages, enrollment in the Medicare program is surging. By 

2033, Medicare is projected to have 80 million beneficiaries—up from 62 million 

beneficiaries in 2020.

• While Medicare enrollment is rising, the number of workers per beneficiary is rapidly 

declining. Workers are the primary funder of Medicare’s HI Trust Fund, which they fund

through payroll taxes. However, the number of workers per Medicare beneficiary has 

declined from 4.6 during the early years of the program to 2.9 in 2020 and is projected by 

the Medicare Trustees to fall to 2.5 by 2028.

• These demographics threaten the financial stability of the Medicare program.

0

20

40

60

80

100

1970 1990 2010 2030

Enrollment (in millions)

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1970 1990 2010 2030

Workers per HI beneficiary
A Data Book: Health care spending and the Medicare program, July 2021 11

0%

1%

2%

3%

4%

5%

6%

7%

1966 1976 1986 1996 2006 2016 2026 2036 2046 2056 2066 2076

Share of GDP

Calendar year

Historical Projected Total Medicare spending

General revenue transfers

State transfers and drug fees

Premiums

Payroll taxes

Tax on benefits

Part A deficit

Chart 1-9. General revenues have overtaken Medicare payroll 

taxes as the largest source of Medicare funding

Note: GDP (gross domestic product). These projections are based on the Trustees’ intermediate set of assumptions and do not 

reflect the potential effects of the coronavirus pandemic. “Tax on benefits” refers to the portion of income taxes that higher 

income individuals pay on Social Security benefits, which is designated for Medicare. “State transfers” (often called the 

Part D “clawback”) refers to payments from the states to Medicare for assuming primary responsibility for prescription 

drug spending that were mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

“Drug fees” refers to the fee imposed by the Affordable Care Act of 2010 on manufacturers and importers of brand-name 

prescription drugs. These fees are deposited in the Part B account of the Supplementary Medical Insurance Trust Fund. 

Source: The annual report of the Boards of Trustees of the Medicare trust funds 2020.

• Medicare spending accounted for 3.7 percent of GDP in 2019. The Medicare Trustees 

project that Medicare’s share of GDP will rise to 5.5 percent by 2033 and to 5.9 percent by 

2038.

• In the early years of the Medicare program, payroll taxes deposited into Medicare’s Hospital 

Insurance Trust Fund (which finances Part A) were the main source of funding for the 

program, but beginning in 2009, general revenue transfers (which help finance Part B and 

Part D) became the largest single source of Medicare funding. General revenue transfers

are expected to continue to be a substantial share of Medicare financing, growing to about 

49 percent by 2034, then remaining stable through the rest of the century. 

• As more general revenues are devoted to Medicare, fewer resources will be available to 

invest in growing the economic output of the future or in supporting other national priorities.

Dedicated 

revenues

2086
12 National health care and Medicare spending

Chart 1-10. Increases in payroll tax or decreases in Part A 

spending needed to maintain HI Trust Fund solvency 

for certain amounts of time 

To maintain HI Trust Fund 

solvency for:

Increase 2.9% 

payroll tax to:

Or decrease Part A 

spending by:

25 years (2020–2044) 3.67% 17.1%

50 years (2020–2069) 3.71 17.3

75 years (2020–2094) 3.66 16.0

Note: HI (Hospital Insurance). Hospital Insurance is also known as Medicare Part A. The potential effects of the coronavirus 

pandemic are not reflected in these projections. 

Source: The annual report of the Boards of Trustees of the Medicare trust funds 2020. 

• The HI Trust Fund, which helps pay for Part A services such as inpatient hospital stays and 

post-acute care provided by skilled nursing facilities and hospice, is mainly financed through 

a dedicated payroll tax (i.e., a tax on wage earnings). 

• From 2008 to 2015, the HI Trust Fund ran an annual deficit (i.e., paid more in benefits than it 

collected in payroll taxes) (data not shown). In 2016 and 2017, the HI Trust Fund ran a 

surplus (data not shown). However, deficits returned in 2018 and 2019 and are projected to 

continue until trust fund assets are depleted in 2026 (under the Trustees’ intermediate 

assumptions). Under high-cost assumptions, the HI Trust Fund could be depleted as early 

as 2023. Under low-cost assumptions, it would remain able to pay full benefits indefinitely.

• To keep the HI Trust Fund solvent over the next 25 years, the Medicare Trustees estimate 

that either the payroll tax would need to be increased immediately from its current rate of 2.9 

percent to about 3.7 percent, or Part A spending would need to be permanently reduced by 

about 17 percent (about $62 billion in 2021). Alternatively, some combination of smaller tax 

increases and smaller spending reductions could be used to achieve solvency.
A Data Book: Health care spending and the Medicare program, July 2021 13

Chart 1-11. Medicare Part A and Part B benefits and cost 

sharing per FFS beneficiary, 2019

Average benefit in 2019

(in dollars)

Average cost sharing in 2019

(in dollars)

Part A $5,051 $406

Part B 6,258 1,582

Note: FFS (fee-for-service). Dollar amounts are nominal for FFS Medicare only and do not include Part D. “Average benefit” 

represents amounts paid for covered services per FFS beneficiary and excludes administrative expenses. “Average cost 

sharing” represents the sum of deductibles, coinsurance, and balance billing paid for covered services per FFS 

beneficiary and excludes all monthly premiums. The “Part A” row reflects spending for 38 million beneficiaries with Part A, 

and the “Part B” row reflects spending for 33 million beneficiaries with Part B.

Source: CMS Office of Enterprise Data and Analytics, CMS Program Statistics, Medicare Utilization and Payments, 2019.

• In calendar year 2019, the Medicare program made $5,051 in Part A benefit payments and 

$6,258 in Part B benefit payments, on average, per FFS beneficiary. 

• Beneficiaries owed an average of $406 in cost sharing for Part A and $1,582 in cost sharing 

for Part B in calendar year 2019. (Cost sharing excludes all monthly premiums.)

• To cover some of those cost-sharing requirements, 89 percent of FFS beneficiaries had 

coverage that supplemented or replaced the Medicare benefit package in 2018, such as 

Medicare Advantage, Medigap coverage, supplemental coverage through former employers, 

or Medicaid (see Chart 3-1).
14 National health care and Medicare spending

Chart 1-12. Medicare spending is concentrated in certain 

services and has shifted over time

Total spending 2010 = $517 billion Total spending 2019 = $787 billion

Note: DME (durable medical equipment), SNF (skilled nursing facility). All data are by calendar year. Dollar amounts are 

Medicare spending only and do not include beneficiary cost sharing. “Other” includes items such as laboratory services, 

physician-administered drugs, renal dialysis performed in freestanding dialysis facilities, services provided in freestanding 

ambulatory surgical center facilities, and ambulance services. Components may not total 100 percent because of

rounding.

Source: The annual report of the Boards of Trustees of the Medicare trust funds 2020.

• In 2019, Medicare spent $787 billion on benefits. Managed care (Medicare Advantage) was the 

largest spending category (34 percent), followed by FFS inpatient hospital services (19 percent), 

prescription drugs provided under Part D (13 percent), and FFS services reimbursed under the 

physician fee schedule (9 percent). Spending on managed care included spending on health care 

services and items purchased through these plans.

• The distribution of Medicare spending among services has changed over time. Spending on managed 

care plans has grown from 22 percent of Medicare spending in 2010 to 34 percent in 2019. This 

growth is largely because the number of beneficiaries enrolled in Medicare Advantage nearly doubled 

over this period (data not shown). Meanwhile, the number of beneficiaries in fee-for-service (FFS) 

Medicare has stayed relatively flat (data not shown).

• Spending on FFS inpatient hospital services has declined as a share of total Medicare spending, 

falling from 26 percent in 2010 to 19 percent in 2019. Spending on physician fee schedule services 

has also declined as a share of Medicare spending, falling from 13 percent to 9 percent over this 

period. At the same time, spending on FFS outpatient services has grown (from 5 percent to 

7 percent of Medicare spending), partly due to physician practices being acquired by hospitals and 

beginning to bill under the outpatient payment system.

Inpatient 

hospital

19%

Outpatient 

hospital

7%

Physician fee 

schedule

9%

Prescription 

drugs 

provided 

under Part D

13%

SNF

4%

Home health

2%

Hospice

3%

DME

1%

Other

8%

Managed 

care

34%

Inpatient 

hospital

26%

Outpatient 

hospital

5%

Physician 

fee 

schedule

13% Prescription 

drugs provided 

under Part D

12%

SNF

5%

Home 

health

4%

Hospice

3%

DME

2%

Other

8%

Managed 

care

22%
A Data Book: Health care spending and the Medicare program, July 2021 15

Chart 1-13. Aggregate Medicare spending for FFS beneficiaries, 

by sector, 2010–2019

Note: FFS (fee-for-service). “Physician fee schedule” includes spending on services provided by physicians and other health 

professionals such as nurse practitioners, physician assistants, and physical therapists. Dollar amounts are Medicare 

spending for FFS beneficiaries only and do not include beneficiary cost sharing or spending for Medicare Advantage 

enrollees.

Source: The annual report of the Boards of Trustees of the Medicare trust funds 2020.

• Medicare fee-for-service spending on inpatient hospital services and physician fee schedule 

services increased modestly from 2010 to 2019, averaging 1.1 percent and 1.3 percent 

growth per year, respectively. Spending on skilled nursing facilities and home health 

services decreased over this period, contracting by –0.2 percent per year on average. 

• In contrast, spending on outpatient hospital services doubled during this period (averaging 

growth of 8.3 percent per year from 2010 to 2019) as more physician practices were 

acquired by hospitals and began billing Medicare’s outpatient payment system. 

133 135 138 140 140 139

145 146 147 147

65 69 70 70 71 70 70 70 71 73

28 31 34 36

41 45 48

51

55

58

47 50 46 47 47 48 47 

47 46 46 

0

20

40

60

80

100

120

140

160

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Medicare spending (dollars in billions)

Calendar year

Inpatient hospital

Physician fee schedule

Outpatient hospital

Skilled nursing facilities and home health agencies
16 National health care and Medicare spending

Chart 1-14. FFS program spending was highly concentrated in a 

small group of beneficiaries, 2018

Note: FFS (fee-for-service). Analysis excludes beneficiaries with any enrollment in a Medicare Advantage plan or other health 

plan that covers Part A and Part B services (e.g., Medicare cost plans, Medicare–Medicaid Plans, and Medicare and 

Medicaid’s Program of All-Inclusive Care for the Elderly [PACE]). 

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, 2018.

• Medicare FFS spending is concentrated among a small number of beneficiaries. In 2018, 

the costliest 5 percent of beneficiaries (i.e., adding the costliest 1 percent and the nextcostliest 4 percent at the top of the bar at left) accounted for 43 percent of annual Medicare 

FFS spending (calculated on unrounded numbers). The costliest 25 percent of beneficiaries 

accounted for 84 percent of Medicare spending (calculated on unrounded numbers). The 

least costly 50 percent of beneficiaries accounted for only 4 percent of FFS spending. 

• Costly beneficiaries tend to be those who have multiple chronic conditions, are using 

inpatient hospital services, are dually eligible for Medicare and Medicaid, and are in the last 

year of life. 

Least costly 50%

4%

Next 25%

13%

Next 15%

23%

Next 5%

18%

Next 4%

27%

Costliest 

1%

15%

0

10

20

30

40

50

60

70

80

90

100

Percent of beneficiaries Percent of program spending

Percent

84%
2

A Data Book: Health care spending and the Medicare program, July 2021 19

Chart 2-1. Aged beneficiaries accounted for the greatest 

share of the Medicare population and program 

spending, 2018

Note: ESRD (end-stage renal disease). The “aged” category includes beneficiaries ages 65 and older without ESRD. The 

“disabled" category includes beneficiaries under age 65 without ESRD. The “ESRD” category includes beneficiaries with 

ESRD, regardless of age. Results include fee-for-service, Medicare Advantage, community-dwelling, and institutionalized 

beneficiaries. The Medicare Current Beneficiary Survey is a point-in-time survey from a sample of Medicare beneficiaries. 

Year-to-year variation in reported data is expected. Totals may not sum to 100 percent due to rounding.

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, Cost Supplement file 2018.

• In 2018, beneficiaries ages 65 and older without ESRD composed 85.1 percent of the 

beneficiary population and accounted for 76.4 percent of Medicare spending. Beneficiaries 

under 65 with a disability and beneficiaries with ESRD accounted for the remaining 

population and spending.

• A disproportionate share of Medicare expenditures is on behalf of Medicare beneficiaries 

with ESRD. On average, these beneficiaries incur spending that is more than six times 

greater than spending for aged beneficiaries (ages 65 years and older without ESRD) and 

more than four times greater than spending for beneficiaries under age 65 with a disability 

(non-ESRD).

Total beneficiaries: 59.3 million

76.4%

85.1%

18.8%

14.0%

4.8%

0.8%

Share of

spending

Share of

beneficiaries

Aged Disabled ESRD

Total beneficiaries: 60.9 million

Total spending: $767 billion
20 Medicare beneficiary demographics

Chart 2-2. Beneficiaries younger than 65 accounted for a 

disproportionate share of Medicare spending, 2018

Note: Results include fee-for-service, Medicare Advantage, community-dwelling, and institutionalized beneficiaries. The 

Medicare Current Beneficiary Survey is a point-in-time survey from a sample of Medicare beneficiaries. Year-to-year 

variation in reported data is expected.

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, Cost Supplement file 2018.

• Beneficiaries younger than 65 made up 14.4 percent of the beneficiary population in 2018

but accounted for 20.8 percent of Medicare spending. 

• In 2018, average Medicare spending per beneficiary was $12,594. 

• For the aged population (65 and older), per capita expenditures increase with age. In 2018, 

per capita expenditures were $9,611 for beneficiaries 65 to 74 years old, $13,300 for those 

75 to 84 years old, and $16,787 for those 85 or older (data not shown).

• In 2018, per capita expenditures for Medicare beneficiaries under age 65 who were enrolled 

because of end-stage renal disease or disability were $18,250 (data not shown). 

20.8%

14.4%

37.4%

49.0%

26.9%

25.5%

14.9%

11.1%

Share of

spending

Share of

beneficiaries

Under 65 65-74 75-84 85+

Average per capita spending = $12,594
A Data Book: Health care spending and the Medicare program, July 2021 21

Chart 2-3. Beneficiaries who reported being in poor health 

accounted for a disproportionate share of 

Medicare spending, 2018

Note: Results include fee-for-service, Medicare Advantage, community-dwelling, and institutionalized beneficiaries. “Other” 

category excluded. The Medicare Current Beneficiary Survey is a point-in-time survey from a sample of Medicare 

beneficiaries. Year-to-year variation in reported data is expected. Totals may not sum to 100 percent due to rounding.

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, Cost Supplement file 2018.

• In 2018, most beneficiaries reported fair to excellent health. Only about 6 percent reported

poor health. 

• Medicare spending is strongly associated with self-reported health status. In 2018, per 

capita expenditures were $7,098 for those who reported excellent or very good health, 

$14,567 for those who reported good or fair health, and $30,634 for those who reported

poor health (data not shown).

26.8%

45.5%

59.3%

49.1%

13.9%

5.5%

Share of

spending

Share of

beneficiaries

Excellent or very good health Good or fair health Poor health

Average per capita spending = $12,594
22 Medicare beneficiary demographics

Chart 2-4. Enrollment in the Medicare program is projected to 

grow rapidly through 2030

Note: Enrollment numbers are based on Part A enrollment only. Beneficiaries enrolled only in Part B are not included. The 

potential effects of the coronavirus pandemic are not reflected in these projections.

Source: The annual report of the Boards of Trustees of the Medicare trust funds 2020.

• The total number of people enrolled in the Medicare program is projected to increase from 

about 62 million in 2020 to about 78 million in 2030.

• The rate of increase in Medicare enrollment has begun to accelerate as more members of

the baby-boom generation become eligible for the program. Beginning in 2030, when the 

entire baby-boom generation will have become eligible, Medicare enrollment will continue to 

increase, but more slowly.

20.1

28.0

33.7

39.3

47.4

62.3

77.5

84.0

87.2

93.2

100.0

106.1 109.3

0

20

40

60

80

100

120

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Beneficiaries (in millions)

Historical Projected
A Data Book: Health care spending and the Medicare program, July 2021 23

Chart 2-5. Characteristics of the Medicare population, 2018

Share of the Share of the

Medicare Medicare

Characteristic population Characteristic population

Total (55.8 million) 100% Living arrangement

Institution 3%

Sex Alone 28

Male 46 With spouse 47

Female 54 Other 22

Race/ethnicity Education

White, non-Hispanic 75 No high school diploma 15

Black, High school diploma only 26

non-Hispanic 10 Some college or more 58

Hispanic 8

Other 7 Income status

Below poverty 15

Age 100–125% of poverty 6

<65 15 125–200% of poverty 17

65–74 48 200–400% of poverty 27

75–84 27 Over 400% of poverty 35

85+ 11

Supplemental insurance status

Health status Medicare only 16

Excellent or very good 45 Managed care 35

Good or fair 48 Employer-sponsored insurance 18

Poor 6 Medigap 19

Medigap with employerResidence sponsored insurance 1

Urban 80 Medicaid 11

Rural 20 Other 1

Note: Total number of beneficiaries, age, and health status values may slightly differ from previous figures because only beneficiaries 

with complete characteristic data were included in this analysis. Components may not sum to 100 percent due to rounding and 

exclusion of an “other” category. “Urban” indicates beneficiaries living in metropolitan statistical areas (MSAs). “Rural” indicates 

beneficiaries living outside MSAs. In 2018, “poverty” was defined as income of $12,043 for single individuals ages 65 and older 

and $15,193 for married couples ages 65 and older. Poverty thresholds are calculated by the U.S. Census Bureau 

(https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-thresholds.html). Some beneficiaries 

may have more than one type of supplemental insurance. The Medicare Current Beneficiary Survey is a point-in-time survey 

from a sample of Medicare beneficiaries. Year-to-year variation in reported data is expected.

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, Cost Supplement file 2018.

• A majority of Medicare beneficiaries are female (rather than male) and White (rather than 

other races/ethnicities). 

• About one-fifth of beneficiaries live in rural areas. 

• Twenty-eight percent of the Medicare population lives alone.

• Most Medicare beneficiaries have some source of supplemental insurance. Managed care

plans are the most common source of supplemental coverage.

3

A Data Book: Health care spending and the Medicare program, July 2021 27

Chart 3-1. Sources of supplemental coverage among 

noninstitutionalized Medicare beneficiaries, 2018

Note: We assigned beneficiaries to the supplemental coverage category they were in for the most time in 2018. They could 

have had coverage in other categories during 2018. “Other public sector” includes federal and state programs not 

included in other categories. Analysis includes only beneficiaries not living in institutions such as nursing homes. It 

excludes beneficiaries who were not in both Part A and Part B throughout their enrollment in 2018 or who had Medicare 

as a secondary payer. Numbers do not total 100 because of rounding.

Source: MedPAC analysis of Medicare Current Beneficiary Survey, Survey file 2018.

• Most beneficiaries living in the community (i.e., noninstitutionalized) have coverage that supplements 

or replaces the Medicare benefit package. In 2018, 89 percent of beneficiaries had supplemental 

coverage or participated in Medicare managed care.

• About 40 percent of beneficiaries had private sector supplemental coverage such as Medigap (about 

22 percent) or employer-sponsored retiree coverage (18 percent).

• About 10 percent of beneficiaries had public sector supplemental coverage, primarily Medicaid.

• Thirty-nine percent of beneficiaries participated in Medicare managed care. This coverage includes 

Medicare Advantage, health care prepayment, and cost plans. These types of arrangements 

generally replace Medicare’s fee-for-service coverage and often provide more coverage.

• The numbers in this chart differ from those in Chart 2-5, Chart 4-1, and Chart 4-4 because of 

differences in the populations represented in the charts. This chart excludes beneficiaries in long-term 

care institutions, while Chart 2-5 and Chart 4-4 include all Medicare beneficiaries, and Chart 4-1 

excludes beneficiaries in Medicare Advantage.

Medigap

21.7%

Employersponsored 

insurance

18.0%

Medicaid

10.0% Other public sector

0.4%

Medicare managed 

care

39.0%

No supplemental 

coverage

11.0%
28 Medicare beneficiary and other payer financial liability

Chart 3-2. Sources of supplemental coverage among 

noninstitutionalized Medicare beneficiaries, by 

beneficiaries’ characteristics, 2018

Number of Employer- Medicare Other

beneficiaries sponsored Medigap managed public Medicare

(thousands) insurance insurance Medicaid care sector only

All beneficiaries 48,821 18% 22% 10% 39% 0% 11%

Age

<65 6,947 6 3 36 37 1 17

65–69 10,850 16 24 7 40 0 13

70–74 11,950 21 25 5 38 1 11

75–79 8,578 20 25 5 42 0 8

80–84 5,436 24 24 6 38 0 8

85+ 5,060 21 26 6 38 0 9

Income-to-poverty ratio

≤1.00 8,038 3 6 42 39 0 10

1.00 to 1.20 2,765 4 11 23 48 0 14

1.20 to 1.35 1,908 4 18 13 42 1 22

1.35 to 2.00 8,182 11 20 5 48 1 15

>2.00 27,927 27 28 1 35 0 9

Eligibility status

Aged 41,630 20 25 6 39 0 10

Disabled 6,783 6 3 36 37 1 17

ESRD 408 11 21 29 21 2 15

Residence

Urban 38,986 18 20 9 42 0 10

Rural 9,835 18 27 14 26 0 15

Sex

Male 21,964 19 20 9 38 1 13

Female 26,857 17 23 11 40 0 10

Health status

Excellent/very good 22,409 22 26 4 39 0 9

Good/fair 23,410 16 19 13 40 1 12

Poor 2,787 9 12 29 34 1 15

Note: ESRD (end-stage renal disease). We assigned beneficiaries to the supplemental coverage category they were in for the 

most time in 2018. They could have had coverage in other categories during 2018. “Medicare managed care” includes 

Medicare Advantage, cost, and health care prepayment plans. “Other public sector” includes federal and state programs 

not included in other categories. “Urban” indicates beneficiaries living in metropolitan statistical areas (MSAs) as indicated 

by core-based statistical areas. “Rural” indicates beneficiaries living outside MSAs, which includes both micropolitan 

statistical areas and rural areas as indicated by core-based statistical areas. Analysis excludes beneficiaries living in 

institutions such as nursing homes. Analysis also excludes beneficiaries who were not in both Part A and Part B 

throughout their enrollment in 2018 or who had Medicare as a secondary payer. The number of beneficiaries differs

among boldface categories because we excluded beneficiaries with missing values. Numbers in some rows do not sum to 

100 percent because of rounding.

Source: MedPAC analysis of Medicare Current Beneficiary Survey, Survey file 2018.

• Beneficiaries most likely to have employer-sponsored supplemental coverage are those who are age 65

or older, have income above twice the poverty level, are eligible because of age, and report better than 

poor health.

• Medigap is most common among those who are age 65 or older, have income higher than 1.35 times the 

poverty level, are eligible because of age or ESRD, are rural dwelling, and report better than poor health. 

• Medicaid coverage is most common among those who are under age 65, have income lower than 1.2

times the poverty level, are eligible because of disability or ESRD, are rural dwelling, and report poor 

health. 

• Lack of supplemental coverage (Medicare coverage only) is most common among beneficiaries who 

are under age 70, have income between 1.00 and 2.00 times the poverty level, are eligible because of

disability or ESRD, are rural dwelling, are male, and report poor health.
A Data Book: Health care spending and the Medicare program, July 2021 29

Chart 3-3. Covered benefits and enrollment in standardized 

Medigap plans, 2019

 Medigap standardized plan type

High 

deductible

Benefit A B C* D F

*

 F G K L M N 

Part A hospital costs ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Part B cost sharing ✓ ✓ ✓ ✓ ✓ ✓ ✓ 50% 75% ✓ $20/$50

Blood (first 3 pints) ✓ ✓ ✓ ✓ ✓ ✓ ✓ 50% 75% ✓ ✓

Hospice cost sharing ✓ ✓ ✓ ✓ ✓ ✓ ✓ 50% 75% ✓ ✓

SNF coinsurance ✓ ✓ ✓ ✓ ✓ 50% 75% ✓ ✓

Part A deductible ✓ ✓ ✓ ✓ ✓ ✓ 50% 75% 50% ✓

Part B deductible ✓ ✓ ✓ 

Part B excess charges ✓ ✓ ✓ 

Foreign travel emergency ✓ ✓ ✓ ✓ ✓ ✓ ✓

Lives covered

(in thousands) 108 207 628 129 6,804 306 3,067 81 43 4 1,360

Note: SNF (skilled nursing facility). Three states (Massachusetts, Minnesota, and Wisconsin) have different plan types and are 

not included in this chart. The ✓ indicates that the plan covers all cost sharing. Percentages indicate that the plan covers 

that share of the total cost sharing. The $20/$50 indicates that the plan covers all but $20 for physician office visits and all 

but $50 for emergency room visits. 

*Beginning in 2020, new policies for Plans C or F are not allowed to be sold. However, beneficiaries who purchased 

C plans or F plans before 2020 will be able to continue to purchase those plans.

Source: MedPAC analysis of National Association of Insurance Commissioners data, 2020.

• Medicare beneficiaries often purchase Medigap plans, also known as Medicare 

supplementary insurance plans, to cover fee-for-service Medicare cost sharing. Statute 

specifies 11 standardized plans. States enforce the standards based on model regulations 

developed by the National Association of Insurance Commissioners. Three states 

(Massachusetts, Minnesota, and Wisconsin) have waivers from these standards and have 

different standard plan types not included in this chart.

• Plan F, which covers all Medicare cost sharing, is the most popular plan, with 6.8 million 

enrollees. However, because the Congress was concerned about the overutilization of 

Medicare services, legislation prohibits the sale of new Plan F policies as of 2020. As a 

result, insurers have begun to direct beneficiaries into other plan types, namely plans G, K,

and N, which do not cover the Part B deductible.

• During 2019, 14 million beneficiaries enrolled in Medigap plans (including those in 

Massachusetts, Minnesota, and Wisconsin). Of all Medicare beneficiaries, about one-fifth 

were enrolled in Medigap plans. 
30 Medicare beneficiary and other payer financial liability

Chart 3-4. Total spending on health care services for 

noninstitutionalized FFS Medicare beneficiaries, by 

source of payment, 2018

Note: FFS (fee-for-service). “Private supplements” includes employer-sponsored plans and individually purchased coverage. 

“Public supplements” includes Medicaid, Department of Veterans Affairs, and other public coverage. “Beneficiaries’ direct 

spending” is on Medicare cost sharing and noncovered services, but not supplemental premiums. Analysis includes only 

FFS beneficiaries not living in institutions such as nursing homes.

Source: MedPAC analysis of Medicare Current Beneficiary Survey, Cost Supplement file, 2018.

• Among FFS beneficiaries living in the community (that is, they are not institutionalized), the total cost of 

health care services (beneficiaries’ direct spending as well as expenditures by Medicare, other public

sector sources, and all private sector sources on all health care goods and services) averaged about 

$16,400 in 2018. Medicare was the largest source of payment: It paid about 68 percent of the health 

care costs for FFS beneficiaries living in the community, an average of $11,195 per beneficiary. The 

level of Medicare spending in this chart differs from the level in Chart 2-1 because this chart excludes 

beneficiaries in Medicare Advantage and those living in institutions, while Chart 2-1 represents all 

Medicare beneficiaries.

• Private sources of supplemental coverage—primarily employer-sponsored retiree coverage and 

Medigap—paid about 13 percent of beneficiaries’ costs, an average of $2,172 per beneficiary.

• Beneficiaries paid about 14 percent of their health care costs out of pocket, an average of $2,249 per 

beneficiary.

• Public sources of supplemental coverage—primarily Medicaid—paid about 5 percent of beneficiaries’ 

health care costs, an average of $798 per beneficiary.

Medicare

68%

Beneficiaries' 

direct spending

14%

Private 

supplements

13%

Public 

supplements

5%

Per capita total spending = $16,414
A Data Book: Health care spending and the Medicare program, July 2021 31

Chart 3-5. Per capita total spending on health care services 

among noninstitutionalized FFS beneficiaries, by 

source of payment, 2018

Note: FFS (fee-for-service). Analysis excludes those who are not in FFS Medicare and those living in institutions such as 

nursing homes. “Out-of-pocket" spending includes Medicare cost sharing and noncovered services, but not supplemental 

premiums.

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, Cost Supplement file, 2018.

• Total spending on health care services varied dramatically among FFS beneficiaries living in 

the community in 2018. Per capita spending for the 10 percent of beneficiaries with the 

highest total spending averaged nearly $84,000. Per capita spending for the 10 percent of 

beneficiaries with the lowest total spending averaged $303.

• Among FFS beneficiaries living in the community, Medicare paid a larger share and 

beneficiaries’ out-of-pocket spending was a smaller share as total spending increased. For 

example, Medicare paid 68 percent of total spending for all beneficiaries, but paid 79

percent of total spending for the 10 percent of beneficiaries with the highest total spending. 

Across FFS beneficiaries living in the community, out-of-pocket spending amounted to 14

percent of total spending, but only 7 percent of total spending for the 10 percent of 

beneficiaries with the highest total spending (data not shown).

$303 $1,711 $4,489

$10,832

$25,952

$83,972

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

<10 10–25 25–50 50–75 75–90 >90

Dollars

Groups of beneficiaries ranked by total spending (percentile ranges)

Medicare

Supplemental payers

Out of pocket
32 Medicare beneficiary and other payer financial liability

Chart 3-6. Geographic variation in use of services has 

decreased among FFS Medicare beneficiaries, 

2008–2018

Note: FFS (fee-for-service). “Service use” is per capita monthly Part A and Part B service use among FFS beneficiaries in each 

area. We defined areas as metropolitan statistical areas within each state for urban counties and rest-of-state 

nonmetropolitan areas for nonurban counties.

Source: MedPAC analysis of 2008, 2013, and 2018 beneficiary-level spending from the Medicare Beneficiary Summary Files and 

Medicare inpatient claims.

• FFS beneficiaries’ use of Medicare-covered services varies by geographic area, but that 

variation decreased from 2008 to 2018. The share of FFS beneficiaries living in 

geographic areas that had service use within 5 percent of the national average (95 

percent to 105 percent) increased from 43 percent in 2008 to 59 percent in 2018. Also, 

the share of FFS beneficiaries living in geographic areas that had service use more than 

25 percent higher than the national average (>125 percent) decreased from 2 percent in 

2008 to almost 0 percent in 2018.

• The service sector that had the largest decrease in variation from 2008 to 2018 was postacute care, especially home health care (data not shown). From 2008 to 2018, the 

variation in use of home health services across geographic areas declined by 24 percent.

0%

10%

20%

30%

40%

50%

60%

70%

< 75% 75%-85% 85%-95% 95%-105% 105%-115% 115%-125% >125%

Share of beneficiaries living in geographic

area with specified level of service use 

Area service use as a percent of national average service use

2008

2013

2018
4

A Data Book: Health care spending and the Medicare program, July 2021 35

Chart 4-1. Dual-eligible beneficiaries accounted for a 

disproportionate share of Medicare spending, 2018

Share of FFS beneficiaries Share of FFS spending

Note: FFS (fee-for-service). “Dual-eligible beneficiaries” are defined as beneficiaries who were eligible for both Medicare and 

Medicaid for at least one month during the year.

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, 2018.

• Dual-eligible beneficiaries are those who qualify for both Medicare and Medicaid. Medicaid 

is a joint federal and state program designed to help people with low incomes obtain needed 

health care. 

• Dual-eligible beneficiaries account for a disproportionate share of Medicare FFS 

expenditures. Although they were 17 percent of the Medicare FFS population in 2018, they 

represented 30 percent of aggregate Medicare FFS spending. 

• On average, Medicare FFS per capita spending is more than twice as high for dual-eligible 

beneficiaries compared with non-dual-eligible beneficiaries: In 2018, $21,390 was spent per 

dual-eligible beneficiary, and $10,072 was spent per non-dual-eligible beneficiary (data not 

shown).

• In 2018, average total spending⎯which includes Medicare, Medicaid, supplemental 

insurance, and out-of-pocket spending across all payers⎯for dual-eligible beneficiaries was 

$31,339 per beneficiary, about twice the amount for other Medicare beneficiaries (data not 

shown).

Dual 

eligible

17%

Non-dual 

eligible

83%

Dual 

eligible

30%

Non-dual 

eligible

70%
36 Dual-eligible beneficiaries

Chart 4-2. Dual-eligible beneficiaries were more likely than 

non-dual-eligible beneficiaries to be under age 65 

and have a disability, 2018

Dual-eligible beneficiaries Non-dual-eligible beneficiaries

Note: Beneficiaries who are under age 65 generally qualify for Medicare because of disability. Once beneficiaries with 

disabilities reach age 65, they are counted as aged beneficiaries. “Dual-eligible beneficiaries” are defined as beneficiaries 

who were eligible for both Medicare and Medicaid for at least one month during the year.

Source: MedPAC analysis of Medicare Current Beneficiary Survey, 2018.

• Disability is a pathway for individuals to become eligible for both Medicare and Medicaid 

benefits. 

• Dual-eligible beneficiaries are more likely than non-dual-eligible beneficiaries to be under

age 65 and have a disability. In 2018, 40 percent of dual-eligible beneficiaries were under

age 65 with a disability compared with 9 percent of the non-dual-eligible population. 

Under 65 

(disabled)

40%

65-74

32%

75-84

18%

85+

10%

Under 65 

(disabled)

9%

65-74

51%

75-84

29%

85+

11%
A Data Book: Health care spending and the Medicare program, July 2021 37

Chart 4-3. Dual-eligible beneficiaries were more likely than 

non-dual-eligible beneficiaries to report being in 

poor health, 2018

Dual-eligible beneficiaries Non-dual-eligible beneficiaries

Note: “Dual-eligible beneficiaries” are defined as beneficiaries who were eligible for both Medicare and Medicaid for at least one 

month during the year.

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, 2018.

• Dual-eligible beneficiaries are more likely than non-dual-eligible beneficiaries to report being 

in poor health. In 2018, 15 percent of dual-eligible beneficiaries reported being in poor 

health compared with 4 percent of non-dual-eligible beneficiaries. 

• Just over half of non-dual-eligible beneficiaries (51 percent) reported being in excellent or 

very good health in 2018. In comparison, about one-fifth (21 percent) of dual-eligible 

beneficiaries reported being in excellent or very good health.

Poor health

15%

Good or 

fair health

64%

Excellent 

or very 

good 

health

21%

Poor health

4%

Good or 

fair health

45%

Excellent 

or very 

good 

health

51%
38 Dual-eligible beneficiaries

Chart 4-4. Demographic differences between dual-eligible

beneficiaries and non-dual-eligible beneficiaries, 2018

Share of dual- Share of non-dualCharacteristic eligible beneficiaries eligible beneficiaries

Sex

Male 38% 47%

Female 62 53

Race/ethnicity

White, non-Hispanic 51 81

African American, non-Hispanic 21 7

Hispanic 19 6

Other 9 6

Limitations in ADLs

No limitations in ADLs 49 76

Limitations in 1–2 ADLs 25 16

Limitations in 3–6 ADLs 26 8

Residence

Urban 79 81

Rural 21 19

Living arrangement

Institution 9 1

Alone 36 26

With spouse 15 55

With children, nonrelatives, others 39 18

Education

No high school diploma 37 10

High school diploma only 32 25

Some college or more 30 65

Income status

Below poverty 60 5

100–125% of poverty 17 4

125–200% of poverty 16 17

200–400% of poverty 6 31

Over 400% of poverty 1 43

Supplemental insurance status

Medicare or Medicare/Medicaid only 52 19

Medicare managed care 42 35

Employer-sponsored insurance 1 22

Medigap 3 23

Medigap/employer <1 1

Other* 2 1

Note: ADL (activity of daily living). “Dual-eligible beneficiaries” are defined as beneficiaries who were eligible for both Medicare and 

Medicaid for at least one month during the year. “Urban” indicates beneficiaries living in metropolitan statistical areas (MSAs). 

“Rural” indicates beneficiaries living outside of MSAs. In 2018, poverty was defined as annual income of $12,043 for people living 

alone and $15,193 for married couples. Poverty thresholds are calculated by the U.S. Census Bureau 

(https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-thresholds.html). Totals may not sum to 100 

percent due to rounding and exclusion of an “other” category.

*Includes public programs such as the Department of Veterans Affairs and state-sponsored drug plans.

Source: MedPAC analysis of Medicare Current Beneficiary Survey, 2018.

• Dual-eligible beneficiaries qualify for Medicaid due in part to low incomes. In 2018, 60 percent of dual-eligible 

beneficiaries lived below the poverty threshold, and 93 percent lived below 200 percent of the poverty threshold. 

Compared with non-dual-eligible beneficiaries, dual-eligible beneficiaries are more likely to be female, be African 

American or Hispanic, lack a high school diploma, have greater limitations in activities of daily living, and live in an 

institution. They are less likely to have supplemental employer-sponsored or Medigap coverage.
A Data Book: Health care spending and the Medicare program, July 2021 39

Chart 4-5. Differences in Medicare spending and service use 

between dual-eligible beneficiaries and non-dualeligible beneficiaries, 2018

Dual-eligible Non-dual-eligible

Service beneficiaries beneficiaries

Average FFS Medicare payment for all beneficiaries

Total Medicare FFS payments $21,390 $10,072

Inpatient hospital 4,349 2,721

Physiciana3,343 2,657

Outpatient hospital 3,318 1,750

Home health 612 368

Skilled nursing facilityb1,017 499

Hospice 412 224

Prescribed medicationc8,317 1,848

Share of FFS beneficiaries using service

Share using any type of service 96.9% 85.7%

Inpatient hospital 21.1 13.2

Physiciana91.5 81.4

Outpatient hospital 75.7 62.1

Home health 10.4 7.9

Skilled nursing facilityb5.3 3.6

Hospice 3.2 1.8

Prescribed medicationc93.0 58.7

Note: FFS (fee-for-service). Data in this analysis are restricted to beneficiaries in FFS Medicare. “Dual-eligible beneficiaries” are 

defined as beneficiaries who were eligible for both Medicare and Medicaid for at least one month during the year. 

Spending totals derived from the Medicare Current Beneficiary Survey (MCBS) do not necessarily match official estimates 

from CMS Office of the Actuary. Total payments may not equal the sum of line items due to omitted “other” category. 

a

Includes a variety of medical services, equipment, and supplies.

b

Individual short-term facility (usually skilled nursing facility) stays for the MCBS population.

c Data from stand-alone prescription drug plans and Medicare Advantage–Prescription Drug plans.

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, 2018.

• In 2018, average per capita Medicare FFS spending for dual-eligible beneficiaries was more 

than twice that for non-dual-eligible beneficiaries⎯$21,390 compared with $10,072. 

• For each type of service, average Medicare FFS per capita spending was higher for dualeligible beneficiaries than for non-dual-eligible beneficiaries.

• Higher average per capita FFS spending for dual-eligible beneficiaries is a function of higher 

use of these services by dual-eligible beneficiaries compared with their non-dual-eligible 

counterparts. Dual-eligible beneficiaries are more likely than non-dual-eligible beneficiaries 

to use each type of Medicare-covered service.
40 Dual-eligible beneficiaries

Chart 4-6. Both Medicare and total spending were concentrated 

among dual-eligible beneficiaries, 2018

Note: “Total spending” includes Medicare, Medicaid, supplemental insurance, and out-of-pocket spending. Data in this analysis 

are restricted to beneficiaries in fee-for-service (FFS) Medicare. “Dual-eligible beneficiaries” are defined as beneficiaries 

who were eligible for both Medicare and Medicaid for at least one month during the year.

Source: MedPAC analysis of the Medicare Current Beneficiary Survey, 2018.

• Annual Medicare FFS and total spending on dual-eligible beneficiaries are concentrated 

among a small number of people. The costliest 5 percent of dual-eligible beneficiaries 

accounted for 35 percent of Medicare spending and 28 percent of total spending on dualeligible beneficiaries in 2018. In contrast, the least costly 50 percent of dual-eligible 

beneficiaries accounted for only 7 percent of Medicare FFS spending and 14 percent of total 

spending on dual-eligible beneficiaries. 

• On average, total spending (including Medicaid, Medigap, etc.) for dual-eligible beneficiaries 

in 2018 was almost twice that for non-dual-eligible beneficiaries—$31,339 compared with 

$16,622, respectively (data not shown).

7

50

14

23

30

26

35

15

31

35

5

28

0

10

20

30

40

50

60

70

80

90

100

Medicare spending for dualeligible beneficiariesShare of dual-eligible

beneficiaries

Total spending for dual-eligible

beneficiaries

Percent
5

A Data Book: Health care spending and the Medicare program, July 2021 43

Chart 5-1. Most Medicare beneficiaries are in managed care 

plans or are assigned to accountable care 

organizations, 2021

Note: ACO (accountable care organization), FFS (fee-for-service), MSSP (Medicare Shared Savings Program). This chart includes 

only beneficiaries enrolled in both Part A and Part B in January 2021. Both Part A and Part B coverage is necessary for either 

Medicare Advantage enrollment or ACO assignment. In general, Medicare managed care plans include Medicare Advantage 

plans as well as cost-reimbursed plans. Other ACOs and ACO-like models include the Next Generation ACO model, the 

Maryland Total Cost of Care (TCOC) model, and the Vermont All-Payer ACO. In the Maryland TCOC model, all FFS 

beneficiaries are assigned to a hospital, and each hospital is responsible for all Part A and Part B spending for all Medicare 

beneficiaries in its market. This system creates ACO-like incentives for the hospital and qualifies physicians affiliated with 

those hospitals for the Medicare Access and CHIP Reauthorization Act (MACRA) bonus payments for participation in eligible 

alternative payment models.

Source: CMS January 2021 enrollment dashboard data, CMS Shared Savings Program January 2021 Fast Facts, CMS ACO Next 

Generation 2019 performance data and 2020 participant lists, and State of Vermont Green Mountain Care Board 2020 

report. 

• Among the 57.6 million Medicare beneficiaries with both Part A and Part B coverage in 2021, 

approximately two-thirds are in Medicare managed care (Medicare Advantage or other 

private plans) or ACO models.

• The Medicare Shared Savings Program—a permanent ACO model established through the

Affordable Care Act of 2010—accounts for most of the beneficiaries assigned to ACO or 

ACO-like payment models.

• Only 31 percent of Medicare beneficiaries with both Part A and Part B coverage are now in 

traditional FFS Medicare—a share that has declined in recent years.

• Even among the share of beneficiaries in traditional FFS, some beneficiaries may be 

assigned to other alternative payments models such as the Bundled Payments for Care 

Improvement Advanced model or the Comprehensive Primary Care Plus model.

Traditional FFS 

31%

MSSP ACO 19%

Medicare 

managed care 

47%

Other ACOs and ACO-like models 

3%
44 

Alternative payment models

Chart 5-2. The number of beneficiaries assigned to MSSP 

ACOs grew rapidly through 2018 and then leveled off

Note: MSSP (Medicare Shared Savings Program), ACO (accountable care organization). Numbers are as of January in each 

year. In 2019, MSSP ACOs were allowed to join the program in July 2019. Those ACOs and the beneficiaries assigned to 

them were not in the program as of January 2019 and are therefore not included in the 2019 counts on this chart. As of 

July 2019, there were 518 MSSP ACOs and 10.9 million beneficiaries assigned to them. In 2021, new MSSP ACOs were 

not allowed to join the program due to the coronavirus pandemic, though ACOs were still allowed to exit the program.

Source: CMS Shared Savings Program January 2021 Fast Facts.

• The number of beneficiaries assigned to MSSP ACOs grew rapidly through 2018 but has 

leveled off in recent years. 

• The number of ACOs peaked in 2018 and then declined between 2018 and 2021, in part 

due to CMS restricting new ACOs from entering MSSP in 2021 because of the coronavirus

pandemic.

• While the number of ACOs and assigned beneficiaries has leveled off in recent years, the 

number of beneficiaries per ACO continues to increase (data not shown).

• CMS finalized changes to the MSSP program at the end of 2018 that included (1) requiring 

ACOs to transition toward greater levels of risk and (2) using regional spending as a 

component of all ACO benchmarks (the spending levels used to measure an ACO’s 

financial performance). These changes coincided with some ACOs dropping out of the 

program and fewer new ACOs joining the program.

220

338

404 433

480

561

487 517

477

3.2

4.9

7.3 7.7

9.0

10.5 10.4

11.2

10.7

0

100

200

300

400

500

600

0

2

4

6

8

10

12

14

2013 2014 2015 2016 2017 2018 2019 2020 2021

Number of MSSP ACOs

MSSP-assigned beneficiaries (millions)
A Data Book: Health care spending and the Medicare program, July 2021 45

Chart 5-3. Distribution of clinicians participating in the 

Medicare Shared Savings Program, by type of 

provider, 2019

Note: MSSP (Medicare Shared Savings Program), ACO (accountable care organization). As of December 2019, there were 514

MSSP ACOs. “Nonphysician” clinicians include nurse practitioners, physician assistants, and clinical nurse specialists. 

Source: Shared Savings Program Accountable Care Organizations public use files.

• MSSP ACOs usually have a combination of primary care physicians, specialists, and 

nonphysician practitioners. On average, MSSP ACOs have about 260 primary care 

physicians, 480 specialists, and 300 nonphysician practitioners (data not shown).

• Nearly 200 MSSP ACOs have 100 or fewer primary care physicians, specialists, or 

nonphysician practitioners. Sixty-seven ACOs have 100 or fewer total clinicians (data not 

shown).

• Sixteen ACOs have more than 1,000 primary care physicians, and 71 ACOs have more than 

1,000 specialists; 157 ACOs have more than 1,000 total clinicians (data not shown). 

0

50

100

150

200

Number of MSSP ACOs

Number of clinicians in MSSP ACO

Primary care physicians Specialists Nonphysicians
46 

Alternative payment models

Chart 5-4. Bundled Payments for Care Improvement 

Advanced is Medicare’s largest episode-based 

payment model, 2021

Note: BPCI (Bundled Payments for Care Improvement).

Source: CMS’s Oncology Care Model website (https://innovation.cms.gov/innovation-models/oncology-care); Comprehensive 

Care for Joint Replacement website (https://innovation.cms.gov/innovation-models/cjr); information on BPCI Advanced 

participants: CMS's Where Innovation Is Happening website (https://innovation.cms.gov/innovationmodels/map#model=bpci-advanced).

• Medicare fee-for-service (FFS) providers can participate in episode-based payment models.

• Episode-based payment models give health care providers a spending target for most types 

of care provided during a clinical episode (e.g., six months of chemotherapy or an inpatient 

admission or outpatient procedure plus most other care provided in the subsequent 90 

days). If total spending is less than the target, Medicare pays providers a bonus; if total 

spending is more than the target, Medicare recoups money from providers.

• Within FFS Medicare, the episode-based payment model with broadest participation (1,205 

acute care hospitals and physician group practices participating) is the BPCI Advanced 

model. 

Oncology Care Model

Comprehensive Care for Joint Replacement

BPCI Advanced 1,205 hospitals

and practices

Number of participating health care organizations

127 practices

378 mandatory + 66 voluntary = 444 hospitals
A Data Book: Health care spending and the Medicare program, July 2021 47

Chart 5-5. Share of BPCI Advanced participants accepting 

financial responsibility for each clinical episode 

group, 2021

Note: BPCI (Bundled Payments for Care Improvement). BPCI Advanced participants can accept episode-based payments for 

multiple clinical-episode service-line groups. The denominator is 1,205 BPCI Advanced episode initiators in 2021. 

Source: List of clinical episodes each BPCI Advanced participant agreed to take financial responsibility for in Model Year 4 (2021) 

downloaded from CMS’s BPCI Advanced webpage (https://innovation.cms.gov/innovation-models/bpci-advanced).

• BPCI Advanced allows hospitals and practices to initiate dozens of clinical episodes, most of 

which are for inpatient admissions (as opposed to outpatient procedures). Starting in Model 

Year 4 (2021), episodes under the model are aggregated into eight clinical-episode serviceline groups (e.g., the cardiac care group includes acute myocardial infarction, cardiac 

arrhythmia, and congestive heart failure).

• About two-thirds of BPCI Advanced participants accept episode-based payments for fewer 

than four clinical-episode service-line groups. Twenty-nine percent accept episode-based 

payments for only one clinical-episode service-line group (data not shown).

71%

58%

49%

41%

38%

30%

25%

23%

Medical and critical care

Cardiac care

Neurological care

Gastrointestinal care

Orthopedics

Spinal procedures

Cardiac procedures

Gastrointestinal surgery
48 

Alternative payment models

Chart 5-6. 2,625 practices are testing the Comprehensive 

Primary Care Plus model, 2021

Note: Comprehensive Primary Care Plus (CPC+) is an advanced alternative payment model that CMS began testing in 2017 in 

some regions and in 2018 in others. CPC+ is a multipayer model, with some Medicaid and private insurers voluntarily paying 

similar fees for their enrollees. Alaska (not shown) was not selected as a region eligible to participate in the CPC+ model.

Source: CMS's list of CPC+ practices (https://data.cms.gov/Special-Programs-Initiatives-Speed-Adoption-of-Bes/ComprehensivePrimary-Care-Plus/eevd-hiep).

• CMS’s CPC+ is an advanced alternative payment model that aims to strengthen primary care by 

providing additional, up-front payments to participating providers of primary care services. These 

payments are intended to support enhanced, coordinated care management and assist with care 

delivery transformation.

• Participating practices receive a risk-adjusted per beneficiary per month care management fee, in 

addition to standard fee-for-service (FFS) payments. Practices can also opt to shift some of their FFS

revenue into prospective payments received quarterly.

• CPC+ practices can earn performance bonuses unless they also participate in a Medicare Shared 

Savings Program (MSSP) accountable care organization (since bonuses are already available 

through the MSSP). About half the CPC+ practices also participate in the MSSP.









Number of practices

472

384 378

187 186 169 140 132 129 95 80 62 47 43 33 31 30 27

OH & N. KentuckyMINJCOPhiladelphia, PAAROKORHudson, NY

Albany & N.

Kansas City,

KS/MO

HIBuffalo, NYMTTNRINELAND
A Data Book: Health care spending and the Medicare program, July 2021 49

Chart 5-7. About 70 percent of the clinicians who qualified for a 

5 percent A–APM bonus in 2021 were in the 

Medicare Shared Savings Program

Note: A–APM (advanced alternative payment model), ACO (accountable care organization), ESRD (end-stage renal disease). 

Clinicians’ 2019 A–APM participation determines their 2021 bonuses. Clinicians can participate in more than one A–APM 

simultaneously. To qualify for the A–APM bonus in 2021, clinicians had to receive 50 percent of their professional services 

payments or provide 35 percent of their patients with professional services through an A–APM in 2019. The A–APM bonus is 

equal to 5 percent of a clinician’s professional services payments from Medicare (not including cost sharing paid by 

beneficiaries). “Other models” includes the Maryland Total Cost of Care model, Comprehensive Care for Joint Replacement 

model, Vermont ACO model, and Oncology Care Model. For the payment models shown, only those model tracks that 

require clinicians to take on some financial risk qualify as A–APMs (e.g., physicians participating in Track 1 of the Medicare 

Shared Savings Program did not qualify for A–APM bonuses because Track 1 involved no financial risk for participants). 

Source: CMS data on clinicians who qualified for the 5 percent bonus in 2021 based on clinicians’ 2019 model participation.

• The payment models that CMS has designated as A–APMs place health care providers at 

some financial risk for Medicare spending while expecting them to meet quality goals for a 

defined patient population. Clinicians who participate in A–APMs qualify for bonuses equal 

to 5 percent of their professional services payments from Medicare. These bonus payments 

are available from 2019 to 2024.

• In 2021, nearly 195,000 clinicians nationwide qualified for the A–APM bonus (based on 

2019 A–APM participation). About 96 percent of these clinicians participated in ACOs, which 

give clinicians an opportunity to earn shared savings payments from Medicare if they lower 

health care spending while meeting care quality standards (data not shown). 

• Among clinicians who qualified for an A–APM bonus in 2021, 39 percent were specialists,

26 percent were primary care physicians, and 35 percent were nonphysician practitioners

(data not shown).

69.1%

29.4%

9.8%

5.2%

1.2%

1.9%

Medicare Shared Savings Program

Next Generation ACO

Bundled Payment for Care Improvement Advanced

Comprehensive Primary Care Plus

Comprehensive ESRD Care

Other models

6

A Data Book: Health care spending and the Medicare program, July 2021 53

Chart 6-1. Urban IPPS hospitals comprised half of short-term 

acute care hospitals but accounted for over 85

percent of all-payer and Medicare FFS inpatient 

stays in 2019

Hospitals Inpatient stays

 All payer Medicare FFS

Number Share of Number Share of Number Share of

Hospital group (in thousands) total (in millions) total (in millions) total

All short-term acute 4.5 100 31.5 100 9.1 100

IPPS 3.1 68 29.7 94 8.6 94

Metropolitan (urban) 2.3 51 27.6 87 7.7 85

 Rural micropolitan 0.5 11 1.8 6 0.7 8

Other rural 0.2 5 0.3 1 0.1 1

For profit 0.8 17 4.9 16 1.4 16

Nonprofit 1.9 41 20.9 66 6.1 67

Government 0.5 10 4.0 13 1.0 11

DSH and teaching 1.1 23 18.6 59 5.0 55

DSH only 1.5 34 9.0 29 2.9 31

Teaching only 0.1 2 0.9 3 0.3 3

Neither 0.4 9 1.2 4 0.5 5

Sole community 0.4 8 1.1 4 0.4 5

Medicare dependent 0.1 3 0.2 1 0.1 1

Neither 2.6 57 28.4 90 8.0 88

Critical access 1.3 29 0.6 2 0.3 3

Maryland <0.1 1 0.5 2 0.2 2

Note: IPPS (inpatient prospective payment system), FFS (fee-for-service), DSH (disproportionate share hospital). Data are for 

short-term acute care hospitals in the U.S. (excluding territories) that had a cost report with a midpoint in fiscal year 2019. 

“Number of hospitals” is the number of Medicare provider numbers; a single provider number can represent multiple 

hospital locations. Metropolitan (urban) counties contain an urban cluster of 50,000 or more people, and rural micropolitan 

counties contain a cluster of 10,000 to 50,000 people. Components may not sum to totals due to rounding and because 

children's and cancer hospitals are not listed separately. 

Source: MedPAC analysis of hospital cost report data from CMS.

• Estimates of the total number of short-term acute care hospitals differ somewhat, depending 

on the source of data. Using cost report data, we estimate that there were about 4,500 

short-term acute care hospitals participating in the Medicare program in 2019, including 

3,100 paid under the inpatient prospective payment system and 1,300 small, rural hospitals 

designated as critical access hospitals.

• Metropolitan (urban) IPPS hospitals accounted for 51 percent of short-term acute care 

hospitals but accounted for 87 percent of the 31.5 million all-payer inpatient stays and 85

percent of the 9.1 million Medicare FFS inpatient stays in 2019.
54 Acute inpatient services

Chart 6-2. Fewer general short-term acute care hospitals

closed in 2020 and openings increased

Note: “Closure” refers to a hospital location that ceased inpatient services, while “opening” refers to a new location for inpatient 

services. The chart does not include the relocation of inpatient services from one hospital to another under common 

ownership within 10 miles, nor does it include hospitals that both opened and closed within a 5-year time period. Data are 

for general short-term acute care hospitals in the U.S. paid under the inpatient prospective payment system, designated 

as critical access hospitals, or covered under the Maryland state waiver. Metropolitan (urban) counties contain an urban 

cluster of 50,000 or more people, and rural micropolitan counties contain a cluster of 10,000 to 50,000 people. The counts 

in this chart differ from those previously published for several reasons, such as removing hospitals previously counted as 

closures but that have since reopened. Year refers to fiscal year.

Source: MedPAC analysis of the CMS Provider of Services file, census data on metropolitan and micropolitan areas, internet 

searches, and personal communication with the Department of Health and Human Services Office of Rural Health Policy.

• In fiscal year 2020, 25 general short-term acute care hospitals participating in the Medicare 

program closed, and 18 hospitals opened. The number of closures decreased from the peak 

in 2019, while the number of openings increased.

• Among the 25 hospital closures in 2020, 13 were in metropolitan counties, 6 were in rural 

micropolitan counties, and 6 were in other rural counties. Similar to prior years, the hospitals 

that closed in 2020 tended to be small (18 had 100 or fewer beds), had low inpatient 

occupancy rates (approximately 29 percent, on average), and had poor profitability (allpayer margin of –11 percent, on average, in the year before closure) (data not shown).

• Nearly all of the hospital openings from 2016 to 2020 were in metropolitan counties.

10 8

12

27

13

3

8

8 6

3

4

11

6

20

12

19

46

25

0

10

20

30

40

50

60

2016 2017 2018 2019 2020

Number of hospitals

Closures

9 8

12 15

2

3

9 8

12

18

0

10

20

30

2016 2017 2018 2019 2020

Number of hospitals

Metropolitan Rural micropolitan Other rural

Openings
A Data Book: Health care spending and the Medicare program, July 2021 55

Chart 6-3. Aggregate occupancy rate at short-term acute care 

hospitals increased, 2015–2019

Note: “Aggregate occupancy rate” is calculated as total used bed days (including inpatient, swing, and observation bed days but 

excluding nursery bed days) divided by total bed days available. “Average daily census” is calculated as total used bed 

days divided by 365; “beds” refers to total bed days available divided by 365. Data are for short-term acute care hospitals 

in the U.S. (excluding territories) that had a cost report with a midpoint in fiscal year 2019. Occupancy rates may vary 

slightly from calculations of components due to rounding.

Source: MedPAC analysis of hospital cost report data from CMS.

• The aggregate occupancy rate at short-term acute care hospitals increased slightly between 

2015 and 2019, from 62.3 percent to 64.4 percent. This increase in occupancy rate reflects

a combination of an increase in hospitals’ average daily inpatient census and a decrease in 

hospitals’ inpatient beds.

• The occupancy rate varied significantly across different groups of hospitals. For example, in 

2019, metropolitan (urban) inpatient prospective payment system hospitals had an 

occupancy rate of 67.6 percent, while critical access hospitals had an occupancy rate of 

31.0 percent (data not shown).

62.3% 62.5% 62.9% 63.6% 64.4%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

2015 2016 2017 2018 2019

Aggregate occupancy rate

680 681 678 672 669

423 426 426 427 431

0

200

400

600

800

1000

2015 2016 2017 2018 2019

(Thousands)

Beds

Average 

daily census
56 Acute inpatient services

Chart 6-4. All-payer inpatient visits per capita decreased while 

outpatient visits per capita increased, 2015–2019

Note: “Outpatient visits” includes all clinic visits, referred visits, observation services, outpatient surgeries, and emergency 

department visits, regardless of the number of diagnostic and/or therapeutic treatments the patient received during the 

visit. Data are for community hospitals (nonfederal short-term general and specialty hospitals), estimated from those who 

responded to the American Hospital Association (AHA) survey. With the 2019 edition of Hospital Statistics, the AHA 

began using a new methodology to classify facilities as hospitals. As a result of the application of the new, broader 

hospital definition, the number of community hospitals in each year increased by approximately 400. 

Source: MedPAC analysis of Hospital Statistics data from the American Hospital Association and CMS National Health 

Expenditure data.

• From 2015 to 2019, there were divergent trends in all-payer inpatient stays and hospital 

outpatient visits per capita, with declines in inpatient stays and growth in outpatient visits.

• All-payer inpatient stays per capita held relatively steady from 2015 to 2017, but declined 

0.7 percent in 2018 and 1.0 percent in 2019—a cumulative change of –1.6 percent from 

2015 to 2019.

• All-payer outpatient visits per capita grew more than 2 percent in each of 2015 and 2016, 

were steadier in 2017 and 2018, and then returned to 2 percent growth in 2019—a 

cumulative change of 4.9 percent from 2015 to 2019.

106 106 106 105 104

0.2% –0.1% 0.2%

–0.7% –1.0%

-5.0%

0.0%

5.0%

10.0%

0

50

100

150

2015 2016 2017 2018 2019

Annual percentage change 

Inpatient stays per 1,000 people

2,284 2,347 2,361 2,350 2,396 

3.7%

2.8%

0.6%

–0.4%

2.0%

-5.0%

0.0%

5.0%

10.0%

0

500

1,000

1,500

2,000

2,500

3,000

2015 2016 2017 2018 2019

Annual percentage change 

Outpatient visits per 1,000 people
A Data Book: Health care spending and the Medicare program, July 2021 57

Chart 6-5. IPPS hospitals’ aggregate total and operating allpayer margins reached record highs in 2019

Note: IPPS (inpatient prospective payment system), EBITDA (earnings before interest, taxes, depreciation, and amortization). 

Hospitals’ aggregate margin is calculated as aggregate payments minus aggregate allowable costs, divided by aggregate 

payments. “All-payer” margin includes payments from all payers. “Total” margin includes investment income; “operating” 

margin is limited to patient care revenue; and EBITDA margin is a measure of cash flow. Analysis includes short-term 

acute care hospitals in the U.S. (excluding territories) paid under the IPPS with complete cost report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• Hospitals’ aggregate all-payer margin reflects the relationship between hospitals’ payments

and costs across all payers (Medicare, Medicaid, other government payers, and private 

payers).

• In 2019, IPPS hospitals’ aggregate total all-payer margin (which includes investment 

income) increased to an all-time high of 7.6 percent. Similarly, IPPS hospitals’ aggregate 

operating margin increased to an all-time high of 6.5 percent, slightly above the prior all-time 

high in 2015.

• In addition, IPPS hospitals’ cash flow margin (which includes earnings before interest, taxes, 

depreciation, and amortization (EBITDA)) increased to 10.5 percent in 2019, the highest 

level since 2015.

• Within these aggregate results, there continued to be substantial variation in hospitals’ 

financial performance. For example, in 2019, for-profit IPPS hospitals’ all-payer operating 

margin was 12.5 percent, compared with nonprofit IPPS hospitals’ all-payer margin of 7.3 

percent (data not shown). In contrast, the all-payer operating margin at rural nonmicropolitan 

IPPS hospitals was only 1.5 percent in 2019.

EBITDA

10.6 10.2 10.3 

9.8 

10.5 

Total

6.9 6.5 

7.1 6.7 

7.6 

Operating

6.4 5.8 5.9 6.0 

6.5 

0

5

10

15

2015 2016 2017 2018 2019

Aggregate all-payer margin (percent)
58 Acute inpatient services

Chart 6-6. Urban IPPS hospitals continued to have a higher 

aggregate total all-payer margin than rural IPPS 

hospitals, 2015–2019

Note: IPPS (inpatient prospective payment system). Hospitals’ aggregate margin is calculated as aggregate payments minus 

aggregate allowable costs, divided by aggregate payments. “Total all-payer” margin includes payments from all payers

and from investments. Metropolitan (urban) counties contain an urban cluster of 50,000 or more people, and rural 

micropolitan counties contain a cluster of 10,000 to 50,000 people; all other counties are classified as “other rural.”

Analysis includes short-term acute care hospitals in the U.S. (excluding territories) paid under the IPPS with complete cost 

report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• Metropolitan (urban) IPPS hospitals continued to have a higher aggregate total all-payer 

margin than rural micropolitan or other rural IPPS hospitals in 2019. (In contrast, rural IPPS 

hospitals had a higher aggregate overall Medicare margin, see Chart 6-11.)

• From 2018 to 2019, the aggregate total all-payer margin for metropolitan IPPS hospitals 

increased from 6.9 percent to a relative high of 7.8 percent, while the margin for rural 

micropolitan IPPS hospitals increased from 5.1 to a relative high of 6.6 percent. These 2019 

margins were the highest since the late 1990s (data not shown). From 2018 to 2019, the 

aggregate all-payer total margin for other rural IPPS hospitals also increased, from 0.9 to 

1.5 percent, but remained below 2015 to 2017 levels. 

• From 2018 to 2019, the aggregate all-payer total margin for critical access hospitals also 

increased, from a relative low of 2.8 percent to 3.6 percent (data not shown).

Metropolitan 6.9

7.8

Rural micropolitan

5.1

6.6

Other rural 0.9

1.5

0

5

10

2015 2016 2017 2018 2019

Aggregate total all-payer margin (percent)
A Data Book: Health care spending and the Medicare program, July 2021 59

Chart 6-7. IPPS hospitals, including those that treat a 

disproportionate share of low-income patients, 

reached record highs in aggregate total all-payer 

margin, 2019

Note: IPPS (inpatient prospective payment system), DSH (disproportionate share hospital). Hospitals’ aggregate margin is 

calculated as aggregate payments minus aggregate allowable costs, divided by aggregate payments. “Total all-payer” 

margin includes payments from all payers and from investments. Analysis includes short-term acute care hospitals in the 

U.S. (excluding territories) paid under the IPPS with complete cost report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• IPPS hospitals that treated a disproportionate share of low-income patients (DSHs) 

continued to have a lower aggregate total all-payer margin than non-DSH hospitals, 

regardless of whether the hospital was a teaching hospital. (In contrast, DSHs had a higher 

aggregate overall Medicare margin than other hospitals; see Chart 6-12.)

• From 2018 to 2019, the aggregate total all-payer margin for DSHs and teaching IPPS 

hospitals increased from 6.5 percent to 7.4 percent, with a similar increase among DSHs but 

non-teaching hospitals (from 6.6 percent to 7.6 percent)—all-time highs since the late-1990s 

in both categories (data not shown).

• Over this same time period, IPPS hospitals that were neither DSHs nor teaching hospitals 

experienced a larger increase in aggregate total all-payer margin, from 8.8 percent to 10.2 

percent—an all-time high since the late-1990s (data not shown). In contrast, the aggregate 

total all-payer margin at the smaller number of teaching but non–disproportionate share

hospitals decreased from 9.9 percent to 9.2 percent.

Neither DSH nor teaching

8.8

10.2

Teaching only

9.9

9.2

DSH only 6.6

7.6

DSH and teaching 6.5

7.4

0

5

10

15

2015 2016 2017 2018 2019

Aggregate total all-payer margin (percent)
60 Acute inpatient services

Chart 6-8. For-profit IPPS hospitals’ aggregate total all-payer 

margin reached an all-time high in 2019

Note: IPPS (inpatient prospective payment system). Hospitals’ aggregate margin is calculated as aggregate payments minus 

aggregate allowable costs, divided by aggregate payments. “Total all-payer” margin includes payments from all payers 

and from investments. Analysis includes short-term acute care hospitals in the U.S. (excluding territories) paid under the 

IPPS with complete cost report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• For-profit IPPS hospitals continued to have a higher aggregate total all-payer margin than 

nonprofit IPPS hospitals. (For-profit IPPS hospitals also have a higher overall Medicare 

margin; see Chart 6-13.) 

• From 2018 to 2019, for-profit hospitals’ aggregate total all-payer margin increased from 11.3 

percent to 12.5 percent. This was the highest level since the late-1990s (data not shown). 

• Over this same period, nonprofit IPPS hospitals’ aggregate total all-payer margin increased 

from 6.3 percent to 7.3 percent, returning to the level in 2017. The 2017 and 2019 total allpayer margins were the highest since an all-time high of 7.4 percent in 2014 (data not 

shown). 

For profit 11.3

12.5

Nonprofit 6.3

7.3

0

5

10

15

2015 2016 2017 2018 2019

Aggregate total all-payer margin (percent)
A Data Book: Health care spending and the Medicare program, July 2021 61

Chart 6-9. IPPS hospitals under low fiscal pressure continued

to have a higher aggregate total all-payer margin 

than those under higher fiscal pressure, 2015–2019

Note: IPPS (inpatient prospective payment system). Hospitals’ aggregate margin is calculated as aggregate payments minus 

aggregate allowable costs, divided by aggregate payments. “Total all-payer” margin includes payments from all payers 

and from investments. “High-pressure” hospitals are defined as those with a median non-Medicare profit margin of 1 

percent or less over five years and a net worth (assets minus liabilities) that would have grown by less than 1 percent per 

year over that period if the hospital’s Medicare profits had been zero. “Low-pressure” hospitals are defined as those with a 

median non-Medicare profit margin greater than 5 percent over five years and a net worth that would have grown by more 

than 1 percent per year over that period if the hospital’s Medicare profits had been zero. “Medium-pressure” hospitals are 

those that fit into neither the high- nor the low-pressure categories. Analysis includes short-term acute care hospitals in 

the U.S. (excluding territories) paid under the IPPS with complete cost report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• IPPS hospitals’ total all-payer margin varied depending on their level of fiscal pressure. 

IPPS hospitals under the highest fiscal pressure—defined as those with a median nonMedicare profit margin of 1 percent or less and lacking material growth in net worth—

continued to have a lower aggregate total all-payer margin than hospitals under less fiscal 

pressure. (IPPS hospitals under fiscal pressure have a higher overall Medicare margin, 

see Chart 6-14.)

• IPPS hospitals under low fiscal pressure maintained a strong and steady aggregate total allpayer margin, including an increase to an all-time high of 10.1 percent in 2019. 

• In contrast, hospitals under high fiscal pressure maintained a negative aggregate total allpayer margin, though it increased to a relative high of –1 percent.

Low pressure 9.3

10.1

Medium pressure 1.8 1.3

High pressure -2.6

-1.0

-5

0

5

10

15

2015 2016 2017 2018 2019

Aggregate total all-payer margin (percent)
62 Acute inpatient services

Chart 6-10. IPPS hospitals’ aggregate overall Medicare margin 

remained negative, but increased in 2019

Note: IPPS (inpatient prospective payment system). Hospitals’ Medicare margin is calculated as aggregate Medicare payments 

minus aggregate allowable Medicare costs, divided by aggregate Medicare payments. “Overall Medicare margin” refers to 

the aggregate margin across hospital service lines (including inpatient, outpatient, swing bed, skilled nursing, 

rehabilitation, psychiatric, and home health services), as well as supplemental payments not tied to the provision of 

services (such as direct graduate medical education and uncompensated care payments) and bad debt payments. 

Analysis includes short-term acute care hospitals in the U.S. (excluding territories) paid under the IPPS with complete cost 

report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• Hospitals’ aggregate overall Medicare margin reflects the relationship between hospitals’

Medicare fee-for-service payments and Medicare-allowable costs across inpatient, 

outpatient, and other services, as well as supplemental Medicare payments not tied to the 

provision of services (such as uncompensated care and direct graduate medical education 

payments).

• From 2018 to 2019, IPPS hospitals’ aggregate overall Medicare margin increased from –9.3 

percent to –8.7 percent. However, the margin remains well below pre-2014 levels (data not 

shown), when Congress reduced DSH payments and added uncompensated care payments 

proportional to the decline in the national uninsured rate (see Chart 6-18). 

• The range of overall Medicare margins at individual IPPS hospitals varied substantially. For 

example, in 2019, 25 percent of hospitals had an overall Medicare margin of 3 percent or 

higher, and another 25 percent had a margin of –18 percent or lower (data not shown). 

-7.6

-9.6

-10.0

-9.3

-8.7

-20

-15

-10

-5

0

2015 2016 2017 2018 2019

Aggregate overall Medicare margin 

(percent)
A Data Book: Health care spending and the Medicare program, July 2021 63

Chart 6-11. Rural IPPS hospitals continued to have a higher 

aggregate overall Medicare margin than urban IPPS 

hospitals, 2015–2019

Note: IPPS (inpatient prospective payment system). Hospitals’ Medicare margin is calculated as aggregate Medicare payments 

minus aggregate allowable Medicare costs, divided by aggregate Medicare payments. “Overall Medicare margin” refers to 

the aggregate margin across hospital service lines (including inpatient, outpatient, swing bed, skilled nursing, 

rehabilitation, psychiatric, and home health services), as well as supplemental payments not tied to the provision of 

services (such as direct graduate medical education and uncompensated care payments) and bad debt payments. 

Metropolitan (urban) counties contain an urban cluster of 50,000 or more people, and rural micropolitan counties contain a 

cluster of 10,000 to 50,000 people; all other counties are classified as “other rural.” Analysis includes short-term acute 

care hospitals in the U.S. (excluding territories) paid under the IPPS with complete cost report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• IPPS hospitals in rural micropolitan and other rural areas continued to have higher 

aggregate overall Medicare margins than metropolitan (urban) IPPS hospitals. (The reverse 

holds for the total all-payer margin; see Chart 6-6.) The higher margins at IPPS rural 

hospitals were in large part attributable to the additional IPPS payments many rural 

hospitals received for their inpatient services through the sole community hospital, 

Medicare-dependent hospital, and low-volume hospital designations (see Chart 6-17).

• From 2018 to 2019, the overall Medicare margin increased for urban, rural micropolitan, and 

other rural hospitals. However, the increase was largest for IPPS hospitals in rural 

nonmicropolitan (“other rural”) areas (from –5.0 percent to –2.7 percent, the highest level 

since 2015).

• From 2018 to 2019, the overall Medicare margin for critical access hospitals remained 

steady, near –2 percent (data not shown).

Other rural

-5.0

-2.7

Rural micropolitan

-6.7

-6.1

Metropolitan

-9.6 -9.0

-20

-15

-10

-5

0

5

2015 2016 2017 2018 2019

Aggregate overall Medicare margin 

(percent)
64 Acute inpatient services

Chart 6-12. IPPS hospitals that treat a disproportionate share of 

low-income patients or are teaching hospitals 

continued to have higher aggregate overall Medicare 

margins than other hospitals, 2015–2019

Note: IPPS (inpatient prospective payment system), DSH (disproportionate share hospital). Hospitals’ Medicare margin is 

calculated as aggregate Medicare payments minus aggregate allowable Medicare costs, divided by aggregate Medicare 

payments. “Overall Medicare margin” refers to the aggregate margin across hospital service lines (including inpatient, 

outpatient, swing bed, skilled nursing, rehabilitation, psychiatric, and home health services), as well as supplemental 

payments not tied to the provision of services (such as direct graduate medical education and uncompensated care 

payments) and bad debt payments. Analysis includes short-term acute care hospitals in the U.S. (excluding territories) 

paid under the IPPS with complete cost report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• IPPS hospitals that treat a disproportionate share of low-income patients (DSHs) or are 

teaching hospitals continued to have a higher aggregate overall Medicare margin than other 

IPPS hospitals. (The reverse holds for the total all-payer margin; see Chart 6-7.) The higher 

margins at DSH and teaching IPPS hospitals were in large part attributable to the additional 

IPPS payments DSH and teaching hospitals received for inpatient services (see Chart 6-17), 

as well as supplemental uncompensated care payments.

• From 2018 to 2019, the aggregate overall Medicare margin increased for DSH hospitals—

both those that were and were not also teaching hospitals—driven by higher 

uncompensated care payments (see Chart 6-18).

DSH and teaching

-8.1 -7.6

Teaching only

-13.2

-13.9

DSH only

-10.5

-9.3

Neither DSH nor 

teaching

-15.5 -15.5

-20

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2015 2016 2017 2018 2019

Aggregate overall Medicare margin (percent)
A Data Book: Health care spending and the Medicare program, July 2021 65

Chart 6-13. For-profit IPPS hospitals continued to have a higher 

aggregate overall Medicare margin than nonprofit 

IPPS hospitals and increased to a positive margin in 

2019

Note: IPPS (inpatient prospective payment system). Hospitals’ Medicare margin is calculated as aggregate Medicare payments 

minus aggregate allowable Medicare costs, divided by aggregate Medicare payments. “Overall Medicare margin” refers to 

the aggregate margin across hospital service lines (including inpatient, outpatient, swing bed, skilled nursing, 

rehabilitation, psychiatric, and home health services), as well as supplemental payments not tied to the provision of 

services (such as direct graduate medical education and uncompensated care payments) and bad debt payments. 

Analysis includes short-term acute care hospitals in the U.S. (excluding territories) paid under the IPPS with complete cost 

report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• For-profit IPPS hospitals continued to have a higher aggregate overall Medicare margin than 

nonprofit hospitals.

• From 2018 to 2019, for-profit IPPS hospitals’ aggregate overall Medicare margin increased 

from –1.0 to 0.5 percent. This was the highest level since 2014 (data not shown). 

• From 2018 to 2019, nonprofit IPPS hospitals’ aggregate overall Medicare margin also 

increased, but by a smaller amount.

For profit

-1.0

0.5

Nonprofit

-10.6 -10.1

-20

-15

-10

-5

0

5

2015 2016 2017 2018 2019

Aggregate overall Medicare margin 

(percent)
66 Acute inpatient services

Chart 6-14. IPPS hospitals under high fiscal pressure continued

to have a higher aggregate overall Medicare margin 

than those under medium and low fiscal pressure, 

2015–2019

Note: IPPS (inpatient prospective payment system). Hospitals’ Medicare margin is calculated as aggregate Medicare payments 

minus aggregate allowable Medicare costs, divided by aggregate Medicare payments. “Overall Medicare margin” refers to 

the aggregate margin across hospital service lines (including inpatient, outpatient, swing bed, skilled nursing, 

rehabilitation, psychiatric, and home health services), as well as supplemental payments not tied to the provision of 

services (such as direct graduate medical education and uncompensated care payments) and bad debt payments. “Highpressure” hospitals are defined as those with a median non-Medicare profit margin of 1 percent or less over five years and 

a net worth (assets minus liabilities) that would have grown by less than 1 percent per year over that period if the 

hospital’s Medicare profits had been zero. “Low-pressure” hospitals are defined as those with a median non-Medicare 

profit margin greater than 5 percent over five years and a net worth that would have grown by more than 1 percent per 

year over that period if the hospital’s Medicare profits had been zero. “Medium-pressure” hospitals are those that fit into 

neither the high- nor the low-pressure categories. Analysis includes short-term acute care hospitals in the U.S. (excluding 

territories) paid under the IPPS with complete cost report data.

Source: MedPAC analysis of hospital cost report data from CMS.

• IPPS hospitals under the highest fiscal pressure—defined as those with a median nonMedicare profit margin of 1 percent or less and a lack of material growth in worth—continued

to have a higher aggregate overall Medicare margin than hospitals under less fiscal 

pressure. (In contrast, IPPS hospitals under fiscal pressure have a lower total all-payer 

margin; see Chart 6-9.)

• From 2018 to 2019, high-pressure IPPS hospitals’ aggregate overall Medicare margin 

increased from –1.2 to 0.2 percent, the highest level since 2015. 

• From 2018 to 2019, the aggregate overall Medicare margin among IPPS hospitals under 

medium and low fiscal pressure also increased, but by a smaller amount.

High pressure

-1.2

0.2

Medium pressure

-4.4 -3.8

Low pressure

-11.5 -10.8

-20

-15

-10

-5

0

5

2015 2016 2017 2018 2019

Aggregate overall Medicare margin (percent)
A Data Book: Health care spending and the Medicare program, July 2021 67

Chart 6-15. Financial pressure led to lower hospital costs per 

discharge in 2019

Level of financial pressure, 2014–2018

High pressure Low pressure

(non-Medicare Medium (non-Medicare

margin ≤ 1%) pressure margin > 5%)

Number of hospitals 480 265 1,329

Financial characteristics, 2019 (medians)

Non-Medicare margin

(private, Medicaid, uninsured) –3% 3% 14% 

Standardized cost per Medicare discharge (as a share of the national median)

For-profit and nonprofit hospitals 0.95 1.00 1.04

Nonprofit hospitals 0.97 1.01 1.06

For-profit hospitals 0.88 0.93 0.96

Annual growth in cost per

discharge, 2016–2019 2% 2% 2%

Overall 2019 Medicare margin 0% –2% –9%

Patient characteristics (medians)

Total hospital discharges in 2019 3,287 5,655 8,503 

Medicare share of inpatient days 37% 35% 35%

Medicaid share of inpatient days 6% 6% 6%

Medicare case-mix index 1.46 1.57 1.69

Note: Standardized costs are adjusted for hospital case mix, wage index, outliers, transfer cases, interest expense, and the 

effects of teaching and low-income Medicare patients on hospital costs. The sample includes short-term acute care 

hospitals paid under the inpatient prospective payment system with over 500 discharges that had complete cost reports 

on file with CMS by October 2020. “High-pressure” hospitals are defined as those with a median non-Medicare profit 

margin of 1 percent or less over five years and a net worth (assets minus liabilities) that would have grown by less than 1 

percent per year over that period if the hospital’s Medicare profits had been zero. “Low-pressure” hospitals are defined as 

those with a median non-Medicare profit margin greater than 5 percent over five years and a net worth that would have 

grown by more than 1 percent per year over that period if the hospital’s Medicare profits had been zero. “Mediumpressure” hospitals are those that fit into neither the high- nor the low-pressure categories. 

Source: MedPAC analysis of hospital cost report data and claims files from CMS.

• Hospitals under high financial pressure had 5 percent lower standardized costs per 

discharge than the national median. For-profit hospitals tended to constrain their costs more 

than nonprofit hospitals. The median for-profit hospital had costs that were 4 percent below 

the median even when they were not under financial pressure. 

• Hospitals with lower volume, lower case mix, and higher Medicare shares of discharges are 

more likely to be under financial pressure. 

• One limitation of this analysis is that it measures only hospital inpatient costs. To the extent 

that hospitals with strong profit margins direct their resources toward non-inpatient 

expenditures (such as the purchase or subsidization of physician practices), those costs 

would not be included in our standardized costs per discharge.
68 Acute inpatient services

Chart 6-16. Medicare FFS payments for inpatient services were 

the largest component of payments to IPPS 

hospitals but not to CAHs, 2015–2019

Note: FFS (fee-for-service), IPPS (inpatient prospective payment system), CAH (critical access hospital), UC (uncompensated 

care), DGME (direct graduate medical education), HIT (health information technology). Medicare-designated CAHs are 

limited to 25 beds and primarily operate in rural areas; Medicare pays these hospitals based on their reported costs. 

Analysis includes short-term acute care hospitals in the U.S. (excluding territories) paid under the IPPS or CAH payment 

system with complete cost report data. Components may not sum to totals due to rounding and components with values 

not shown.

Source: MedPAC analysis of hospital cost report data from CMS.

• In fiscal year 2019, IPPS hospitals received $191.5 billion in Medicare FFS payments, 

including $111.0 billion for general inpatient services and $61.9 billion for outpatient 

services. From 2015 to 2019, IPPS hospitals’ Medicare FFS inpatient payments increased at 

an average annual rate of 1.6 percent, while outpatient payments increased 5.6 percent. 

These increases were driven by increases in payments per service (data not shown).

• In fiscal year 2019, CAHs received $11.2 billion in Medicare FFS payments, including $2.7 

billion for general inpatient services, $6.3 billion for outpatient services, and $2.2 billion in 

post-acute care services (mainly provided in swing beds). From 2015 to 2019, CAHs’ 

Medicare FFS inpatient payments held relatively steady, while outpatient revenue increased 

6.4 percent, and post-acute care revenue increased 3.7 percent. These increases were 

driven by increases in payments per service (data not shown).

104.2 108.1 110.3 110.5 111.0

49.8 52.5 55.8 59.2 61.9

174.7 179.2 183.6 187.3 191.5

0

50

100

150

200

250

2015 2016 2017 2018 2019

Billions of dollars

IPPS

2.7 2.7 2.8 2.8 2.7

4.9 5.4 5.7 6.1 6.3

1.9 2.1 2.1 2.2 2.2

9.8 10.2 10.7 11.2 11.2

0

5

10

15

2015 2016 2017 2018 2019

Billions of dollars

General inpatient services Outpatient services

Post-acute care and psychiatric services Supplemental payments (UC, DGME, HIT)

CAH
A Data Book: Health care spending and the Medicare program, July 2021 69

Chart 6-17. About 15 percent of IPPS payments were from 

adjustments and additional payments, 2019

Share of IPPS payments

Hospital group Base PPS Low income Teaching Outliers Rural and/or Quality

(DSH) (IME) Isolated

All IPPS 84.9% 3.2% 6.5% 4.7% 1.4% –0.8%

Metropolitan (urban) 85.0 3.3 6.9 4.9 0.7 –0.8

Micropolitan 84.3 2.4 2.1 2.3 9.4 –0.5

Other rural 80.1 2.3 0.5 1.3 16.2 –0.3

For profit 90.0 3.4 3.6 3.0 1.0 –1.2

Nonprofit 85.1 3.1 6.5 4.5 1.4 –0.7

Government 77.5 4.0 9.8 7.2 2.1 –0.8

DSH and teaching 81.4 3.7 9.7 5.4 0.6 –0.8

DSH only 91.2 3.2 0.0 3.2 3.2 –0.8

Teaching only 88.4 0.1* 6.3 4.7 0.9 –0.4

Neither 93.9 0.1* 0.0 2.8 3.4 –0.4

Sole community 79.1 2.2 2.4 2.4 14.3 –0.4

Medicare dependent 83.3 1.9 0.4 1.1 13.7 –0.4

Low volume 79.1 2.0 0.5 1.4 17.4 –0.2

Note: IPPS (inpatient prospective payment system), DSH (disproportionate share hospital), IME (indirect medical education). 

Payments are shares of total inpatient operating and capital PPS payments, and exclude uncompensated care, direct 

graduate medical education, Medicare Advantage IME, and other pass-through payments outside of the IPPS. "Rural and/or 

isolated" includes additional payments to sole community hospitals, Medicare-dependent hospitals, and low-volume hospitals; 

while sole community and Medicare-dependent hospitals that are paid on their hospital-specific rate do not technically receive 

any base PPS payments or adjustments, the “Rural and/or Isolated” column includes only the amount by which their rate 

exceeds the otherwise applicable IPPS payments. "Quality" includes payments and penalties from the Value-Based 

Purchasing Program, Hospital Readmissions Reduction Program, and Hospital Acquired Conditions Reduction Program. 

Metropolitan (urban) counties contain an urban cluster of 50,000 or more people; rural micropolitan counties contain a cluster 

of 10,000 to 50,000 people; all other counties are classified as “other rural.” Analysis limited to IPPS hospitals in the U.S. with 

a complete cost report having a midpoint in fiscal year 2019. Components may not sum to totals due to rounding and 

because other types of payments, such as new technology payments, are not included in the table.

* DSH group defined as receiving inpatient operating DSH payments, while DSH payments column includes both inpatient

operating and capital DSH payments. All urban hospitals with more than 100 beds are eligible for inpatient capital DSH 

payments.

Source: MedPAC analysis of hospital cost report data from CMS.

• Base payments accounted for about 85 percent of IPPS payments to hospitals for inpatient 

services provided to Medicare FFS beneficiaries, while low-income and teaching adjustments, 

outlier payments, rural and/or isolated payments, and quality payments and penalties accounted 

for the remaining 15 percent.

• The share of IPPS payments from different payment types varied substantially across different 

groups of hospitals. For example, while special payments to rural or isolated hospitals 

accounted for 1.4 percent of all IPPS payments to hospitals, they accounted for over 13 

percent of payments to hospitals designated as sole community, Medicare dependent, and/or 

low-volume hospitals.
70 Acute inpatient services

Chart 6-18. Medicare’s uncompensated care payments to IPPS 

hospitals have increased from a relative low in 2017

Note: IPPS (inpatient prospective payment system), DSH (disproportionate share). Uncompensated care payments are postsequestration. Chart does not include capital DSH payments.

Source: CMS IPPS final rules. 

• In addition to IPPS payments for fee-for-service Medicare beneficiaries’ inpatient stays, the 

Medicare program makes uncompensated care payments to IPPS hospitals to help cover 

their costs of treating uninsured patients. Pursuant to a provision in the Affordable Care Act

of 2010, beginning in 2014, each eligible hospital receives (1) a reduced operating DSH 

payment and (2) an uncompensated care payment. Under the revised operating DSH 

payment equation, hospitals receive 25 percent of the DSH funds they would have received 

under prior law. Second, each hospital receives uncompensated care payments equal to its 

share of a fixed pool of dollars, defined as 75 percent of estimated aggregated operating 

DSH payments under the prior-law DSH formula multiplied by the national uninsured rate as 

a percentage of the uninsured rate in 2013. Therefore, when the rate of uninsured 

individuals increases and hospitals have greater losses on uncompensated care, CMS gives 

hospitals higher uncompensated care add-on payments to their IPPS rates.

• Between 2019 and 2021, Medicare’s uncompensated care payments were relatively steady. 

This reflected three factors roughly offsetting each other in those years: the change in 

estimated prior-law DSH payments, the change in the national uninsured rate, and the 

portion of the year that Medicare sequestration was suspended.

Estimated prior-law 

DSH payments

$16.58 

$15.17 

Uncompensated 

care payments

$8.28 $8.29 

$0

$5

$10

$15

$20

2015 2016 2017 2018 2019 2020 2021

Dollars (in billions)

Estimated 

uninsured rate as 

percentage of 

2013 rate

67.1% 72.9%

0%

50%

100%

2015 2016 2017 2018 2019 2020 2021

Percent
A Data Book: Health care spending and the Medicare program, July 2021 71

Chart 6-19. Medicare FFS inpatient stays per capita decreased, 

2015–2019

Note: FFS (fee-for-service). Data are for short-term acute care hospitals in the U.S. (exclusive of territories). 

Source: MedPAC analysis of Medicare Provider Analysis and Review data and enrollment data from CMS.

• The number of inpatient stays per 1,000 Medicare FFS beneficiaries decreased from 260 in 

2015 to 243 in 2019. This is a slower decline than earlier in the decade (data not shown) but 

is still a faster decline than all-payer inpatient stays per capita (see Chart 6-4). 

• The magnitude of the decrease in Medicare FFS inpatient stays per capita varied across 

types of hospitals. For example, from 2018 to 2019, the number of inpatient stays per capita 

fell 1.6 percent at hospitals located in metropolitan (urban) areas, 3.8 percent at those in 

rural micropolitan areas, and 6 percent at those located in other rural areas (data not 

shown).

260 253 252 248 243

0.4%

-2.9%

-0.2%

-1.7% -1.9%

-5.0%

0.0%

5.0%

10.0%

0

50

100

150

200

250

300

2015 2016 2017 2018 2019

Annual percentage change 

Inpatient stays per 1,000 

Part A beneficiaries
72 Acute inpatient services

Chart 6-20. Four major diagnostic categories accounted for over 

half of all Medicare FFS inpatient stays at short-term 

acute care hospitals, 2015–2019

Note: FFS (fee-for-service). Data are for short-term acute care hospitals in the U.S. (exclusive of territories). 

Source: MedPAC analysis of Medicare Provider Analysis and Review data from CMS.

• Over half of all Medicare FFS inpatient stays at short-term acute care hospitals were for 

beneficiaries with a primary diagnosis in one of four major diagnostic categories: circulatory, 

musculoskeletal, respiratory, or infectious diseases.

• The most common major diagnostic category of Medicare FFS inpatient stays is diseases of 

the circulatory system, such as heart failure and cardiac arrhythmia. After a relative low in 

2016, its share increased to over 20 percent in 2019.

• Of the four most common major diagnostic categories, the one with the largest increase 

from 2015 to 2019 was infectious and parasitic diseases, such as septicemia. This rise 

continued a longer term trend, with the share of Medicare FFS beneficiaries’ inpatient stays 

for infectious diseases doubling since 2010 (data not shown).

Circulatory

19.6% 19.5% 19.9% 20.1% 20.5%

Musculoskeletal

13.2%

13.9% 13.8% 13.5% 13.5%

Respiratory

14.2%

13.3% 13.5% 13.4% 12.6%

Infectious

8.8%

9.3% 9.9% 10.5% 10.6%

0%

5%

10%

15%

20%

25%

30%

2015 2016 2017 2018 2019

Share of inpatient stays
A Data Book: Health care spending and the Medicare program, July 2021 73

Chart 6-21. Share of one-day stays among Medicare FFS 

beneficiaries at short-term acute care hospitals 

increased, 2015–2019

Note: FFS (fee-for-service). Data are for short-term acute care hospitals in the U.S. (exclusive of territories). Components may 

not sum to 100 percent due to rounding. 

Source: MedPAC analysis of Medicare Provider Analysis and Review data from CMS.

• The share of Medicare FFS beneficiaries’ inpatient stays at short-term acute care hospitals 

that were only one day long increased from 2015 to 2019. This reversed the prior trend of 

declining one-day stays from 2010 to 2014 (data not shown). As the Commission has 

previously noted, growth in the number of one-day stays starting in 2015 could be due to the 

reduced likelihood that CMS’s recovery audit contractors (RACs) would deny payment for 

one-day stays. In 2015, CMS ceased patient status reviews (which previously resulted in 

challenges to one-day stay claims). The result was that from 2014 to 2015, claims 

challenged by the RACs as overpayments fell by 91 percent (data not shown). 

• From 2015 to 2019, there was also a slight increase in the share of stays that were two days 

long and a decrease in the share of stays three days or longer. 

• Together, these changes correspond to a 1.9 percent decrease in the average length of 

stay, from 5.05 days in 2015 to 4.95 days in 2019 (data not shown). Over 90 percent of 

Medicare FFS beneficiaries’ inpatient stays in 2019 were 10 days or fewer; however, a small 

share (0.66 percent) of stays lasted over a month (data not shown). 

11.6% 12.3% 12.9% 13.4% 14.1%

2 days

17.6% 18.1% 18.4% 18.4% 18.1%

70.8% 69.7% 68.7% 68.2% 67.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2015 2016 2017 2018 2019

Share of inpatient stays

3+ days

1 day
74 Acute inpatient services

Chart 6-22. Number of Medicare FFS outpatient observation 

visits per capita remained relatively steady, and

nearly half were longer than 24 hours, 2015–2019

Note: FFS (fee-for-service). Observation visits are separately payable visits with a length of stay of at least eight hours. Data for 

outpatient observation visits include short-term acute care hospitals in the U.S. (exclusive of territories) paid under the 

inpatient prospective payment system or under the Maryland state waiver. “Outpatient observation visits per capita” refers 

to outpatient observation visits—that is, observation visits that did not result in an inpatient admission—per Medicare FFS 

Part B beneficiary. Years are calendar years. Components may not sum to 100 percent due to rounding and component 

values not shown.

Source: MedPAC analysis of outpatient standard analytical file data from CMS. 

• Hospitals sometimes use observation care to determine whether a patient should be 

hospitalized for inpatient care, transferred to an alternative treatment setting, or sent home. 

On April 1, 2002, Medicare began providing separate payments to hospitals for some 

observation services. Previously, the observation services were packaged into the payments 

for the emergency department or clinic visits that occurred with observation care.

• The number of Medicare FFS outpatient observation visits per capita remained relatively 

steady from 2015 to 2019, at about 45 visits per 1,000 beneficiaries. 

• The decision on whether to discharge or admit a patient can usually be made in less than 24 

hours; however, the Medicare benefit does not limit the length of outpatient observation 

stays. In each year from 2015 to 2019, nearly half of outpatient observation visits were 

longer than 24 hours, including 9 to 10 percent that spanned more than 2 days and 1 to 2 

percent that spanned more than 3 days.

49% 50% 51% 51% 51%

40% 39% 39% 38% 39%

10% 9% 9% 9% 9%

44.4 45.4 45.0 44.6 45.0

0

10

20

30

40

50

60

2015 2016 2017 2018 2019

Outpatient observation visits per 1,000 

FFS beneficiaries

<24 hours 1 to 2 days 2 to 3 days 3+ days
A Data Book: Health care spending and the Medicare program, July 2021 75

Chart 6-23. Medicare FFS payments to inpatient psychiatric 

facilities decreased in 2019

Note: FFS (fee-for-service). These fiscal year–incurred data represent only program spending; they do not include beneficiary 

cost sharing. Spending for inpatient psychiatric care furnished in scatter beds in acute care hospitals (and paid for under 

the acute care inpatient prospective payment system) is not included in this chart.

Source: CMS Office of the Actuary.

• Medicare pays for inpatient psychiatric facility (IPF) care under the IPF prospective payment 

system.

• Payments have been relatively steady at about $4 billion since 2012. 

• However, since 2017, Medicare’s payments to IPFs have declined about 9 percent, 

consistent with a 13 percent decrease in IPF stays (data not shown).

3.8 3.9 4.0 3.9 4.0 4.0 3.9 3.9 3.8

3.6

0.0

1.0

2.0

3.0

4.0

5.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Dollars (in billions)
76 Acute inpatient services

Chart 6-24. The share of for-profit Medicare-certified inpatient 

psychiatric facilities increased, 2012–2019

Average annual change

2012– 2015– 2018–

Type of IPF 2012 2015 2018 2019 2015 2018 2019

All 1,568 1,576 1,584 1,530 0.2% 0.2% –3.4%

Urban 1,241 1,245 1,254 1,225 0.1 0.2 –2.3

Rural 326 330 327 303 0.4 –0.3 –7.3

Freestanding 450 483 524 527 2.4 2.8 0.6

Hospital-based units 1,118 1,093 1,060 1,003 –0.8 –1.0 –5.4

Nonprofit 762 726 723 682 –1.6 –0.1 –5.7

For profit 436 503 523 522 4.9 1.3 –0.2

Government 370 347 338 326 –2.1 –0.9 –3.6

Note: IPF (inpatient psychiatric facility). Data are from facilities that submitted valid Medicare cost reports in the given fiscal 

year. Components may not sum to totals due to missing data.

Source: MedPAC analysis of hospital cost report data from CMS.

• Between 2012 and 2015, the number of IPFs that filed Medicare cost reports grew, on 

average, 0.2 percent per year. Similarly, between 2015 and 2018, the supply of IPFs 

increased slightly, growing, on average, 0.2 percent per year. However, in 2019, the number 

of IPFs fell by 3.4 percent. 

• A growing share of Medicare IPF users receive care in for-profit facilities. Between 2012 and 

2015, the number of for-profit IPFs grew 4.9 percent per year, on average. Over the same 

period, the number of nonprofit IPFs fell more than 1 percent per year, on average. The 

number of for-profit IPFs continued to grow through 2018, while the number of nonprofit 

IPFs slightly declined. From 2018 to 2019, the number of for-profit IPFs remained relatively 

stable, while the number of nonprofit facilities decreased by 5.7 percent.
A Data Book: Health care spending and the Medicare program, July 2021 77

Chart 6-25. Almost three-quarters of Medicare FFS beneficiaries’ 

stays at IPFs were for psychosis, 2019

MS–DRG Diagnosis Share

885 Psychosis 73.4%

884 Organic disturbances and mental retardation 7.0

057 Degenerative nervous system disorders without MCC 5.5

897 Alcohol/drug abuse or dependency, no rehabilitation, without MCC 4.4

881 Depressive neurosis 3.2

895 Alcohol/drug abuse or dependency with rehabilitation, without MCC 1.6

882 Neurosis except depressive 1.3

880 Acute adjustment reaction and psychosocial dysfunction 0.9

883 Disorders of personality and impulse control 0.7

056 Degenerative nervous system disorders with MCC 0.5

894 Alcohol/drug use—left AMA 0.4

886 Behavioral and developmental disorders 0.2

896 Alcohol/drug abuse or dependency without rehabilitation, with MCC 0.1

876 OR procedure with principal diagnosis of mental illness 0.1

887 Other mental disorders 0.1

081 Nontraumatic stupor and coma without MCC <0.1

080 Nontraumatic stupor and coma with MCC <0.1

Nonpsychiatric MS–DRGs 0.8

Total 100.0

Note: FFS (fee-for-service), IPF (inpatient psychiatric facility), MS–DRG (Medicare severity–diagnosis related group), MCC 

(major comorbidity or complication), AMA (against medical advice), OR (operating room). Total may not sum to 100 

percent due to rounding.

Source: MedPAC analysis of Medicare Provider Analysis and Review data from CMS.

• Medicare patients in IPFs are generally assigned 1 of 17 psychiatric MS–DRGs. 

• The MS–DRG system does not differentiate well among Medicare beneficiaries in IPFs. The 

most frequently occurring IPF diagnosis—psychosis—accounted for about 73 percent of IPF 

discharges in 2019. This broad category includes patients with principal diagnoses of 

schizophrenia, bipolar disorder, and major depression.

• In 2019, the next most common discharge diagnosis, accounting for 7 percent of IPF cases, 

was organic disturbances and mental retardation.
78 Acute inpatient services

Chart 6-26. The majority of Medicare FFS beneficiaries who 

received IPF services were under the age of 65, 2019

Share of Share of IPF

all IPF users with more

Characteristic users than one IPF stay

Current eligibility status

Aged 43.3% 30.5%

Disabled 56.6 69.4

ESRD only 0.1 0.1

Age

<45 23.6 31.8

45–64 32.5 36.9

65–79 30.0 23.9

80+ 14.0 7.4

All 100.0 27.5

Note: FFS (fee-for-service), IPF (inpatient psychiatric facility), ESRD (end-stage renal disease). The “aged” category includes 

beneficiaries ages 65 and older without ESRD. The “disabled” category includes beneficiaries under age 65 without 

ESRD. The “ESRD only” category includes beneficiaries with ESRD, regardless of age. Components may not sum to 

totals due to rounding.

Source: MedPAC analysis of Medicare Provider Analysis and Review data from CMS.

• Of Medicare beneficiaries who had at least one IPF stay in 2019, 56.6 percent qualified for 

Medicare because of a disability. These beneficiaries tend to be younger and poorer than 

the typical fee-for-service beneficiary.

• Approximately 28 percent of Medicare beneficiaries who used an IPF in 2019 had more than 

one IPF stay during the year. These beneficiaries were much more likely than all IPF users 

to be disabled, often because of a psychiatric diagnosis.
7

A Data Book: Health care spending and the Medicare program, July 2021 81

Chart 7-1. Medicare spending per fee-for-service beneficiary on 

services in the fee schedule for physicians and other 

health professionals, 2009–2019

Note: Dollar amounts are Medicare spending only and do not include beneficiary cost sharing. The category “disabled” excludes 

beneficiaries who qualify for Medicare because they have end-stage renal disease. All beneficiaries age 65 and over are 

included in the “aged” category.

Source: The annual report of the Boards of Trustees of the Medicare trust funds 2020.

• The fee schedule for physicians and other health professionals includes a broad range of 

services such as office visits, surgical procedures, and diagnostic and therapeutic services. 

“Other health professionals” refers to nurse practitioners, physician assistants, physical 

therapists, and other clinicians. Total fee schedule spending (excluding beneficiary cost 

sharing) was $73.5 billion in 2019 (data not shown).

• Spending per fee-for-service beneficiary for fee schedule services increased between 2009

and 2011, remained stable between 2011 and 2017, and began growing again after 2017. 

From 2009 to 2019, spending per beneficiary (across aged beneficiaries and those with 

disabilities) grew at a cumulative rate of 15 percent.

• Per capita spending for beneficiaries with disabilities (under age 65) is lower than per capita 

spending for aged beneficiaries (ages 65 and over). In 2019, for example, per capita 

spending for beneficiaries with disabilities was $1,893 compared with $2,227 for aged 

beneficiaries. However, spending per capita grew much faster for beneficiaries with 

disabilities than aged beneficiaries between 2009 and 2019 (20 percent vs. 13 percent, 

respectively). 

1,963

2,142 2,125 2,124 2,104

2,227

1,581

1,732 1,764 1,804 1,749

1,893

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2009 2011 2013 2015 2017 2019

Spending per beneficiary (dollars)

Aged

Disabled
82 

Ambulatory care

Chart 7-2. Physician fee schedule–allowed charges by type of 

service, 2019

 Total allowed charges in 2019 = $97.2 billion

Note: Components may not sum to 100 percent due to rounding.

Source: MedPAC analysis of the Carrier Standard Analytic File for 100 percent of beneficiaries.

• In 2019, allowed charges for physician fee schedule services totaled $97.2 billion. Allowed 

charges include both program spending and beneficiary cost sharing. 

• In 2019, half of all allowed charges were for evaluation and management (E&M) services. 

• Within the E&M category, about half of allowed charges were for office/outpatient visits. The 

remaining allowed charges within the E&M category were for various types of services 

provided across a broad range of settings, including hospital inpatient departments, 

emergency departments, and nursing facilities (data not shown).

Evaluation and 

management

50.0%

Other procedures

23.0%

Imaging

11.0%

Major procedures

7.6%

Tests

5.1%

Anesthesia

2.9%

Other

0.5%
A Data Book: Health care spending and the Medicare program, July 2021 83

Chart 7-3. Total encounters per FFS beneficiary increased and

mix of clinicians furnishing them changed from 2014

to 2019

Specialty category

Encounters per beneficiary

Percent change in 

encounters per beneficiary

2014 2019 Average annual Total

Total (all clinicians) 20.8 22.2 1.3% 6.5%

Primary care physicians 3.9 3.5 –2.4 –11.5

Specialists 12.6 12.9 0.5 2.3

APRNs/PAs 1.4 2.5 11.5 72.1

Other practitioners 2.9 3.4 3.2 17.1

Note: FFS (fee-for-service), APRN (advanced practice registered nurse), PA (physician assistant). We define “encounters” as 

unique combinations of beneficiary identification numbers, claim identification numbers (for paid claims), and national 

provider identifiers of the clinicians who billed for the service. Figures may not sum to totals due to rounding. Figures do 

not account for “incident to” billing, meaning, for example, that encounters with APRNs/PAs that are billed under 

Medicare’s “incident to” rules are included in the physician totals. We use the number of FFS beneficiaries enrolled in Part 

B to define encounters per beneficiary. 

Source: MedPAC analysis of the Carrier Standard Analytic File for 100 percent of beneficiaries and 2020 annual report of the 

Boards of Trustees of the Medicare trust funds.

• Encounters measure beneficiary interactions with clinicians. For example, if a physician 

billed for an office visit and an X-ray on the same claim, we count that as one encounter.

• The number of encounters per beneficiary grew 1.3 percent per year from 2014 to 2019, 

suggesting stable access to care.

• Encounters with specialist physicians accounted for a majority of all encounters and grew 

modestly from 2014 to 2019. 

• In contrast, encounters with APRNs or PAs grew rapidly from 2014 to 2019, and encounters 

with primary care physicians declined substantially. These changes continue a longer term 

trend of declines in services billed by primary care physicians and rapid increases in 

services billed by APRNs and PAs).

• The decline in encounters with primary care physicians occurred across a broad range of 

services, including evaluation and management services, tests, procedures, and imaging 

services (data not shown). 
84 

Ambulatory care

Chart 7-4. Medicare beneficiaries’ ability to get timely 

appointments with physicians was comparable with 

that of privately insured individuals, 2017–2020

Medicare (ages 65 and older) Private insurance (ages 50–64)

Survey question 2017 2018 2019 2020 2017 2018 2019 2020

Unwanted delay in getting an appointment: Among those who needed an appointment, “How often did

you have to wait longer than you wanted to get a doctor’s appointment?”

For routine care

Never 73%ab 70%a 72%b 69%a 69%ab 64%ab 74% 73%a

Sometimes 20ab 20a 20 22a 22 ab 26ab 19 20a

Usually 3 5

b

 3 3 4 5 4 4

Always 3 3

a

 3 3 3 4

ab

 3 3

For illness or injury

Never 80a 79a 80 79 76ab 74ab 81 80

Sometimes 15a 15a 14 15 18ab 19ab 15 15

Usually 2 2 2 2 2 3 2 3

Always 1

a

 2

b

 2 2 2

a

 2 1 2

Note: Numbers may not sum to 100 percent due to rounding and to some responses (“Don’t Know” or “Refused”) not being

presented. Overall sample sizes for each group (Medicare and privately insured) were approximately 4,000 in all years. 

Sample sizes for individual questions varied. Survey includes beneficiaries enrolled in traditional fee-for-service Medicare 

or Medicare Advantage.

a Statistically significant difference (at a 95 percent confidence level) between Medicare and privately insured respondents 

in the given year.

b Statistically significant difference (at a 95 percent confidence level) from 2020 within the same insurance coverage 

category.

Source: MedPAC-sponsored annual telephone surveys conducted 2017–2020.

• Most Medicare beneficiaries have one or more doctor appointments in a given year. Their 

ability to schedule timely appointments is one indicator of access that we examine.

• Medicare beneficiaries ages 65 and older report similar access to physicians for appointments 

as compared with privately insured individuals ages 50 to 64. For example, in 2020, among 

those needing an appointment for routine care, 69 percent of Medicare beneficiaries reported 

that they never had to wait longer than they wanted, which is similar to the 73 percent of 

privately insured individuals who reported this. Among those needing an appointment for 

illness or injury, 79 percent of Medicare beneficiaries reported never waiting longer than they 

wanted to get an appointment, which was not statistically significantly different from the 80 

percent of privately insured individuals who reported this.

• Appointment scheduling for illness or injury is better than for routine care appointments for 

both Medicare beneficiaries and privately insured individuals.
A Data Book: Health care spending and the Medicare program, July 2021 85

Chart 7-5. Medicare and privately insured patients reported

more difficulty finding a new primary care provider 

than a new specialist, 2017–2020

Medicare (ages 65 and older) Private insurance (ages 50–64)

Survey question 2017 2018 2019 2020 2017 2018 2019 2020

Looking for a new provider “In the past 12 months, have you tried to get a new ...?”

(Percent answering “Yes”)

Primary care provider 9%a 10%b 8% 8% 11%ab 10%b 9% 7%

Specialist 17ab 19ab 17b 15 20ab 21ab 15 13

Getting a new provider: Among those who tried to get an appointment with a new provider, “How

much of a problem was it finding a primary care provider/specialist who would treat you? Was it ... ?”

Primary care provider

No problem 69ab 71b 72ab 60 59a 67b 62a 57

Small problem 13 13 13a 16a 18 16b 20a 24a

Big problem 14ab 14b 14b 22 22a 16 17 18

Specialist

No problem 83 84b 85ab 79 81 80 79a 77

Small problem 11 7 6

a

 9 11 9 11a 11

Big problem 5

ab

 8

b 8 11 8a 10 9 11

Note: Numbers may not sum to 100 percent due to rounding and to some responses (“Don’t Know” or “Refused”) not being 

presented. Overall sample sizes for each group (Medicare and privately insured) were approximately 4,000 in all years. 

Sample sizes for individual questions varied. Survey includes beneficiaries enrolled in traditional fee-for-service Medicare 

or Medicare Advantage.

a Statistically significant difference (at a 95 percent confidence level) between Medicare and privately insured respondents in the 

given year.

b Statistically significant difference (at a 95 percent confidence level) from 2020 within the same insurance coverage category.

Source: MedPAC-sponsored annual telephone surveys, conducted 2017–2020.

• In 2020, only 8 percent of Medicare beneficiaries and 7 percent of privately insured individuals reported 

looking for a new primary care provider. This finding suggests that most people were either satisfied with 

their current provider or did not need to look for one.

• In 2020, Medicare beneficiaries and privately insured individuals were more likely to report problems 

finding a new primary care provider than a new specialist.

• Of the 8 percent of Medicare beneficiaries who looked for a new primary care provider in 2020, 22 percent 

reported a “big problem” finding a new one, and another 16 percent reported a “small problem” finding a 

new one. Although this finding means that only 3 percent of the total Medicare population reported 

problems finding a new primary care provider, the Commission is concerned about the continuing pattern 

of greater problems accessing primary care than specialty care.

• Of the 7 percent of privately insured individuals who looked for a new primary care provider in 2020, 18 

percent reported a “big problem” finding a new one, and another 24 percent reported a “small problem” 

finding a new one.
86 

Ambulatory care

Chart 7-6. Slightly higher shares of non-White patients 

reported delays getting appointments compared 

with White patients, regardless of insurance type, 

2020

Medicare (ages 65 and older) Private insurance (ages 50–64)

Survey question All White Non-White All White Non-White

Unwanted delay in getting an appointment: Among those who needed an appointment, “How often did

you have to wait longer than you wanted to get a doctor’s appointment?”

For routine care

Never 69%a 71%ab 63%ab 73%a 75%ab 69%ab

Sometimes 22a 22a 24 20a 19a 22

Usually 3 3 3 4 4 4

Always 3 2

b

 4

b 3 2 4

For illness or injury

Never 79 80b 74b 80 81b 76

b

Sometimes 15 15 17 15 15 15

Usually 2 2 3 3 2

b

 4

b

Always 2 1 2 2 1

b

 3

b

Note: “White” refers to non-Hispanic White respondents. Numbers may not sum to 100 percent due to rounding and to some 

responses (“Don’t Know” or “Refused”) not being presented. Overall sample size for each group (Medicare and privately 

insured) was approximately 4,000 in 2020. Sample size for individual questions varied. Survey includes beneficiaries 

enrolled in traditional fee-for-service Medicare or Medicare Advantage.

a Statistically significant difference (at a 95 percent confidence level) between Medicare and privately insured respondents 

in the given category.

b Statistically significant difference (at a 95 percent confidence level) by race/ethnicity within the same insurance category. 

Source: MedPAC-sponsored telephone survey conducted in 2020.

• In 2020, White respondents were more likely to report that they never had to wait longer 

than they wanted to get an appointment for routine care or for an illness or injury compared 

to non-White respondents. This trend was observed both for Medicare beneficiaries and for 

privately insured individuals.
A Data Book: Health care spending and the Medicare program, July 2021 87

Chart 7-7. Slightly higher shares of non-White patients 

reported difficulties finding a new specialist 

compared with White patients, but these differences 

were not statistically significant, 2020

Medicare (ages 65 and older) Private insurance (ages 50–64)

Survey question All White Non-White All White Non-White

Looking for a new provider: “In the past 12 months, have you tried to get a new ...?”

Primary care provider 8% 8% 9% 7% 7% 8%

Specialist 15 15b 12

b

 13 14 12

Getting a new provider: Among those who tried to get an appointment with a new provider, “How much 

of a problem was it finding a primary care provider/specialist who would treat you?

Was it ... ?”

Primary care provider

No problem 60 61 57 57 54 63

Small problem 16a 16a 18 24a 25a 22

Big problem 22 22 22 18 20 14

Specialist

No problem 79 81 75 77 78 74

Small problem 9 8 11 11 10 14

Big problem 11 11 14 11 11 13

Note: “White” refers to non-Hispanic White respondents. Numbers may not sum to 100 percent due to rounding and to some 

responses (“Don’t Know” or “Refused”) not being presented. Overall sample size for each group (Medicare and privately 

insured) was approximately 4,000 in 2020. Sample size for individual questions varied. Survey includes beneficiaries 

enrolled in traditional fee-for-service Medicare or Medicare Advantage.

a Statistically significant difference (at a 95 percent confidence level) between Medicare and privately insured respondents 

in the given category.

b Statistically significant difference (at a 95 percent confidence level) by race/ethnicity within the same insurance category. 

Source: MedPAC-sponsored telephone survey conducted in 2020.

• In 2020, slightly higher shares of non-White respondents reported difficulties finding a new 

specialist compared to White respondents, regardless of insurance type, but these 

differences were not statistically significant. Non-White Medicare beneficiaries also reported 

slightly more difficulties finding a primary care provider than did White beneficiaries, but this 

difference was also not statistically significant.

• More privately insured individuals reported experiencing a small problem finding a new 

primary care provider than did Medicare beneficiaries.
88 

Ambulatory care

Chart 7-8. Changes in physicians’ professional liability 

insurance premiums, 2013–2020

Note: Bars represent a four-quarter moving average percentage change. 

Source: CMS, Office of the Actuary. Data are from CMS’s Professional Liability Physician Premium Survey. 

• Medicare’s fee schedule for physicians and other health professionals includes payments to 

clinicians that are intended to cover the relative cost of professional liability insurance (PLI)

premiums. Payments for PLI account for 4.3 percent of total payments under the fee 

schedule (data not shown). 

• Changes in the PLI premiums paid by physicians and other health professionals reflect a 

cyclical pattern, alternating between periods of low premiums (characterized by high 

investment returns for insurers and vigorous competition) and high premiums (characterized 

by declining investment returns and market exit). 

• Premiums grew slowly from the first quarter of 2013 through the first quarter of 2014, declined 

from the second quarter of 2014 through the third quarter of 2018, and began increasing again 

in the first quarter of 2019. 

1.6

1.0

0.3

-0.5

-1.0

-1.2

-1.1

-0.7

-0.5

-0.6

-0.5

-0.1

0.2

0.6

1.0

1.4

-2

-1

0

1

2

2013 2014 2015 2016 2017 2018 2019 2020

Percent change
A Data Book: Health care spending and the Medicare program, July 2021 89

Chart 7-9. Spending on hospital outpatient services covered 

under the outpatient PPS, 2010–2020

Note: PPS (prospective payment system). Spending amounts are for services covered by the Medicare outpatient PPS. They do 

not include services paid on separate fee schedules (e.g., ambulance services and durable medical equipment) or those 

paid on a cost basis (e.g., corneal tissue acquisition and flu vaccines) or payments for clinical laboratory services, except 

those packaged into payment bundles. 

*Estimated figures.

Source: CMS, Office of the Actuary.

• The Office of the Actuary estimates that spending under the outpatient PPS was $76.4 billion in 

2020 ($61.9 billion in program spending, $14.5 billion in beneficiary copayments). We estimate 

that the outpatient PPS accounted for about 7 percent of total Medicare program spending in 

2020 (data not shown).

• From calendar year 2010 to 2020, overall spending by Medicare and beneficiaries on 

hospital outpatient services covered under the outpatient PPS increased by 108 percent, an 

average of 7.6 percent per year. The Office of the Actuary projects continued growth in total 

spending, averaging 10.5 percent per year from 2020 to 2022 (data not shown).

• Beneficiary cost sharing under the outpatient PPS includes the Part B deductible and 

coinsurance for each service. Under the outpatient PPS, beneficiary cost sharing was about 

19 percent in 2020 (data not shown).

28.3 30.9 33.7 36.0 41.1 44.7 47.6 51.1 54.9 57.9 61.9 8.4 8.9

9.4 10.4

11.2

11.5

12.1

12.0

12.5

13.7

14.5

0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

Dollars (in billions)

Beneficiary cost sharing

Program payments
90 

Ambulatory care

Chart 7-10. Most hospitals provide outpatient services

Share offering

Acute care Outpatient Outpatient Emergency

Year hospitals services surgery services

2008 3,607 94% 87% N/A

2010 3,518 95 90 N/A

2012 3,483 95 91 93%

2014 3,429 96 92 93

2016 3,370 96 93 93

2018 3,301 96 93 90

2019 3,245 96 93 91

2020 3,194 96 93 91

Note: N/A (not applicable). We list emergency services from 2008 through 2010 as “N/A” because the data source we used in 

this chart changed the variable for identifying hospitals’ provision of emergency services. We believe this change in 

variable definition makes it appear that the share of hospitals providing emergency services increased sharply from 2010 

to 2012, but we question whether such a large increase actually occurred. This chart includes services provided or 

arranged by acute care short-term hospitals and excludes long-term, Christian Science, psychiatric, rehabilitation, 

children’s, critical access, and alcohol/drug hospitals.

Source: Medicare Provider of Services files from CMS.

• The number of hospitals that furnish services under Medicare’s outpatient prospective 

payment system has declined slowly since 2008, from 3,607 in 2008 to 3,194 in 2020.

• The share of hospitals providing outpatient services remained stable, and the share offering 

outpatient surgery steadily increased from 2008 through 2014 and has remained stable 

since then. The share offering emergency services declined slightly from 2016 to 2018.
A Data Book: Health care spending and the Medicare program, July 2021 91

Chart 7-11. Payments and volume of services under the 

Medicare hospital outpatient PPS, by type of 

service, 2019

Payments Volume

Note: PPS (prospective payment system), E&M (evaluation and management). “Payments” include both program spending and 

beneficiary cost sharing. We grouped services into the following categories, according to the Berenson-Eggers Type of 

Service codes developed by CMS: evaluation and management, procedures, imaging, and tests. “Pass-through drugs” 

and “separately paid drugs/blood products” are classified by their payment status indicator. The percentages in both 

figures do not sum to 100 due to rounding.

Source: MedPAC analysis of standard analytic file of outpatient claims for 2019.

• Hospitals provide many types of services in their outpatient departments, including 

emergency and clinic visits, imaging and other diagnostic services, laboratory tests, and 

ambulatory surgery.

• The payments for services are distributed differently from volume. For example, in 2019, 

procedures accounted for 46 percent of payments but only 14 percent of volume.

• Procedures (e.g., endoscopies, surgeries, and skin and musculoskeletal procedures) 

accounted for the greatest share of payments for services (46 percent) in 2019, followed by

separately paid drugs and blood products (20 percent), E&M services (19 percent), and 

imaging services (12 percent).

• Payments for separately payable drugs and blood products and pass-through drugs have 

increased in relation to other categories in the outpatient PPS, increasing from 15 percent of 

total outpatient PPS spending in 2013 (data not shown) to 23 percent of total outpatient PPS 

spending in 2019. Pass-through drugs are new drugs that have been approved by the Food 

and Drug Administration; were not paid under Medicare’s hospital outpatient payment 

system before January 1, 1997; and have been determined to have costs that are not 

insignificant in relation to the outpatient PPS payment rate for the applicable service. Statute 

allows drugs to have pass-through status for two to three years.

Tests

1%

Passthrough 

drugs

3%

Procedures

46%

Imaging

12%

E&M

19%

Separately 

paid drugs/

blood 

products

20%

Tests

2% Pass-through 

drugs

4%

Procedures

14%

Imaging

8%

E&M 14%

Separately 

paid 

drugs/blood 

products

57%
92 

Ambulatory care

Chart 7-12. Hospital outpatient services with the highest 

Medicare expenditures, 2019

Share of

Medicare Volume Payment

APC title expenditures (thousands) rate

Total 51%

All emergency visits 6 12,547 $345

Clinic visits 6 32,684 116

Comprehensive observation services 5 1,430 2,387

Level 5 musculoskeletal procedures 3 174 10,714

Level 3 endovascular procedures 2 167 9,669

Level 3 electrophysiologic procedures 2 75 19,214

Level 4 musculoskeletal procedures 2 218 5,700

Level 3 drug administration 2 6,521 187

Level 2 ICD and similar procedures 2 37 30,656

Level 3 radiation therapy 2 1,943 520

Level 1 endovascular procedures 2 357 2,810

Level 2 imaging without contrast 1 8,501 113

Level 2 imaging with contrast 1 2,441 386

Level 4 imaging without contrast 1 1,855 497

Level 2 lower GI procedures 1 1,012 980

Level 1 laparoscopy and related procedures 1 194 4,596

Level 4 endovascular procedures 1 60 15,355

Level 3 nuclear medicine and related services 1 696 1,129

Level 1 intraocular procedures 1 428 1,917

Level 1 imaging without contrast 1 3,486 231

Level 4 drug administration 1 2,518 288

Level 3 pacemaker and similar procedures 1 68 9,897

Level 1 upper GI procedures 1 955 762

Level 2 excision/biopsy/incision and drainage 1 460 1,376

Level 3 vascular procedures 1 234 2,642

Level 4 nuclear medicine and related services 1 443 1,376

Level 5 urology and related services 1 152 4,021

Average APC 600 168

Note: APC (ambulatory payment classification), ICD (implantable cardioverter-defibrillator), GI (gastrointestinal). The payment 

rate for “all emergency visits” is a weighted average of payment rates for 10 emergency visit APCs (not listed on this 

chart). The shares of payments for the 27 APC categories do not add to the total share of payments (51 percent) because 

of rounding. The average APC figures in the last line represent averages for all APCs.

Source: MedPAC analysis of 100 percent analytic files of outpatient claims for calendar year 2019.

• Although the outpatient prospective payment system covers thousands of services, 

expenditures are concentrated in a few categories that have high volume, high payment 

rates, or both.
A Data Book: Health care spending and the Medicare program, July 2021 93

Chart 7-13. Separately payable drugs have increased as a share 

of total spending in the outpatient prospective 

payment system, 2014–2019

Note: OPPS (outpatient prospective payment system).

Source: MedPAC analysis of hospital outpatient standard analytic claims files from 2014 through 2019.

• The OPPS packages the cost of most drugs into the payment for the related services. 

However, the OPPS has two programs that provide separate payment for higher cost drugs: 

the pass-through program, which is focused on drugs that are new to the market, and the 

program for separately payable non-pass-through (SPNPT) drugs, which is focused on 

drugs that have been established in the drug market. Pass-through drugs can hold that 

status for two to three years, after which they can become SPNPT drugs. Most SPNPT 

drugs were previously pass-through drugs.

• Separately payable drugs have become an increasingly larger share of OPPS spending, 

increasing from 14.7 percent in 2014 to 22.4 percent in 2019.

• The share of OPPS spending attributable to separately payable drugs increased each year 

from 2014 to 2019, but the increase was relatively small from 2017 to 2018. The small 

increase during that period was the result of a policy implemented by CMS that substantially 

decreased the payment rates for SPNPT drugs that hospitals obtained through the 340B 

Drug Pricing Program. Without that policy, we estimate that separately payable drugs would 

have been 22.7 percent of OPPS spending in 2018 and 24.8 percent in 2019.

14.7

16.3

18.4

20.4 20.5

22.4

0

5

10

15

20

25

30

2014 2015 2016 2017 2018 2019

Separately payable drugs as a 

share of OPPS spending
94 

Ambulatory care

Chart 7-14. Number of Medicare-certified ASCs increased by 

11 percent, 2013–2019

2013 2014 2015 2016 2017 2018 2019

Medicare payments (billions of dollars) $3.7 $3.8 $4.1 $4.3 $4.6 $4.9 $5.2

New centers (during year) 178 191 170 171 216 230 226

Closed or merged centers (during year) 120 123 109 101 101 103 84

Net total number of centers (end of year) 5,233 5,301 5,362 5,432 5,547 5,674 5,816

Net percent growth in number

of centers 1.1% 1.3% 1.2% 1.3% 2.1% 2.3% 2.5%

Share of all centers that are:

For profit 95 95 95 95 95 95 95

Nonprofit 4 4 4 4 4 4 4

Government 2 2 2 1 1 1 1

Urban 93 93 93 93 93 93 93

Rural 7 7 7 7 7 7 7

Note: ASC (ambulatory surgical center). Medicare payments include program spending and beneficiary cost sharing for ASC 

facility services. Some figures differ from Chart 7-14 in our 2020 data book because CMS updated the Provider of 

Services file. Some totals may not sum to 100 percent due to rounding.

Source: MedPAC analysis of Provider of Services file from CMS 2019. Payment data are from CMS, Office of the Actuary. 

• ASCs are distinct entities that furnish ambulatory surgical services not requiring an overnight 

stay in a hospital. The most common ASC procedures are cataract removal with lens 

insertion, upper gastrointestinal endoscopy, colonoscopy, and nerve procedures.

• Total Medicare payments per fee-for-service (FFS) Medicare beneficiary for ASC services 

increased by approximately 6 percent per year, on average, from 2013 through 2019 (data 

not shown). Payments per FFS beneficiary served in an ASC grew by 4.9 percent per year 

during this period. From 2018 to 2019, total payments rose by 7.3 percent, and payments 

per beneficiary grew by 8.3 percent (per beneficiary data not shown). 

• The number of Medicare-certified ASCs grew at an average annual rate of 1.8 percent 

from 2013 through 2019. In this same period, an annual average of 197 new facilities 

entered the market, while an average of 106 closed or merged with other facilities.
A Data Book: Health care spending and the Medicare program, July 2021 95

Chart 7-15. Between 33 and 70 low-value services were provided 

per 100 FFS beneficiaries in 2018; Medicare spent 

between $2.4 billion and $6.9 billion on these services 

Measure

Broader version of measure Narrower version of measure

Count 

per 100 

beneficiaries

Share of 

beneficiaries 

affected

Spending 

(millions)

Count 

per 100 

beneficiaries

Share of 

beneficiaries 

affected

Spending 

(millions)

Imaging for nonspecific

low back pain 12.6 9.2% $263 3.5 3.2% $73

PSA screening at age >75 years 8.7 5.9 82 4.9 4.0 46

Colon cancer screening 

for older adults 6.9 6.6 412 0.2 0.2 3

Spinal injection for low back pain 6.9 3.6 1,418 3.1 1.9 633

PTH testing in early CKD 5.4 3.3 109 4.6 2.8 93

Carotid artery disease screening 

in asymptomatic adults 4.6 4.2 262 3.7 3.4 212

T3 level testing for patients 

with hypothyroidism 4.3 2.5 28 4.3 2.5 28

Preoperative chest radiography 4.0 3.6 63 0.9 0.9 15

Stress testing for stable 

coronary disease 3.7 3.6 1,129 0.4 0.4 132

Head imaging for 

uncomplicated headache 3.7 3.3 268 2.3 2.2 167

Cervical cancer screening at 

age >65 years 1.6 1.6 35 1.4 1.4 32

Homocysteine testing in 

cardiovascular disease 1.2 0.9 10 0.2 0.2 2

Head imaging for syncope 1.2 1.1 84 0.7 0.7 51

Preoperative echocardiography 0.9 0.9 78 0.3 0.3 24

Preoperative stress testing 0.6 0.6 192 0.2 0.2 61

CT for uncomplicated rhinosinusitis 0.6 0.5 45 0.2 0.2 19

Screening for carotid artery disease 

for syncope 0.5 0.5 30 0.4 0.4 22

Imaging for plantar fasciitis 0.5 0.4 11 0.3 0.2 4

BMD testing at frequent intervals 0.5 0.5 11 0.3 0.3 7

Vitamin D testing in absence of 

hypercalcemia or decreased kidney 

function 0.4 0.4 7 0.4 0.3 7

Cancer screening for patients 

with CKD on dialysis 0.3 0.3 10 0.1 0.1 1

PCI/stenting for stable 

coronary disease 0.3 0.3 1,435 0.1 0.1 254

Arthroscopic surgery for knee 

osteoarthritis 0.2 0.2 188 0.04 0.04 35

Preoperative PFT 0.2 0.2 2 0.1 0.1 1

Vertebroplasty/kyphoplasty for 

osteoporotic vertebral fractures 0.2 0.1 336 0.2 0.1 328

Hypercoagulability testing after DVT 0.2 0.1 5 0.1 0.05 2

IVC filter to prevent pulmonary embolism 0.1 0.1 21 0.1 0.1 21

Renal artery angioplasty/stenting 0.1 0.1 176 0.02 0.02 43

EEG for headache 0.1 0.1 4 0.03 0.03 2

Carotid endarterectomy for 

asymptomatic patients 0.1 0.1 145 0.02 0.02 59

Pulmonary artery catheterization in ICU 0.01 0.01 0.2 0.005 0.004 0.2

Total 70.5 35.9 6,860 33.1 21.6 2,377

(Chart continued next page)
96 

Ambulatory care

Chart 7-15. Between 33 and 70 low-value services were provided 

per 100 FFS beneficiaries in 2018; Medicare spent 

between $2.4 billion and $6.9 billion on these services 

(continued)

Note: FFS (fee-for-service), PSA (prostate-specific antigen), PTH (parathyroid hormone), CKD (chronic kidney disease), CT 

(computed tomography), BMD (bone mineral density), PCI (percutaneous coronary intervention), PFT (pulmonary function 

test), DVT (deep vein thrombosis), IVC (inferior vena cava), EEG (electroencephalography), ICU (intensive care unit). 

“Count” refers to the number of unique services. Numbers may not sum to totals due to rounding. The total for share of 

beneficiaries affected does not equal the column sum because some beneficiaries received services covered by multiple 

measures. “Spending” includes Medicare Part A and Part B program spending and beneficiary cost sharing for services 

detected by measures of low-value care. Spending is based on a standardized price for each service from 2009 that was 

updated to 2018. The broad and narrow version of the measure for T3 level testing for patients with hypothyroidism is the 

same. 

Source: MedPAC analysis of 100 percent of Medicare claims using measures developed by Schwartz and colleagues (Schwartz, 

A. L., B. E. Landon, A. G. Elshaug, et al. 2014. Measuring low-value care in Medicare. JAMA Internal Medicine 174: 

1067–1076; Schwartz, A. L., M. E. Chernew, B. E. Landon, et al. 2015. Changes in low-value services in year 1 of the 

Medicare Pioneer Accountable Care Organization Program. JAMA Internal Medicine 175: 1815–1825).

• Low-value care is the provision of a service that has little or no clinical benefit or care in 

which the risk of harm from the service outweighs its potential benefit.

• The 31 measures of low-value care in this chart were developed by a team of researchers. 

The measures are drawn from evidence-based lists—such as Choosing Wisely—and the 

medical literature. We applied these measures to 100 percent of Medicare claims data from 

2018. These 31 measures do not represent all instances of low-value care; the actual 

number (and corresponding spending) may be much higher. 

• The researchers developed two versions of each measure: a broader version (more

sensitive, less specific) and a narrower version (less sensitive, more specific). Increasing the 

sensitivity of a measure captures more potentially inappropriate use but is also more likely to 

misclassify some appropriate use as inappropriate. Increasing a measure’s specificity leads 

to less misclassification of appropriate use as inappropriate at the expense of potentially 

missing some instances of inappropriate use. 

• Based on the broader versions of the measures, our analysis found about 70 instances of 

low-value care per 100 beneficiaries in 2018, with about 36 percent of beneficiaries 

receiving at least 1 low-value service that year. Medicare spending for these services was 

$6.9 billion. Based on the narrower versions of the measures, our analysis showed about 33

instances of low-value care per 100 beneficiaries, with almost 22 percent of beneficiaries 

receiving at least 1 low-value service. Medicare spending for these services totaled about

$2.4 billion.
A Data Book: Health care spending and the Medicare program, July 2021 97

Chart 7-16. Imaging and cancer screening accounted for most of 

the volume of low-value care in 2018 

Note: “Count” refers to the number of unique services provided to fee-for-service Medicare beneficiaries. 

Source: MedPAC analysis of 100 percent of Medicare claims using measures developed by Schwartz and colleagues (Schwartz, 

A. L., B. E. Landon, A. G. Elshaug, et al. 2014. Measuring low-value care in Medicare. JAMA Internal Medicine 174: 

1067–1076; Schwartz, A. L., M. E. Chernew, B. E. Landon, et al. 2015. Changes in low-value services in year 1 of the 

Medicare Pioneer Accountable Care Organization Program. JAMA Internal Medicine 175: 1815–1825).

• We assigned each of the 31 measures of low-value care from Chart 7-15 to 1 of 6 clinical 

categories. 

• Imaging and cancer screening accounted for nearly 60 percent of the volume of low-value 

care per 100 beneficiaries using the broader versions of the measures. The “imaging”

category includes back imaging for patients with nonspecific low back pain and screening for 

carotid artery disease in asymptomatic adults. The “cancer screening” category includes 

prostate-specific antigen testing for men ages 75 or older and colorectal cancer screening 

for older adults.

• Using the narrower versions of the measures, imaging and diagnostic and preventive testing 

accounted for 64 percent of the volume of low-value care per 100 beneficiaries.

0

10

20

30

40

50

60

70

80

Broader measures Narrower measures

Count per 100 beneficiaries

Cardiovascular testing and procedures

Preoperative testing

Other surgical procedures

Diagnostic and preventive testing

Cancer screening

Imaging

Total: 70

Total: 33
98 

Ambulatory care

Chart 7-17. Cardiovascular testing and procedures, other 

surgical procedures, and imaging accounted for 

most of spending on low-value care in 2018 

Note: “Spending” includes Medicare Part A and Part B program spending and beneficiary cost sharing for services detected by 

measures of low-value care. To estimate spending, we used standardized prices to adjust for regional differences in 

payment rates. The standardized price is the median payment amount per service in 2009, adjusted for the increase in 

payment rates between 2009 and 2018. This method was developed by Schwartz et al. (2014). 

Source: MedPAC analysis of 100 percent of Medicare claims using measures developed by Schwartz and colleagues (Schwartz, 

A. L., B. E. Landon, A. G. Elshaug, et al. 2014. Measuring low-value care in Medicare. JAMA Internal Medicine 174: 

1067–1076; Schwartz, A. L., M. E. Chernew, B. E. Landon, et al. 2015. Changes in low-value services in year 1 of the 

Medicare Pioneer Accountable Care Organization Program. JAMA Internal Medicine 175: 1815–1825).

• Cardiovascular testing and procedures and other surgical procedures accounted for 71 percent 

of total spending on low-value care using the broader measures. Other surgical procedures and 

imaging made up nearly two-thirds of spending on low-value care using the narrower measures.

• The “cardiovascular testing and procedures” category includes stress testing for stable coronary 

disease and percutaneous coronary intervention with balloon angioplasty or stent placement for 

stable coronary disease. The “other surgical procedures” category includes spinal injection for 

low back pain and arthroscopic surgery for knee osteoarthritis. The “imaging” category includes 

back imaging for patients with nonspecific low back pain and screening for carotid artery disease 

in asymptomatic adults.

• The spending estimates probably understate actual spending on low-value care because they do 

not include the cost of downstream services (e.g., follow-up tests and procedures) that may 

result from the initial low-value service. Also, we are not capturing all low-value care through 

these 31 measures.

0

1

2

3

4

5

6

7

8

Broader measures Narrower measures

Medicare spending (in billions of dollars)

Cardiovascular testing and procedures

Preoperative testing

Other surgical procedures

Diagnostic and preventive testing

Cancer screening

Imaging

Total: $6.9

Total: $2.4 
8

A Data Book: Health care spending and the Medicare program, July 2021 101

Chart 8-1. The number of post-acute care providers decreased 

slightly in 2020

Average

annual

percent Percent

change change

2016 2017 2018 2019 2020 2016−2020 2019−2020

Home health

agencies 12,342 11,964 11,701 11,571 11,456 –1.7 –1.0

Inpatient

rehabilitation

facilities 1,188 1,178 1,170 1,152 1,113 –1.5 –3.4

Long-term

care hospitals 423 411 386 371 351 –4.6 –5.4

Skilled nursing

facilities 15,344 15,377 15,350 15,297 15,156 –0.3 –0.9

Source: MedPAC analysis of active provider counts from CMS Survey and Certification’s Quality, Certification, and Oversight 

reports (skilled nursing facilities and home health agencies) and CMS Provider of Services files (inpatient rehabilitation 

facilities and long-term care hospitals).

• The number of home health agencies has been declining since 2013 after several years of 

substantial growth (data not shown). The decline in agencies was concentrated in Texas 

and Florida, two states that saw considerable growth after the implementation of the home 

health prospective payment system in October 2000.

• The supply of inpatient rehabilitation facilities (IRFs) has been declining slightly since 2016. 

Most IRFs are distinct units in acute care hospitals; about one-quarter are freestanding 

facilities. However, because freestanding IRFs tend to have more beds, they account for 

about half of Medicare discharges from IRFs.

• After peaking in 2012 (data not shown), the number of long-term care hospitals (LTCHs) has 

decreased. The decline became more rapid after the implementation of a dual payment-rate

system that reduced payments for certain Medicare discharges from LTCHs beginning in 

fiscal year 2016.

• The total number of skilled nursing facilities rose between 2016 and 2017, then decreased 

less than 1 percent per year between 2017 and 2019. 
102 

Post-acute care

Chart 8-2. Medicare fee-for-service spending for post-acute 

care was relatively stable from 2010 to 2019

Note: These calendar year‒incurred data represent program spending only; they do not include beneficiary cost sharing.

Source: CMS Office of the Actuary 2021.

• Aggregate fee-for-service (FFS) spending on post-acute care (PAC) has remained stable 

since 2012, in part because of expanded enrollment in managed care under Medicare 

Advantage (Medicare Advantage spending is not included in this chart). However, spending 

growth has varied by PAC sector.

• FFS spending on skilled nursing facilities increased sharply in 2011, reflecting CMS’s 

adjustment for the implementation of the new case-mix groups (resource utilization groups, 

version IV). Once CMS established that the adjustment it made was too large, it lowered the 

adjustment, and spending dropped in 2012. Overall, spending on SNF care and home 

health care was relatively stable between 2012 and 2019, decreasing slightly in the latter 

part of the period. 

• FFS spending on inpatient rehabilitation facilities (IRFs) has increased steadily over the past 

decade. In all, spending on IRFs increased 36 percent between 2010 and 2019. 

• FFS spending on long-term care hospitals (LTCHs) has decreased by 29 percent since 

2015, largely due to the implementation of the dual payment-rate system that reduced 

payments for certain LTCH cases.

58.6

61.3

58.3 58.8 59.2 60.4 59.7 58.8 58.4 57.5

27.8

31.1

28.2 28.6 29.0 29.6 28.9 28.5 28.1 27.6

19.6 18.6 18.2 18.1 18.0 18.4 18.4 18.1 18.2 18.1

6.1 6.4 6.7 6.9 7.2 7.5 7.7 8.0 8.3 8.3

5.0 5.2 5.3 5.2 5.0 5.0 4.7 4.1 3.8 3.5 0

10

20

30

40

50

60

70

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Dollars (in billions)

Calendar year

All post-acute care

Skilled nursing facilities

Home health agencies

Inpatient rehabilitation facilities

Long-term care hospitals
A Data Book: Health care spending and the Medicare program, July 2021 103

Chart 8-3. Freestanding SNFs and for-profit SNFs accounted

for the majority of facilities, Medicare stays, and 

Medicare spending in 2019

Medicare-covered Medicare payments

Type of SNF Facilities stays (billions)

Totals 14,923 2,069,107 $25.4

Freestanding 96% 96% 97%

Hospital based 4 4 3

Urban 73 84 85

Rural 27 16 15

For profit 71 71 75

Nonprofit 23 25 22

Government 6 4 3

Note: SNF (skilled nursing facility). The spending amount included here is lower than that reported by the Office of the Actuary, 

and the count of SNFs is slightly lower than what is reported in CMS Survey and Certification’s Quality, Certification, and 

Oversight reports.

Source: MedPAC analysis of the Provider of Services and Medicare Provider Analysis and Review files from CMS.

• In 2019, freestanding facilities accounted for 96 percent of SNF stays and 97 percent of 

Medicare’s payments to SNFs.

• Urban facilities accounted for 73 percent of facilities, 84 percent of stays, and 85 percent of 

Medicare payments in 2019. 

• In 2019, for-profit facilities accounted for 71 percent of facilities and stays and 75 percent of 

Medicare payments. 
104 

Post-acute care

Chart 8-4. SNF admissions and stays continued to decline 

in 2019 

 Percent 

 change

Volume measure 2014 2016 2018 2019 2018‒2019

Covered admissions per 

 1,000 FFS beneficiaries 68.3 65.9 62.5 59.5 –4.8%

Covered days per 1,000 1,843 1,693 1,559 1,475 –5.4

 FFS beneficiaries

Covered days per admission 27.0 25.7 25.0 24.8 –0.8

Note: SNF (skilled nursing facility), FFS (fee-for-service). Data include 50 states and the District of Columbia. 

Source: Calendar year data from CMS, Office of Information Products and Data Analytics, 2021.

• In 2019, 4 percent of beneficiaries enrolled in FFS Medicare used SNF services (data not 

shown). 

• Between 2018 and 2019, covered SNF admissions per 1,000 FFS beneficiaries decreased 

4.8 percent. The decline is consistent with a decline in FFS per capita inpatient hospital 

stays that were three days or longer and therefore qualified for Medicare coverage of SNF 

care (data not shown).

• During the same period, covered days per admission declined 0.8 percent to 24.8 days, so 

there were fewer covered days per 1,000 beneficiaries. 
A Data Book: Health care spending and the Medicare program, July 2021 105

Chart 8-5. Freestanding SNF Medicare margins remained high 

in 2019

2012 2014 2016 2018 2019

All 14.1% 12.8% 11.6% 10.8% 11.3%

Rural 13.3 10.8 9.7 8.5 9.6 

Urban 14.2 13.1 11.9 11.2 11.6

Nonprofit 5.7 4.3 2.6 0.8 0.9 

For profit 16.3 15.1 14.1 13.5 14.3 

Note: SNF (skilled nursing facility). 

Source: MedPAC analysis of freestanding SNF cost reports 2012–2019.

• The aggregate Medicare margin for freestanding SNFs in 2019 exceeded 10 percent for the 

20th consecutive year (not all years are shown). After reaching over 21 percent in 2011 

(data not shown), the margins have declined primarily because current law requires annual 

market basket increases to payments to be offset by a productivity adjustment. The 

Medicare margin in 2019 increased from 2018 because SNFs kept their cost growth below 

the average increase in per day payments.

• In 2019, on average, urban facilities had higher Medicare margins than rural facilities. Forprofit SNFs had considerably higher Medicare margins than nonprofit SNFs, reflecting their 

larger size and lower cost growth.

• In 2019, the average total margin (the margin across all payers and all lines of business) for 

freestanding facilities was 0.6 percent, up from –0.3 percent in 2018 (data not shown). 
106 

Post-acute care

Chart 8-6. Cost and payment differences explain variation in 

Medicare margins for freestanding SNFs in 2019

 

Highest margin Lowest margin Ratio of highest

quartile quartile quartile to

Characteristic (n = 3,256) (n = 3,255) lowest quartile

Cost measures 

Standardized cost per day $281 $424 0.66

Standardized cost per discharge $11,771 $14,926 0.79

Average daily census (patients) 89 63 1.40

Revenue measures

Medicare payment per day $544 $470 1.16

Medicare payment per discharge $23,353 $15,820 1.48

Share of days in intensive therapy 89% 81% 1.10

Share of medically complex days 3 3 1.00

Medicare share of facility revenue 21 11 1.91

Average length of stay (days) 42 34 1.25

Medicaid share of days 68 56 1.20

Patient characteristics

Case-mix index 1.41 1.32 1.07

Share of dual-eligible beneficiaries 53% 34% 1.56

Share of minority beneficiaries 15 5 3.00

Share of very old beneficiaries 25 33 0.76

Facility mix

Share for profit 84% 53% N/A

Share urban 79 71 1.11

Note: SNF (skilled nursing facility), N/A (not applicable). Values shown are medians for the quartile. Highest margin quartile SNFs

were in the top 25 percent of the distribution of Medicare margins. Lowest margin quartile SNFs were in the bottom 25 

percent of the distribution of Medicare margins. “Standardized cost per day” includes Medicare costs adjusted for differences

in area wages and the case mix (using the nursing component’s relative weights) of Medicare beneficiaries. “Days in 

intensive therapy” are days classified into ultra-high and very high rehabilitation case-mix groups. “Very old beneficiaries” are 

85 years or older. “Medically complex days” are those assigned to clinically complex or special-care case-mix groups.

Quartile figures presented in the table are rounded, but the ratio column was calculated using unrounded data.

Source: MedPAC analysis of freestanding SNF claims and cost reports 2019.

• Medicare margins varied widely across freestanding SNFs. One-quarter of SNFs had 

Medicare margins at or below 0.33 percent, and one-quarter of facilities had Medicare 

margins at or above 21.4 percent (data not shown). 

• High-margin SNFs had lower costs per day (34 percent lower costs than low-margin SNFs), 

after adjusting for wage and case-mix differences, and higher payment per day (16 percent). 

• Facilities with the highest Medicare margins had higher case-mix indexes, higher shares of 

beneficiaries who were dually eligible for Medicare and Medicaid, and higher shares of 

minority beneficiaries.
A Data Book: Health care spending and the Medicare program, July 2021 107

Chart 8-7. SNFs’ quality measures improved slightly between 

2015 and 2019 

Average annual change

Measure 2015 2017 2018 2019 2015–2019 2018–2019

Successful discharge to the community

All SNFs 43.9% 44.4% 44.3% 45.8% 1.1% 3.2%

For profit 43.0 43.6 43.5 44.8 1.0 3.0

Nonprofit 47.2 47.6 47.4 48.7 0.8 2.7

Freestanding 43.4 44.0 44.0 45.4 1.1 3.3

Hospital based 52.9 53.8 52.8 53.8 0.4 2.0

Hospitalizations 

All SNFs 15.1 14.4 14.1 13.7 –2.4 –3.1

For profit 15.7 14.9 14.6 14.2 –2.4 –2.6 

Nonprofit 13.3 12.9 12.7 12.3 –2.0 –2.9 

Freestanding 15.3 14.6 14.3 13.8 –2.5 –3.0

Hospital based 10.6 10.2 10.6 10.0 –1.5 –5.4

Note: SNF (skilled nursing facility). “Successful discharge to the community” includes beneficiaries discharged to 

the community (including those discharged to the same nursing home they were in before) who did not have 

an unplanned hospitalization or die in the 30 days after discharge. The hospitalization measure captures all 

unplanned hospital admissions, readmissions, and outpatient observation stays that occurred during the 

SNF stay. Both measures are uniformly defined and risk adjusted across SNFs, home health agencies, 

inpatient rehabilitation facilities, and long-term care hospitals. Providers with at least 60 stays in the year 

were included in calculating the average facility rate. The “All SNFs” category includes the performance of 

government-owned SNFs, which are not displayed separately in the table. The average annual changes 

were calculate using unrounded annual rates. 

Source: MedPAC analysis of SNF claims and linked inpatient hospital stays 2015 through 2019 for fee-for-service 

beneficiaries. 

• Rates of successful discharge to the community improved between 2015 and 2019. A 

greater share of beneficiaries was discharged to the community (45.8 percent compared 

with 43.9 percent). This pattern held across ownership groups and facility type.

• The rates of hospitalization during the SNF stay improved (decreased) between 2015 and 

2019. A smaller share of beneficiaries was hospitalized during a SNF stay (13.7 percent 

compared with 15.1 percent). This pattern held across ownership groups and facility types. 
108 

Post-acute care

Chart 8-8. Trends in the provision of home health care

 Percent change 2011–2019

2011 2019 Annual average Cumulative

Number of users (in millions) 3.4 3.3 –0.5% –4.3%

Share of FFS beneficiaries

who used home health care 9.4% 8.6% –1.1 –8.7

Episodes (in millions) 6.8 6.1 –1.3 –11.0

Episodes per home health patient 2.0 1.9 –0.9 –7.0

Visits per home health episode 17.2 16.4 –0.6 –4.7

Visits per home health patient 34.2 30.4 –1.3 –11.1

Average payment per episode $2,916 $3,167 1.0 8.6

Note: FFS (fee-for-service). Yearly figures presented in the table are rounded, but the percent-change columns were calculated 

using unrounded data. Average payment per episode excludes payments for low-use episodes (those with fewer than five

visits). Other measures of utilization include low-use episodes.

Source: MedPAC analysis of the home health standard analytic file from CMS. 

• Between 2011 and 2019, episode volume declined by 11.0 percent and the number of users 

dropped 4.3 percent.

• The number of visits per patient decreased between 2011 and 2019. This decline was a 

consequence of two other utilization declines in this period: a decline in average number of 

episodes per home health patient and a decline in the average number of visits per episode.

• The average payment per full episode was $3,167 in 2019, an increase of 8.6 percent

relative to 2011. Throughout the 2011 to 2019 period, Medicare implemented a number of 

policies to reduce or slow the growth of home health payments. However, despite these 

reductions, the margins of freestanding home health agencies averaged in excess of 15 

percent in this period, indicating that payments remain well in excess of costs despite these 

policies (data not shown).
A Data Book: Health care spending and the Medicare program, July 2021 109

Chart 8-9. Most home health episodes are not preceded by 

hospitalization or PAC stay

 Number of episodes Percent change

(in millions) 2011‒2019

 2011 2019 Annual average Cumulative

Episodes preceded by a 

 hospitalization or PAC stay 2.2 2.1 –0.4% –3.3%

Episodes not preceded by a 

 hospitalization or PAC stay 4.6 4.0 –1.5 –12.8

Share of episodes not preceded 

 by a hospitalization or PAC stay 68% 66% –0.3 –2.7

Total 6.8 6.1 –1.3 –11.1

Note: PAC (post-acute care). “Episodes preceded by a hospitalization or PAC stay” refers to episodes that occurred less than 

15 days after a stay in a hospital (including a long-term care hospital), skilled nursing facility, or inpatient rehabilitation 

facility. “Episodes not preceded by a hospitalization or PAC stay” refers to episodes for which there was no hospitalization 

or PAC stay in the previous 15 days. 

Source: MedPAC analysis of 2019 home health standard analytic file, 2019 Medicare Provider and Analysis Review file, and 2019

skilled nursing facility standard analytic file from CMS.

• Most home health episodes are not preceded by a hospitalization or institutional PAC stay, 

and these episodes accounted for about two-thirds of PAC stays in 2011 through 2019. 

During this period, the number of home health episodes not preceded by a hospitalization or 

PAC stay declined 12.8 percent, while the number of episodes preceded by a hospitalization 

or PAC stay decreased 3.3 percent. 

• Before the 2011 through 2019 period, there was large growth in the number and share of 

episodes not preceded by a hospital or institutional PAC stay (data not shown). In 2001, 

episodes not preceded by a hospital or institutional PAC stay accounted for 53 percent of 

volume; by 2011, those episodes had increased to 67 percent of total episodes. Over the 

same period, the share of episodes preceded by a hospitalization or institutional PAC stay 

declined from 47 percent in 2001 to 33 percent in 2011 (data not shown). The shares of 

episode volume accounted for by these two categories have not changed substantially since 

2011. 

• Beneficiaries for whom the majority of home health episodes were preceded by a 

hospitalization or PAC stay had different characteristics from community-admitted 

beneficiaries (those who had no prior hospitalization or PAC stay) (data not shown). 

Community-admitted beneficiaries were more likely to be dually eligible for Medicare and 

Medicaid, to have more home health episodes, and to have more episodes with a high 

share of home health aide services compared with other home health users coming from a 

hospitalization or other PAC stay. Community-admitted users generally had slightly fewer 

chronic conditions, tended to be older, and were more likely to have dementia or 

Alzheimer’s disease. 
110 

Post-acute care

Chart 8-10. Medicare margins for freestanding home health

agencies, 2018 and 2019

Share of

agencies

2018 2019 2019

All 15.3% 15.8% 100%

Geography

Mostly urban 15.7 16.1 83

Mostly rural 12.6 13.9 17

Type of control

For profit 16.8 17.2 87

Nonprofit 10.1 11.0 13

Volume quintile (lowest to highest)

First 10.4 9.8 20

Second 11.0 11.5 20

Third 13.8 13.3 20

Fourth 14.4 14.3 20

Fifth 16.7 17.4 20

Note: Agencies are characterized as urban or rural based on the residence of the majority of their patients. 

Source: MedPAC analysis of 2018–2019 Medicare Cost Report files from CMS.

• In 2019, freestanding home health agencies (HHAs) (87 percent of all HHAs) had an 

aggregate margin of 15.8 percent. HHAs that served mostly urban patients in 2019 had an 

aggregate margin of 16.1 percent; HHAs that served mostly rural patients had an aggregate 

margin of 13.9 percent. The 2019 margin is consistent with the historically high margins the 

home health industry has experienced since the prospective payment system (PPS) was 

implemented in 2000. The margins from 2001 to 2018 averaged 16.2 percent (data not 

shown), indicating that most agencies have been paid well in excess of their costs under the 

PPS.

• For-profit agencies in 2019 had an average margin of 17.2 percent, and nonprofit agencies 

had an average margin of 11.0 percent.

• Agencies with higher episode volumes had higher margins. The agencies in the lowest 

volume quintile in 2019 had an aggregate margin of 9.8 percent, while those in the highest 

quintile had an aggregate margin of 17.4 percent.
A Data Book: Health care spending and the Medicare program, July 2021 111

Chart 8-11. Since 2015, home health agencies have reported a 

modest improvement in the rate of successful 

discharge from home health care to the community, 

but the rate of hospitalization has increased

Measure 2015 2016 2017 2018 2019

Successful discharge to community 68.3% 69.2% 69.6% 70.4% 72.2%

Hospitalization during home health stay 20.6% 20.8% 21.4% 21.5% 21.4%

Note: “Successful discharge to the community” includes beneficiaries discharged to the community (including those discharged 

to the same nursing home) who did not have an unplanned hospitalization or die in the 30 days after discharge. The 

hospitalization measure captures all unplanned hospital admissions and readmissions and outpatient observation stays 

that occur during the stay. Both measures are uniformly defined and risk adjusted across the four post-acute care 

settings. Providers with at least 60 stays in the year (the minimum count to meet a reliability threshold of 0.7) were 

included in calculating the average facility rate.

Source: MedPAC analysis of Medicare Provider Analysis and Review and home health standard analytic files from CMS.

• Over the five years between 2015 and 2019, the share of patients successfully discharged 

from home health care to the community rose from 68.3 percent to 72.2 percent (higher 

rates indicate better performance). In this period, the share of patients hospitalized during 

their care increased slightly from 20.6 percent to 21.4 percent (higher rates indicate worse

performance). 

• In general, hospital-based home health agencies (HHAs), HHAs located in urban areas, and 

nonprofit HHAs performed better than their counterparts on these measures (data not 

shown). Performance varied across providers; for example, the HHA at the 25th percentile 

of the distribution for hospitalization had a rate of 17.3 percent, while the agency at the 75th 

had a rate of 25.4 percent. 
112 

Post-acute care

Chart 8-12. Number of FFS IRF cases increased in 2019

Average

annual percent Percent

change change

2010 2015 2018 2019 2010–2019 2018–2019

Number of IRF cases 365,095 393,475 408,038 409,059 1.3% 0.3%

Cases per 10,000 101.3 103.4 105.7 106.9 0.6 1.6

FFS beneficiaries

Payment per case $16,814 $18,527 $20,124 $20,417 2.2 1.5

Average length of stay

(in days) 13.1 12.7 12.7 12.6 –0.4 –0.5

Note: FFS (fee-for-service), IRF (inpatient rehabilitation facility). Numbers of cases reflect Medicare FFS utilization only. Yearly 

figures presented in the table are rounded, but the percent-change columns were calculated using unrounded data.

Source: MedPAC analysis of Medicare Provider Analysis and Review data from CMS. 

• After a period of relative stability from 2015 to 2017, the number of Medicare FFS cases 

increased 3.0 percent between 2017 and 2018, growing to about 408,000 cases in 2018

(not all data shown). From 2018 to 2019, the number of cases grew slightly by 0.3 percent to 

about 409,000 cases.

• In 2019, the number of IRF cases per 10,000 FFS beneficiaries grew to 106.9, up 1.6

percent from the previous year. Relatively few Medicare beneficiaries use IRF services 

because, to qualify for Medicare coverage, IRF patients must be able to tolerate and benefit

from rehabilitation therapy that is intensive, which is usually interpreted to mean at least 

three hours of therapy a day for at least five days a week. Yet, compared with all Medicare 

beneficiaries, those admitted to IRFs in 2019 were disproportionately over age 85 (data not 

shown).

• With the increase in the number of IRF cases per FFS beneficiary, FFS Medicare’s share of 

IRF discharges remains high at 58 percent of total discharges (data not shown).

• From 2018 to 2019, the average length of stay in an IRF decreased slightly, by 0.5 percent,

to 12.6 days.
A Data Book: Health care spending and the Medicare program, July 2021 113

Chart 8-13. Most common types of FFS inpatient rehabilitation 

facility cases, 2019

Type of case Share of cases

Stroke 19.8%

Other neurological conditions 14.4

Debility 12.3

Brain injury 11.0

Fracture of the lower extremity 10.0

Other orthopedic conditions 8.1

Cardiac conditions 6.1

Spinal cord injury 4.9

Major joint replacement of lower extremity 3.7

All other 10.0

Note: FFS (fee-for-service). “Other neurological conditions” includes multiple sclerosis, Parkinson’s disease, polyneuropathy, 

and neuromuscular disorders. “Fracture of the lower extremity” includes hip, pelvis, and femur fractures. Patients with 

debility have generalized deconditioning not attributable to other conditions. “Other orthopedic conditions” excludes 

fractures of the hip, pelvis, and femur and hip and knee replacements. “All other” includes conditions such as 

amputations, arthritis, and pain syndrome. All Medicare FFS inpatient rehabilitation facility cases with valid patient 

assessment information were included in this analysis. 

Source: MedPAC analysis of Inpatient Rehabilitation Facility–Patient Assessment Instrument data from CMS.

• In 2019, the most frequently occurring case type among FFS beneficiaries admitted to 

inpatient rehabilitation facilities (IRFs) was stroke, which accounted for 19.8 percent of 

Medicare FFS cases. 

• Between 2018 and 2019, we observed disproportionate growth in the number of cases with 

debility: The share of these cases rose from 11.6 percent to 12.3 percent of FFS IRF cases

(2018 data not shown).

• The distribution of case types differs by type of IRF (data not shown). For example, in 2019, 

only 16 percent of cases in freestanding for-profit IRFs were admitted for rehabilitation 

following a stroke, compared with 26 percent of cases in hospital-based nonprofit IRFs. 

Likewise, 20 percent of cases in freestanding for-profit IRFs were admitted with “other 

neurological conditions,” about twice the share admitted to hospital-based nonprofit IRFs. 

Cases with other orthopedic conditions also made up a higher share of cases in 

freestanding for-profit facilities than in all other IRFs. 
114 

Post-acute care

Chart 8-14. Inpatient rehabilitation facilities’ Medicare margins

by type of facility, 2010–2019

2010 2012 2014 2016 2017 2018 2019

All IRFs 8.6% 11.2% 12.2% 13.3% 13.9% 14.7% 14.3%

Hospital based –0.5 0.7 0.6 0.9 1.5 2.5 2.1

Freestanding 21.4 24.0 25.2 25.9 25.6 25.4 24.6

Urban 9.0 11.6 12.6 13.6 14.2 15.0 14.7

Rural 4.9 6.7 6.5 9.2 8.4 10.1 8.6

Nonprofit 2.1 2.1 1.7 1.6 2.1 2.4 1.2

For profit 19.6 23.1 23.9 24.6 24.3 24.7 24.2

Note: IRF (inpatient rehabilitation facility).

Source: MedPAC analysis of cost report data from CMS. 

• In 2019, the aggregate IRF Medicare margin decreased slightly to 14.3 percent. 

• Margins varied by ownership, with for-profit IRFs having substantially higher margins. At the 

same time, Medicare margins in freestanding IRFs far exceeded those of hospital-based 

facilities. 

• Nevertheless, one-quarter of hospital-based IRFs had Medicare margins greater than 12

percent (data not shown), indicating that many hospitals can manage their IRF units 

profitably. Further, despite comparatively low average margins in hospital-based IRFs, 

evidence suggests that these units make a positive financial contribution to their parent 

hospitals. For example, aggregate inpatient Medicare margins for hospitals are consistently 

higher for hospitals with IRF units versus hospitals without IRF units (1.0 percentage point 

higher in 2019; data not shown). 
A Data Book: Health care spending and the Medicare program, July 2021 115

Chart 8-15. Low standardized costs led to high margins for both 

hospital-based and freestanding IRFs, 2019

Characteristic Lowest cost quartile Highest cost quartile

Median cost per discharge

 All $12,162 $21,593

 Hospital based 12,717 21,648

 Freestanding 11,803 21,109

Median Medicare margin

 All 29.6% −19.7%

 Hospital based 25.4 −19.8

 Freestanding 31.2 −19.0

Median

 Number of beds 50 18

 Occupancy rate 76% 55%

Share of facilities in the quartile that are:

 Hospital based 35% 94%

 Freestanding 65 6

 Nonprofit 24 71

 For profit 72 14

 Government 4 15

 Urban 96 74

 Rural 4 26

Note: IRF (inpatient rehabilitation facility). Cost per discharge is standardized for differences in wages across geographic areas, 

differences in case mix across providers, and differences across providers in the prevalence of high-cost outliers, shortstay outliers, and transfer cases.

Source: MedPAC analysis of Medicare cost report and Medicare Provider Analysis and Review data from CMS.

• IRFs with the lowest standardized costs (those in the lowest cost quartile) had a median 

standardized cost per discharge that was 44 percent less than that of the IRFs with the 

highest standardized costs (those in the highest cost quartile).

• IRFs with the lowest costs tended to be larger: The median number of beds was 50 in the 

lowest cost quartile compared with 18 in the highest cost quartile. In addition, IRFs with the 

lowest costs had a higher median occupancy rate (76 percent vs. 55 percent, respectively). 

These results suggest that low-cost IRFs benefit from economies of scale.

• Low-cost IRFs were disproportionately freestanding and for profit. Still, 35 percent of IRFs in 

the lowest cost quartile were hospital based and 24 percent were nonprofit. By contrast, in 

the highest cost quartile, 94 percent were hospital based and 71 percent were nonprofit.
116 

Post-acute care

Chart 8-16. Risk-adjusted quality indicators for IRFs held steady 

or improved slightly from 2015 to 2019

Measure 2015 2016 2017 2018 2019

All-condition hospitalizations within an IRF stay 7.9% 7.7% 7.9% 7.7% 7.8%

Successful discharge to community 64.6 64.6 64.8 65.1 65.5

Note: IRF (inpatient rehabilitation facility). The all-condition hospitalization measure captures all unplanned hospital admissions 

and readmissions and outpatient observation stays that occur during the stay. Successful discharge to the community 

includes beneficiaries discharged to the community (including those discharged to the same nursing home) who did not 

have an unplanned hospitalization or die in the 30 days after discharge. Both measures are uniformly defined and risk

adjusted across the four post-acute care settings. Providers with at least 60 stays in the year (the minimum count to meet 

a reliability of 0.7) were included in calculating the average facility rate. High rates of hospitalizations within a stay indicate 

worse quality. High rates of successful discharge to the community indicate better quality. 

Source: Analysis of Medicare claims data and Inpatient Rehabilitation Facility‒Patient Assessment Instrument data from CMS. 

• From 2015 through 2019, the two quality measures we examined were steady or improved. 

• The national average rate of risk-adjusted all-condition hospitalizations within an IRF stay

slightly declined from 7.9 percent in 2015 to 7.8 percent in 2019 (lower rates are better). The 

national average rate of risk-adjusted successful discharge to community improved slightly 

from 64.6 percent in 2015 to 65.5 percent in 2019. 
A Data Book: Health care spending and the Medicare program, July 2021 117

Chart 8-17. Twenty-five MS–LTC–DRGs accounted for more than

70 percent of LTCH discharges in 2019

MS–LTC Share

–DRG Description Discharges of cases

189 Pulmonary edema and respiratory failure 18,650 20.5%

207 Respiratory system diagnosis with ventilator support 96+ hours 11,995 13.2

871 Septicemia without ventilator support 96+ hours with MCC 4,999 5.5

208 Respiratory system diagnosis with ventilator support <96 hours 2,464 2.7

166 Other respiratory system OR procedures with MCC 2,092 2.3

949 Aftercare with CC/MCC 1,983 2.2

981 Extensive OR procedure unrelated to principal diagnosis with MCC 1,788 1.9

177 Respiratory infections and inflammations with MCC 1,709 1.9

539 Osteomyelitis with MCC 1,630 1.8

291 Heart failure and shock with MCC 1,508 1.7

682 Renal failure with MCC 1,508 1.7

 4 Tracheostomy with ventilator support 96+ hours or primary diagnosis

except face, mouth, and neck without major OR 1,315 1.4

314 Other circulatory system diagnoses with MCC 1,268 1.4

592 Skin ulcers with MCC 1,181 1.3

559 Aftercare, musculoskeletal system and connective tissue with MCC 1,153 1.3

862 Postoperative and post-traumatic infections with MCC 1,132 1.2

919 Complications of treatment with MCC 1,112 1.2

853 Infectious and parasitic diseases with OR procedure with MCC 982 1.1

637 Diabetes with MCC 935 1.0

870 Septicemia with ventilator support 96+ hours 921 1.0

638 Diabetes with CC 860 0.9

 56 Degenerative nervous system disorders with MCC 834 0.9

560 Aftercare, musculoskeletal system and connective tissue with CC 764 0.8

689 Kidney and urinary tract infections with MCC 727 0.8

193 Simple pneumonia and pleurisy with MCC 708 0.8

371 Major gastrointestinal disorders and peritoneal infections with MCC 708 0.8

Top 25 MS–LTC–DRGs 64,926 71.2

Total 91,147 100.0

Note: MS–LTC–DRG (Medicare severity long-term care diagnosis related group), LTCH (long-term care hospital), MCC (major 

complication or comorbidity), OR (operating room), CC (complication or comorbidity). MS–LTC–DRGs are the case-mix 

system for LTCHs. Shares for each MS–LTC–DRGs presented in the table are rounded, but the sum of the top 25 was 

calculated using unrounded values.

Source: MedPAC analysis of Medicare Provider Analysis and Review data from CMS.

• Cases in LTCHs are concentrated in a relatively small number of MS–LTC–DRGs. In 2019, the 

top 25 MS–LTC–DRGs accounted for over 71 percent of LTCH Medicare cases.

• Consistent with 2016 through 2018, the two most frequent diagnoses in LTCHs in 2019 were

pulmonary edema and respiratory failure and a respiratory system diagnosis with ventilator 

support for more than 96 hours. 

• Respiratory conditions continue to grow as a share of LTCH cases. More than 43 percent of all 

cases were respiratory conditions in 2019, an increase of 3 percentage points over 2018. 
118 

Post-acute care

Chart 8-18. Total Medicare FFS LTCH cases decreased by over 

10 percent, and cases meeting the LTCH-qualifying 

criteria decreased by 2 percent from 2016 and 2019 

2016 2017 2018 2019

Average 

annual change 

2016–2019

Cases

All 125,586 116,424 102,288 91,147 –10.1%

Meeting criteria 72,318 74,666 71,916 67,987 –2.0

Share meeting criteria 58% 64% 70% 75% 8.6

Cases per 10,000 

FFS beneficiaries

All 32.5 30.1 26.5 23.8 –9.8

Meeting criteria 18.7 19.3 18.6 17.8 –1.7

Payment 

per case

All $40,656 $38,253 $40,105 $41,448 0.6

Meeting criteria $46,223 $46,127 $46,789 $46,800 0.4

Length of stay 

(in days)

All 26.8 26.3 26.6 26.8 –0.1

Meeting criteria 27.9 27.9 28.0 28.0 0.1

Note: FFS (fee-for-service), LTCH (long-term care hospital). “Meeting criteria” refers to Medicare cases that meet the criteria 

specified in the Pathway for SGR Reform Act of 2013 for payment under the LTCH prospective payment system. All 

counts are for stays covered by FFS Medicare and do not include those in private plans. 

Source: MedPAC analysis of Medicare Provider Analysis and Review data from CMS and the annual report of the Boards of 

Trustees of the Medicare trust funds. 

• Beginning in fiscal year 2016, only certain LTCH cases qualify for the higher standard LTCH 

prospective payment system (PPS) rate pursuant to changes made in the Pathway to SGR 

Reform Act of 2013. Cases that do not meet LTCH-qualifying criteria are paid a lower siteneutral rate—the lower of (1) an amount based on Medicare’s inpatient hospital PPS rate or 

(2) 100 percent of the cost of the case.

• The number of LTCH cases per 10,000 FFS beneficiaries declined by 9.8 percent between 

2016 and 2019. The number of cases meeting the criteria for the LTCH PPS rate decreased 

by just 1.7 percent during the same period.

• Changes in payment per case from 2016 through 2019 reflect a lower payment rate for cases 

that did not meet the LTCH-qualifying criteria and offsetting increases in the share of cases 

that qualified for the standard LTCH PPS rate.

• The average length of stay for all LTCH cases and for cases meeting the criteria for the 

standard LTCH PPS rate have remained relatively stable since 2016.
A Data Book: Health care spending and the Medicare program, July 2021 119

Chart 8-19. The aggregate LTCH Medicare margin decreased 

in 2019

Type of 

LTCH

Share of 

discharges

in 2019

Medicare margin

2015 2016 2017 2018 2019

All 100% 4.7% 3.9% −2.2% −0.5% −1.6%

Nonprofit 14 −5.9 −5.7 −13.0 −11.7 –12.2

For profit 84 6.5 5.5 −0.3 1.3 0.4

Note: LTCH (long-term care hospital). Nonprofit and for-profit rows sum to 98 percent of stays because margins for governmentowned facilities, which account for 2 percent of stays, are not shown.

Source: MedPAC analysis of cost report data from CMS.

• In fiscal year 2016, CMS began implementing a dual payment-rate system under which

LTCH cases not meeting criteria specified in law are paid a lower site-neutral rate—the

lower of an amount based on (1) Medicare’s inpatient hospital prospective payment system

rate or (2) 100 percent of the cost of the case. As a result, the aggregate Medicare margin 

fell to −2.2 percent in 2017. LTCH Medicare margins have since increased but remained 

negative.

• The aggregate Medicare margin for for-profit LTCHs (which accounted for 84 percent of all 

Medicare discharges in 2019) decreased from 6.5 percent in 2015 to 0.4 percent in 2019. 

The aggregate margin for nonprofit LTCHs decreased from –5.9 percent in 2015 to –12.2

percent in 2019. 

9

A Data Book: Health care spending and the Medicare program, July 2021 123

Chart 9-1. Enrollment in MA plans, 2003–2021

Note: MA (Medicare Advantage).

Source: CMS Medicare managed care contract reports and monthly summary reports, February 2003–2021. 

• Enrollment in MA plans that are paid on an at-risk capitated basis reached 26.4 million 

enrollees in February 2021. MA enrollment represents 46 percent of all 57.7 million 

Medicare beneficiaries eligible to enroll in an MA plan (beneficiaries enrolled in both Part A 

and Part B). Other private plans account for an additional 1 percent of all Medicare 

beneficiaries with both Part A and Part B coverage. (Other private plans consist of cost 

plans, plans under the Program of All-Inclusive Care for the Elderly (PACE), and Medicare–

Medicaid plans participating in CMS’s financial alignment demonstration.) 

• MA enrollment has grown steadily since 2003 (increasing nearly sixfold) and has grown 

particularly rapidly in recent years: In each of the last three years, MA enrollment has grown 

by 10 percent. The Medicare program paid MA plans about $317 billion in 2020 to cover 

Part A and Part B services for MA enrollees (data not shown).

4.6 4.7 4.9

6.9

8.1

9.4

10.5 11.0 11.7

12.8

14.1

15.4

16.4 17.2

18.5

20.0

21.9

24.0

26.4

0

5

10

15

20

25

30

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Beneficiaries (in millions) 
124 Medicare Advantage

Chart 9-2. MA plans available to almost all Medicare 

beneficiaries, 2013–2021

 Share of Medicare beneficiaries living in counties with plans available

 CCPs

HMO or Any Average plan

local PPO Regional Any MA offerings per

(local CCP) PPO CCP PFFS plan beneficiary

2013 95 71 99 59 100 19

2014 95 71 99 53 100 18

2015 95 70 98 47 99 17

2016 96 73 99 47 99 18

2017 95 74 98 45 99 18

2018 96 74 98 41 99 20

2019 97 74 98 38 99 23

2020 98 73 99 36 99 27

2021 98 72 99 34 99 32

Note: MA (Medicare Advantage), CCP (coordinated care plan), HMO (health maintenance organization), PPO (preferred 

provider organization), PFFS (private fee-for-service). These data do not include plans that have restricted enrollment or 

are not paid based on the MA plan bidding process (special needs plans, cost plans, employer-only plans, and certain 

demonstration plans).

Source: MedPAC analysis of plan bid data from CMS, 2013–2021.

• There are four types of MA plans, three of which are CCPs. Local CCPs include HMOs and 

local PPOs, which have comprehensive provider networks and limit or discourage use of outof-network providers. Local CCPs may choose which individual counties to serve. Regional 

PPOs cover entire state-based regions and have networks that may be looser than those of 

local PPOs. CCPs accounted for 97 percent of Medicare private plan enrollees as of February 

2021 (data not shown). Since 2011, PFFS plans are required to have networks in areas with 

two or more CCPs. In other areas, PFFS plans are not required to have networks, and 

enrollees are free to use any Medicare provider.

• Local CCPs are available to 98 percent of Medicare beneficiaries in 2021, and regional 

PPOs are available to 72 percent of beneficiaries. Since 2006, almost all Medicare 

beneficiaries have had MA plans available (data not shown); 99 percent have an MA plan 

available in 2021.

• The number of plans from which beneficiaries may choose in 2021 is higher than at any time 

during the years examined. In 2021, beneficiaries can choose from an average of 32 plans 

operating in their counties.
A Data Book: Health care spending and the Medicare program, July 2021 125

Chart 9-3. Average monthly rebate dollars, by plan type, 

2016–2021

Note: HMO (health maintenance organization), PPO (preferred provider organization), PFFS (private fee-for-service), MA 

(Medicare Advantage). Employer group waiver and special needs plans are excluded.

Source: MedPAC analysis of bid and plan finder data from CMS.

• Perhaps the best summary measure of plan benefit value is the average rebate, which plans 

receive to provide additional benefits. Plans are awarded rebates for bidding under their 

benchmarks. The rebates must be returned to the plan members in the form of extra 

benefits. The extra benefits may be lower cost sharing, supplemental benefits, or lower 

premiums. The average rebate for all non-employer, non–special needs plans rose to a high 

of $140 per month per beneficiary for 2021.

• HMOs have had, by far, the highest rebates because they tend to bid lower than other types 

of plans. Average rebates for HMOs have risen sharply over the past few years and are at a 

historical high of $158 per month per beneficiary for 2021.

• For both local and regional PPOs, the rebates rose sharply after 2016. Rebates for local 

PPOs have tripled since 2016.

• While the availability of PFFS plans continues to decline, rebates for PFFS plans rose 

sharply in 2021—reflecting both higher benchmarks and lower bids relative to benchmarks 

among remaining PFFS plans. Overall rebates for PFFS plans are susceptible to greater 

year-to-year changes as the number of enrollees in these plans becomes smaller.

101

34

17

26

81

105

49

16

40

89

111

59

15

45

95

125

71

18

46

107

141

86

17

49

122

158

103

45

59

140

0

20

40

60

80

100

120

140

160

180

HMO Local PPO PFFS Regional PPO Any MA plan

Average monthly rebate dollars per beneficiary

2016 2017 2018 2019 2020 2021
126 Medicare Advantage

Chart 9-4. Changes in enrollment vary among major plan types

Total enrollees

(in thousands)

 Percent change

Plan type 2017 2018 2019 2020 2021 2020–2021

Local CCPs 16,920 18,463 20,502 22,704 25,325 12% 

Regional PPOs 1,353 1,327 1,255 1,170 1,003 –14

PFFS 190 154 118 87 61 –30

Note: CCP (coordinated care plan), PPO (preferred provider organization), PFFS (private fee-for-service). Local CCPs include 

HMOs and local PPOs.

Source: CMS health plan monthly summary reports, February 2017–2021.

• Enrollment in local CCPs grew by 12 percent over the past year. Enrollment in regional 

PPOs declined by 14 percent, and enrollment in PFFS plans dropped by 30 percent. 

Combined enrollment in the three types of plans grew by 10 percent from February 2020 to 

February 2021 (data not shown).
A Data Book: Health care spending and the Medicare program, July 2021 127

Chart 9-5. MA and cost plan enrollment by state and type of 

plan, 2021

All MA-eligible beneficiaries Distribution (in percent) of enrollees by plan type

State or territory (in thousands) HMO Local PPO Regional PPO PFFS Cost Total

U.S. total 57,550 28% 16% 2% 0% 0% 46%

Alabama 985 26 28 1 0 0 54

Alaska 94 0 2 0 0 0 2

Arizona 1,267 39 10 1 0 0 49

Arkansas 601 19 8 7 1 0 36

California 5,782 47 4 0 0 0 51

Colorado 862 36 14 0 0 0 50

Connecticut 631 23 29 1 0 0 53

Delaware 202 11 13 0 0 0 24

Florida 4,434 35 15 4 0 0 54

Georgia 1,641 15 28 8 0 0 51

Hawaii 248 21 33 2 0 0 57

Idaho 330 27 16 0 0 0 43

Illinois 2,069 14 19 0 0 0 34

Indiana 1,200 17 24 2 0 0 43

Iowa 599 12 15 0 0 2 30

Kansas 507 8 17 1 1 0 27

Kentucky 873 20 24 2 0 1 46

Louisiana 827 40 8 1 0 0 50

Maine 324 27 21 2 0 0 50

Maryland 923 11 7 0 0 0 18

Massachusetts 1,229 18 10 1 0 0 29

Michigan 1,986 20 32 0 0 0 53

Minnesota 980 17 33 0 0 6 56

Mississippi 573 18 10 2 0 0 31

Missouri 1,161 27 17 3 0 0 47

Montana 222 10 14 0 0 0 25

Nebraska 328 14 10 0 1 2 26

Nevada 498 41 8 0 0 0 48

New Hampshire 280 12 15 1 0 0 28

New Jersey 1,466 16 23 0 0 0 39

New Mexico 396 25 21 0 0 0 46

New York 3,354 32 15 4 0 0 50

North Carolina 1,921 21 22 4 0 0 47

North Dakota 124 0 6 0 0 18 24

Ohio 2,209 29 19 1 0 0 49

Oklahoma 691 15 17 1 0 0 33

Oregon 826 34 19 0 0 0 53

Pennsylvania 2,553 30 20 0 0 0 51

Puerto Rico 653 92 2 0 0 0 94

Rhode Island 201 41 8 0 0 0 50

South Carolina 1,043 13 17 8 0 0 38

South Dakota 167 1 10 0 0 16 27

Tennessee 1,293 32 16 0 0 0 49

Texas 3,953 28 18 4 0 0 50

Utah 381 36 11 0 0 0 48

Vermont 141 7 9 4 0 0 21

Virgin Islands 18 0 28 0 0 0 28

Virginia 1,406 20 9 2 0 0 32

Washington 1,291 34 8 0 0 0 43

Washington, DC 78 11 19 0 0 0 30

West Virginia 414 5 35 1 1 4 45

Wisconsin 1,137 28 19 1 0 4 52

Wyoming 106 0 2 0 2 1 6

Note: MA (Medicare Advantage), HMO (health maintenance organization), PPO (preferred provider organization), PFFS (private 

fee-for-service). Cost plans are not MA plans; they submit cost reports rather than bids to CMS. U.S. total includes

beneficiaries in U.S. territories. Component percentages and U.S. total may not sum to totals due to rounding. In contrast 

with prior years, we report MA enrollment as a share of MA-eligible beneficiaries (Medicare beneficiaries with both Part A 

and Part B coverage). In prior years, we reported MA enrollment as a percentage of total Medicare beneficiaries.

Source: CMS enrollment and population data February 2021.
128 Medicare Advantage

Chart 9-6. MA plan benchmarks, bids, and Medicare program

payments relative to FFS spending, 2021

All plans HMOs Local PPOs Regional PPOs PFFS

Benchmarks/FFS 108% 108% 109% 99% 107%

Bids/FFS 87 86 92 87 100

Payments/FFS 101 100 103 94 104

Note: MA (Medicare Advantage), FFS (fee-for-service), HMO (health maintenance organization), PPO (preferred provider 

organization), PFFS (private fee-for-service). Data exclude employer plans, which do not submit plan bids but receive 

payment based on the bids and benchmarks of nonemployer plans. All numbers in this table have been risk adjusted and 

reflect quality bonuses, but they have not been adjusted for coding intensity differences between MA and FFS that exceed 

the statutory minimum adjustment. Payments for all MA plans would average 104 percent of FFS spending if coding 

differences were fully reflected. The FFS spending denominator used in the table includes all Part A and Part B spending. MA 

payments relative to spending for FFS enrollees with both Part A and Part B would decrease by about 1 percentage point.

Source: MedPAC analysis of plan bid data from CMS October 2020.

• Since 2006, plan bids have partly determined the Medicare payments that plans receive. Plans bid to 

offer Part A and Part B coverage to Medicare beneficiaries (Part D coverage is bid separately). The 

bid includes plan administrative cost and profit. CMS bases the Medicare payment for a private plan 

on the relationship between its bid and its applicable benchmark.

• The benchmark is an administratively determined bidding target. Benchmarks for each county are set 

by means of a statutory formula based on percentages (ranging from 95 percent to 115 percent) of each 

county’s per capita Medicare FFS spending. Plans with quality ratings of 4 or more stars may have their 

benchmarks raised by 10 percent in some counties.

• If a plan’s bid is above the benchmark, then the plan receives the benchmark as payment from Medicare 

and enrollees have to pay an additional premium that equals the difference. If a plan’s bid is below the 

benchmark, the plan receives its bid plus a “rebate,” defined by law as a percentage of the difference 

between the plan’s bid and its benchmark. The percentage is based on the plan’s quality rating, and it 

ranges from 50 percent to 70 percent. The plan must then return the rebate to its enrollees in the form of 

lower cost sharing, supplemental benefits, or lower premiums.

• We estimate that MA benchmarks average 108 percent of FFS spending when weighted by MA 

enrollment. The ratio varies by plan type, which draws enrollment from different geographic areas.

• Plans’ enrollment-weighted bids average 87 percent of FFS spending in 2021. On average, each 

coordinated care plan type (HMO, local PPO, regional PPO) has demonstrated the ability to provide 

the same services for less than FFS in the areas where they bid. 

• Plan bid data indicate that 2021 MA payments will be 101 percent of FFS spending, but this figure 

does not include employer plans and does not account for risk-coding differences between FFS and 

MA plans that have not been resolved through the coding intensity factor. We estimate that coding 

differences add 3 percentage points to payments relative to FFS.

• The ratio of payments relative to FFS spending varies by the type of MA plan. HMO and regional 

PPO payments are estimated to be 100 percent and 94 percent of FFS, respectively, while payments 

to local PPOs and PFFS plans average 103 percent and 104 percent of FFS, respectively.
A Data Book: Health care spending and the Medicare program, July 2021 129

Chart 9-7. Enrollment in employer group MA plans, 2008–2021

Note: MA (Medicare Advantage).

Source: CMS enrollment data, February 2008–2021.

• While most MA plans are available to any Medicare beneficiary residing in a given area, 

some MA plans are available only to retirees whose Medicare coverage is supplemented by 

their former employer or union. These plans are called employer group plans. Such plans 

are usually offered through insurers and are marketed to groups formed by employers or 

unions rather than to individual beneficiaries.

• As of February 2021, about 5.0 million enrollees were in employer group plans, or about 19

percent of all MA enrollees. Employer plan enrollment grew by 6 percent from 2020 and has 

more than doubled since 2012.

1.56 1.83 1.92 2.08 2.32 2.53

2.96 3.14 3.16

3.68

4.13 4.51 4.73 5.02

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Enrollment (in millions)
130 Medicare Advantage

Chart 9-8. Number of special needs plan enrollees, 2012–2021

Source: CMS special needs plans comprehensive reports, April 2012–2021.

• The Congress created special needs plans (SNPs) as a new MA plan type in the Medicare 

Prescription Drug, Improvement, and Modernization Act of 2003 to provide a common 

framework for the existing plans serving special needs beneficiaries and to expand 

beneficiaries’ access to and choice among MA plans.

• SNPs were originally authorized for five years, but SNP authority was extended several 

times. The Bipartisan Budget Act of 2018 made SNPs permanent.

• CMS approves three types of SNPs: dual-eligible SNPs enroll only beneficiaries dually 

entitled to Medicare and Medicaid, chronic condition SNPs enroll only beneficiaries who 

have certain chronic or disabling conditions, and institutional SNPs enroll only beneficiaries 

who reside in institutions or are nursing-home certified.

• Enrollment in dual-eligible SNPs has grown continuously and exceeds 3.4 million in 2021, 

more than doubling since 2014.

• Enrollment in chronic condition SNPs has grown at varying rates as plan requirements have 

changed, but it has generally risen annually since 2012.

• Enrollment in institutional SNPs declined in 2021, returning to its 2019 level.

1,188

1,380

1,576 1,678

1,790

1,959

2,210

2,532

2,929

3,453

201 266 288 313 332 335 349 349 375 384

47 49 50 50 58 63 74 87 104 87

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Number of special needs plan enrollees

(in thousands)

Dual Chronic Institutional
A Data Book: Health care spending and the Medicare program, July 2021 131

Chart 9-9. Number of SNPs and SNP enrollment rose from 

2020 to 2021

Note: SNP (special needs plan).

Source: CMS special needs plans comprehensive reports, April 2020 and 2021.

• The number of SNPs increased by 16 percent from April 2020 to April 2021. Dual-eligible 

SNPs increased by 14 percent, institutional SNPs increased by 16 percent, and the number 

of chronic condition SNPs increased by 25 percent.

• In 2021, most SNPs (62 percent) are for dual-eligible beneficiaries, while 17 percent are for 

beneficiaries who reside in institutions (or reside in the community but have a similar level of 

need), and 21 percent are for beneficiaries with chronic conditions.

• From April 2020 to April 2021, the number of SNP enrollees increased by 15 percent. 

Enrollment in SNPs for dual-eligible beneficiaries grew by 18 percent, enrollment in SNPs 

for institutionalized beneficiaries declined by 16 percent, and enrollment in SNPs for

beneficiaries with certain chronic conditions grew by 2 percent. Enrollment in all SNPs has 

grown from 0.9 million in May 2007 (not shown) to 3.9 million in April 2021.

• The availability of SNPs varies by type of special needs population served (data not shown). 

In 2021, 92 percent of beneficiaries reside in areas where SNPs serve dual-eligible 

beneficiaries (up from 90 percent in 2020), 72 percent live where SNPs serve 

institutionalized beneficiaries (up from 67 percent in 2020), and 57 percent live where SNPs 

serve beneficiaries with chronic conditions (up from 52 percent in 2020).

551 627

150

174

171

214

0

200

400

600

800

1000

1200

April 2020 April 2021

Number of SNPs

Chronic or disabling condition

Institutional

Dual eligible

2,929

3,453

104

87

375

384

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

April 2020 April 2021

SNP enrollment (in thousands)

Chronic or disabling condition

Institutional

Dual eligible
132 Medicare Advantage

Chart 9-10. The share of Medicare beneficiaries in private plans 

does not differ substantially in medically 

underserved areas compared with other areas, 

but is lower in rural areas, 2021

MA-eligible

population

(in millions)

As percent of 

MA-eligible

population

Share of 

MA-eligible 

population

category in 

MA plans

All beneficiaries 57.5 100% 46%

County’s medically underserved 

area designation

Partial county 35.9 62 47

Entire county 10.3 18 45

No medically underserved areas 11.3 20 43

Urban influence code designation

Metropolitan 47.2 82 48

Rural: Micropolitan 5.8 10 37

Rural: Adjacent to metropolitan 2.8 5 36

Rural: Not adjacent to metropolitan 1.7 3 29

Note: MA (Medicare Advantage). Beneficiaries in the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands or 

in non-U.S. areas are excluded. MA plans consist of HMOs, local preferred provider organizations (PPOs), regional 

PPOs, private fee-for-service plans, and Medical Savings Account plans. In contrast with prior years, we report MA 

enrollment as a share of MA-eligible beneficiaries (Medicare beneficiaries with both Part A and Part B coverage). In prior 

years, we reported MA enrollment as a share of total Medicare beneficiaries. Medically underserved areas (MUAs) are 

designated by the Health Resources and Services Administration (HRSA) as partial counties (census tracts and county 

subdivisions) or entire counties that disproportionately have a combination of indicators such as a low number of primary 

care providers per 1,000 population, high infant mortality, high poverty, and a large elderly population. Urban influence 

codes (UICs) are designated by the Office of Management and Budget (OMB) by the population size of the metro area, 

and nonmetropolitan counties by the size of the largest city or town and proximity to metro and micropolitan areas (areas 

with a population of at least 10,000 people but fewer than 50,000). The UICs were last updated in 2013 and are updated 

every 10 years. Components may not sum to totals due to rounding. 

Source: MedPAC analysis of HRSA MUAs, OMB UICs, and CMS enrollment data February 2021.

• In general, an MA plan’s service area consists of one or more entire counties. (MA regional

PPOs are required to cover entire regions, which consist of one or more states. In rare

circumstances, MA “local” plans receive a waiver that allows them to serve only a portion of

a county if the plan is able to prove that the demographic composition (e.g., income and

race) of the portion of the county the plan intends to serve is not substantively different from

the rest of the county.)

• We examined beneficiary access to MA plans and market share of MA plans by two geographic

designations: MUAs and UICs.

(Chart continued next page)
A Data Book: Health care spending and the Medicare program, July 2021 133

Chart 9-10. The share of Medicare beneficiaries in private plans 

does not differ substantially in medically 

underserved areas compared with other areas, 

but is lower in rural areas, 2021 (continued)

• HRSA designates MUAs by census tract, county, or county subdivisions. HRSA designates

MUAs based on a score of four combined indicators: (1) disproportionately low number of

primary care providers per 1,000 people, (2) high infant mortality, (3) high poverty, and (4) a

large elderly population. Part of a county may be designated as an MUA, the entire county

may receive the designation, or the entire county may have no MUAs.

• The Office of Management and Budget UICs classify geographic areas as metropolitan,

micropolitan, adjacent to metropolitan, and not adjacent to metropolitan; the latter three

types of areas are considered rural. UICs distinguish metropolitan counties by the

population size of their metro area and nonmetropolitan counties by the size of the largest

city or town and proximity to metro and micropolitan areas (areas with a population of at

least 10,000 people but fewer than 50,000). The UICs were last updated in 2013 and are

updated every 10 years.

• Counties that have designated medically underserved areas (either partially or counties that

are entirely composed of MUAs) have shares of MA enrollment similar to counties with no

designated MUAs. The share of beneficiaries (with both Part A and Part B coverage) in MA

plans is the highest in counties partially designated as MUAs (47 percent). The proportion of

Medicare beneficiaries in MA plans located in counties that are designated entirely as MUAs

(45 percent) is almost the same as counties that do not have any MUA designation (43

percent).

• Most (82 percent) of all 57.5 million Medicare beneficiaries eligible for MA enrollment live in

metropolitan areas. The share of Medicare beneficiaries who live in metropolitan areas

enrolled in MA plans (48 percent) is higher than the share of rural beneficiaries enrolled in

MA plans.

• Nearly all Medicare beneficiaries in rural areas reside in a micropolitan county or a county

that is adjacent to a metropolitan area. More than one-third of Medicare beneficiaries in

these areas are enrolled in MA plans. From 2020 to 2021, MA enrollment in these rural

areas grew faster compared with metropolitan areas (16 percent compared with 9 percent;

data not shown).

• About 3 percent of Medicare beneficiaries reside in a rural county that is not adjacent to a

metropolitan area. More than one-quarter (29 percent) of these beneficiaries are enrolled in

MA plans. From 2020 to 2021, MA enrollment in these areas grew by 19 percent (data not

shown).
134 Medicare Advantage

Chart 9-11. MA enrollment patterns do not differ by medically 

underserved area designation but do vary based on 

urban influence designation, 2021

MA 

population

(in millions)

As a 

percent of 

MA 

population

Share of category

HMO

Local

PPO

Regional 

PPO

Other MA

plans

All Medicare private plan enrollees 26.4 100% 60% 36% 4% <0.5%

County’s medically underserved 

area designation

Partial county 16.9 64 65 32 2 <0.5

Entire county 4.6 17 52 38 9 <0.5

No medically underserved areas 4.9 18 50 45 4 <0.5

Urban influence code designation

Metropolitan 22.8 86 64 33 3 <0.5

Rural: Micropolitan 2.2 8 41 50 9 1

Rural: Adjacent to metropolitan 1.1 4 37 50 12 1

Rural: Not adjacent to metropolitan 0.5 2 32 55 12 2

Note: MA (Medicare Advantage), HMO (health maintenance organization), PPO (preferred provider organization). Beneficiaries 

in the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands or in non-U.S. areas are excluded. MA 

plans consist of HMOs, local PPOs, regional PPOs, private fee-for-service plans, and Medical Savings Account plans. In 

contrast with prior years, we report MA enrollment as a share of MA-eligible beneficiaries (Medicare beneficiaries with 

both Part A and Part B coverage). In prior years, we reported MA enrollment as a percentage of total Medicare 

beneficiaries. Medically underserved areas (MUAs) are designated by the Health Resources and Services Administration 

(HRSA) as partial counties (census tracts and county subdivisions) or entire counties that disproportionately have a 

combination of indicators such as a low number of primary care providers per 1,000 population, high infant mortality, high 

poverty, and a large elderly population. Urban influence codes (UICs) are designated by the Office of Management and 

Budget (OMB) by the population size of the metro area, and nonmetropolitan counties by the size of the largest city or 

town and proximity to metro and micropolitan areas (areas with a population of at least 10,000 people but fewer than 

50,000). The UICs were last updated in 2013 and are updated every 10 years. Components may not sum to totals due to 

rounding.

Source: MedPAC analysis of HRSA MUAs, OMB UICs, and CMS enrollment and population data February 2021.

• Local coordinated care plans (HMOs and local PPOs), which represent 96 percent of private 

plan enrollees, may choose which individual counties to serve. Regional PPOs (4 percent of 

all MA enrollees) cover entire state-based regions.

• Enrollment by type of plan is not notably different among counties with different MUA 

designations. The proportion of enrollees in HMOs is similar for counties that are designated 

entirely as medically underserved areas (52 percent) compared with counties that do not 

have any medically underserved area designation (50 percent). The remainder of private 

plan enrollment in these areas is generally in either local or regional PPOs.

• HMOs account for the largest share of MA plan enrollment in metropolitan areas (64

percent), but PPOs account for the largest share of MA plan enrollment in rural areas (more 

than 60 percent combined between local PPOs and regional PPOs).
A Data Book: Health care spending and the Medicare program, July 2021 135

Chart 9-12. MA plans are available to nearly all beneficiaries in 

medically underserved and rural areas, 2021

As a 

share of 

MAeligible

population

Share of Medicare beneficiaries

living in counties with plans available in 2021

CCPs

Any

MA plan HMO

Local 

PPO

HMO or 

local 

PPO

Regional 

PPO

Any 

CCP

All MA-eligible beneficiaries 100% 99% 97% 95% 98% 74% 99%

County’s medically underserved 

area designation

Partial county 63 99 98 95 99 69 99

Entire county 18 99 92 94 96 83 99

No medically underserved areas 19 98 96 96 98 81 98

Urban influence code designation

Metropolitan 82 >99.5 99 96 >99.5 73 >99.5

Rural: Micropolitan 10 97 89 91 94 77 96

Rural: Adjacent to metropolitan 5 97 89 91 95 83 96

Rural: Not adjacent to 

metropolitan 3 90 73 77 82 71 88

Note: MA (Medicare Advantage), CCP (coordinated care plan), HMO (health maintenance organization), PPO (preferred 

provider organization). These data do not include the Virgin Islands, Guam, American Samoa, the Northern Mariana 

Islands, non-U.S. areas, and they do not include MA plans that have restricted enrollment (special needs plans, employeronly plans). In contrast with prior years, we report MA enrollment as a share of MA-eligible beneficiaries (Medicare 

beneficiaries with both Part A and Part B coverage) rather than as a share of all Medicare beneficiaries. As a result, 

regional PPO availability slightly increased compared with using all Medicare beneficiaries as our denominator. Medically 

underserved areas (MUAs) are designated by the Health Resources and Services Administration (HRSA) as partial 

counties (census tracts and county subdivisions) or entire counties that disproportionately have a combination of 

indicators such as a low number of primary care providers per 1,000 population, high infant mortality, high poverty, and a 

large elderly population. Urban influence codes (UICs) are designated by the Office of Management and Budget (OMB) by 

the population size of the metro area, and nonmetropolitan counties by the size of the largest city or town and proximity to 

metro and micropolitan areas (areas with a population of at least 10,000 people but fewer than 50,000). The UICs were 

last updated in 2013 and are updated every 10 years. 

Source: MedPAC analysis of HRSA MUAs, OMB UICs, and CMS enrollment and population data February 2021.

• We examined the availability of MA plans to all MA-eligible beneficiaries. Consistent with 

prior work, we exclude employer plans and special needs plans. Although about one-third of 

MA enrollees are in these excluded plans, their availability is restricted to certain 

populations. In addition, we do not include other private plans such as cost plans.

• MA plans are available to nearly all Medicare beneficiaries, irrespective of whether 

beneficiaries reside in a county with a designated medically underserved area. Among 

counties that are designated entirely as medically underserved areas, 99 percent of 

beneficiaries have access to an MA plan.

• Nearly all Medicare beneficiaries residing in metropolitan areas have access to an MA plan.

• Nearly all beneficiaries in rural counties have access to an MA plan. About 97 percent of 

beneficiaries in micropolitan counties or those adjacent to a metropolitan area have access to 

an MA plan. Among the 3 percent of Medicare beneficiaries residing in a rural county that is 

not adjacent to a metropolitan area, 90 percent have access to an MA plan.
136 Medicare Advantage

Chart 9-13. Most Medicare beneficiaries have access to a 

considerable number of MA plans, but rural 

beneficiaries and beneficiaries in counties 

composed entirely of MUAs typically have fewer 

plans from which to choose, 2021

As a share of 

MA-eligible

population

Average plan 

offerings

per beneficiary

Share of Medicare 

beneficiaries living in 

counties with an 

available zeropremium plan with 

drug coverage

All beneficiaries 100% 32 96%

County’s medically underserved area designation

Partial county 63 35 97

Entire county 18 22 94

No medically underserved areas 19 29 96

Urban influence code designation

Metropolitan 82 34 98

Rural: Micropolitan 10 19 88

Rural: Adjacent to metropolitan 5 18 91

Rural: Not adjacent to metropolitan 3 13 76

Note: MA (Medicare Advantage), MUA (medically underserved area). These data do not include the Virgin Islands, Guam, 

American Samoa, the Northern Mariana Islands, non-U.S. areas, and MA plans that have restricted enrollment (special 

needs plans, employer-only plans). MUAs are designated by the Health Resources and Services Administration (HRSA) 

as partial counties (census tracts and county subdivisions) or entire counties that disproportionately have a combination of 

indicators such as a low number of primary care providers per 1,000 population, high infant mortality, high poverty, and a 

large elderly population. Urban influence codes (UICs) are designated by the Office of Management and Budget (OMB) by 

the population size of the metro area, and nonmetropolitan counties by the size of the largest city or town and proximity to 

metro and micropolitan areas (areas with a population of at least 10,000 people but fewer than 50,000). The UICs were 

last updated in 2013 and are updated every 10 years. 

Source: MedPAC analysis of HRSA MUAs, OMB UICs, and CMS enrollment and population data February 2021.

• In 2021, the average beneficiary has 32 plans from which to choose in his or her county. 

• On average, beneficiaries residing in counties that are designated entirely as medically underserved areas 

have fewer MA plans from which to choose, but still have an average of 22 plans available to them. About 

94 percent of beneficiaries in these counties have a zero-premium plan with drug coverage available.

• On average, Medicare beneficiaries residing in metropolitan areas have more MA plans from which to 

choose (an average of 34 plan choices) compared with beneficiaries in rural areas. Nevertheless, the 

average beneficiary in micropolitan counties or those adjacent to a metropolitan area can choose 

among an average of 19 plans. Beneficiaries residing in rural counties that are not adjacent to a 

metropolitan area (3 percent of all beneficiaries) have 13 plans from which to choose, on average.

• At least one zero-premium plan with drug coverage is available to most beneficiaries (96 percent). 

Availability of these plans in rural areas is somewhat less prevalent than in metropolitan areas. In 

metropolitan areas, 98 percent of beneficiaries have access to a zero-premium plan. In comparison, 

about 90 percent of beneficiaries in micropolitan counties or those adjacent to a metropolitan area 

have access to a zero-premium plan. In rural counties that are not adjacent to a metropolitan area, 76

percent of beneficiaries have an available zero-premium plan.
A Data Book: Health care spending and the Medicare program, July 2021 137

Chart 9-14. Twenty most common condition categories 

among MA beneficiaries, as defined in the 

CMS–HCC model, 2019

Share of

beneficiaries

Conditions (defined by HCC) with listed condition

Vascular disease 21.9%

Diabetes with chronic complications 21.7

COPD 15.0

Major depressive, bipolar, and paranoid disorders 14.3

CHF 13.0

Specified heart arrhythmias 12.2

Morbid obesity 10.3

Chronic kidney disease, moderate (stage 3) 8.9

Rheumatoid arthritis and inflammatory connective tissue disease 7.9

Diabetes without complications 6.9

Coagulation defects and other specified hematological disorders 6.5

Breast, prostate, colorectal, and other cancers and tumors 5.2

Substance abuse disorder, moderate/severe, or substance use

 with complications 5.1

Other significant endocrine and metabolic disorders 4.9

Angina pectoris 4.3

Acute renal failure 3.8

Cardio-respiratory failure and shock 3.0

Seizure disorders and convulsions 2.7

Ischemic or unspecified stroke 2.4

Septicemia, sepsis, systemic inflammatory response

syndrome/shock 2.1

Note: MA (Medicare Advantage), CMS–HCC (CMS–hierarchical condition category), COPD (chronic obstructive pulmonary 

disease), CHF (congestive heart failure).

Source: MedPAC analysis of Medicare risk score files.

• CMS uses the CMS–HCC model to risk adjust capitated payments to MA plans so that 

payments better reflect the clinical needs of MA enrollees given the number and severity of 

their clinical conditions. The CMS–HCC model uses beneficiaries’ conditions, which are 

collected into HCCs, to adjust the capitated payments.

• Vascular disease is the most common HCC, and over 28 percent of MA enrollees are in at 

least one of the two diabetes HCCs.
138 Medicare Advantage

Chart 9-15. MA enrollment patterns, by age, Medicaid dualeligible status, and ESRD status, June 2020

All MA eligible FFS MA MA enrollment 

as a share of all 

MA-eligible 

category

Enrollment, 

in millions

Share 

of total

Enrollment, 

in millions

Share 

of total

Enrollment, 

in millions

Share 

of total

Total 55.4 100% 31.8 100% 23.7 100% 43%

Aged (65 or older) 47.7 86 27.2 86 20.5 87 43

Under 65 7.7 14 4.5 14 3.2 13 41

Non–dual eligible 45.1 81 26.3 83 18.9 80 42

Aged (65 or older) 41.5 75 24.2 76 17.3 73 42

Under 65 3.6 7 2.0 6 1.6 7 44

Full dual eligibility 7.1 13 4.2 13 2.9 12 40

Aged (65 or older) 4.2 8 2.3 7 1.9 8 45

Under 65 2.9 5 1.9 6 1.0 4 33

Partial dual eligibility 3.2 6 1.3 4 1.9 8 60

Aged (65 or older) 2.0 4 0.7 2 1.3 5 64

Under 65 1.2 2 0.6 2 0.6 3 53

Enrollment subcategories, all ages

ESRD 0.5 1 0.4 1 0.1 <0.5 23

Beneficiaries with 

partial dual eligibility

QMB only 1.6 3 0.7 2 0.9 4 58

SLMB only 1.0 2 0.4 1 0.6 3 61

QI 0.6 1 0.2 1 0.4 1 62

Note: MA (Medicare Advantage), ESRD (end-stage renal disease), FFS (fee-for-service), QMB (qualified Medicare beneficiary), 

SLMB (specified low-income beneficiary), QI (qualified individual). Data exclude cost plans, plans under the Program of 

All-Inclusive Care for the Elderly, and Medicare–Medicaid Plans participating in CMS’s financial alignment demonstration. 

MA-eligible beneficiaries are Medicare beneficiaries with both Part A and Part B coverage. Dual-eligible beneficiaries are 

eligible for Medicare and Medicaid. Data exclude Puerto Rico because enrollment data undercount dual-eligible

categories. As of June 2020, Puerto Rico had nearly 600,000 Medicare beneficiaries enrolled in MA plans, and 276,000 

were enrolled in dual-eligible special needs plans. Figures may not sum to totals due to rounding.

Source: MedPAC analysis of 2020 common Medicare environment files.

• Medicare beneficiaries with Medicaid benefits who have full dual eligibility—that is, those who have coverage for 

their Medicare out-of-pocket costs (premiums and cost sharing) as well as coverage for services such as longterm care services and supports—are less likely to enroll in MA plans than beneficiaries with “partial” dual 

eligibility. Fully dual-eligible beneficiaries are those with coverage through state Medicaid programs including

certain QMBs (i.e., QMB-Plus) and certain SLMBs (i.e., SLMB-Plus) who also have Medicaid coverage for 

services. Beneficiaries with partial dual eligibility (such as QIs or SLMBs) have coverage for Medicare premiums 

or premiums and Medicare cost sharing (as QMBs).

• Medicare plan enrollment among the dually eligible continues to increase. In 2020, 40 percent of full duals were 

in MA plans (up from 36 percent in 2019; data not shown), and 60 percent of partial dual-eligible beneficiaries 

were in MA plans (up from 53 percent in 2019; data not shown). QI beneficiaries have the highest rates of MA 

enrollment among partial duals (62 percent).

• A substantial share of the dually eligible (40 percent; data not shown) are under the age of 65 and entitled to 

Medicare on the basis of disability or ESRD. Beneficiaries under age 65 who are fully dual eligible are far less 

likely than aged fully dual-eligible beneficiaries to enroll in MA (33 percent vs. 45 percent, respectively). As a 

result, a similar share of MA enrollees is fully dual-eligible compared with FFS enrollees (13 percent vs. 12

percent, respectively).

• Before 2021, individuals with ESRD were largely prohibited from joining an MA plan during open enrollment, 

although they could remain in their current plan or join an ESRD chronic condition special needs plan. Therefore, 

ESRD beneficiaries had relatively low rates of plan enrollment in 2020 (23 percent).
10

00

A Data Book: Health care spending and the Medicare program, July 2021 141

Chart 10-1. Medicare spending for Part B drugs furnished by 

physicians, hospital outpatient departments, and 

suppliers, 2005–2019

Note: HOPD (hospital outpatient department). Data include Part B–covered drugs furnished by several provider types, including 

physicians, suppliers, and hospital outpatient departments, and exclude those furnished by critical access hospitals, 

Maryland hospitals, and dialysis facilities. “Medicare spending” includes program payments and beneficiary cost sharing. 

Data reflect all Part B drugs whether they were paid based on the average sales price or another payment formula. Data 

exclude blood and blood products (other than clotting factor). Components may not sum to totals due to rounding.

Source: MedPAC and Acumen LLC analysis of Medicare claims data.

• The Medicare program and beneficiaries spent about $39 billion on Part B drugs furnished by 

physicians, HOPDs, and suppliers in 2019, an increase of about 11.6 percent from 2018.

• Since 2005, Medicare pays for most Part B drugs at a rate of the average sales price plus 6 

percent (ASP + 6 percent). Between 2005 and 2019, total spending grew at an average annual 

rate of 8.0 percent. Spending growth was slower from 2005 to 2009 (about 3.7 percent per year 

on average) and more rapid from 2009 to 2019 (about 9.7 percent per year on average).

• Eligible hospitals that participate in the 340B drug discount program receive substantial 

discounts on outpatient drugs, including those covered by Medicare Part B. Beginning 2018, 

Medicare reduced the payment rate for certain Part B drugs furnished by 340B hospitals to 

ASP – 22.5 percent. The 340B policy reduced 2019 Medicare Part B spending on drugs in 

outpatient hospitals by about $2.2 billion (compared with what 2019 payments would have 

been in the absence of the policy). 

(Chart continued next page)

13.4 14.0 14.9 14.5 15.4 16.6 

18.6 

20.3 21.6 22.8 

25.8

29.2

32.1

34.9

39.0

9.1 9.6 9.9 9.8 10.2 10.7 11.6 12.2 12.6 13.2

15.0

16.6

18.0

19.9

22.0

2.8 2.9 3.2 3.1 3.6 4.2 5.2 6.1 6.9 7.5 8.7

10.4

12.3 13.1

15.0

1.4 1.5 1.8 1.6 1.7 1.7 1.8 2.0 2.1 2.2 2.1 2.1 1.8 1.9 2.0 0

3

6

9

12

15

18

21

24

27

30

33

36

39

42

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Medicare spending (dollars in billions)

Total

Physicians

HOPDs

Suppliers
142 

Prescription drugs

Chart 10-1. Medicare spending for Part B drugs furnished by 

physicians, hospital outpatient departments, and 

suppliers, 2005–2019 (continued)

• Of total 2019 Part B drug spending, physicians accounted for 56 percent ($22 billion), HOPDs 

accounted for 38 percent ($15 billion), and suppliers accounted for 5 percent ($2 billion). 

• Overall, from 2009 to 2019, Part B drug spending has grown more rapidly for HOPDs than for 

physicians and suppliers—at average annual rates of about 15 percent, 8 percent, and 2 percent, 

respectively. 

• Not included in these data are critical access hospitals and Maryland hospitals, which are not paid 

under the ASP system, and end-stage renal disease facilities, which are paid for most Part B drugs 

through the dialysis bundled payment rate. Medicare and beneficiaries spent approximately $1.0 

billion in critical access hospitals and $0.4 billion in Maryland hospitals for Part B drugs in 2019. 

Also in 2019, Medicare spent $1.3 billion for calcimimetics in dialysis facilities through a transitional 

drug add-on payment adjustment to the bundled dialysis payment rate.
A Data Book: Health care spending and the Medicare program, July 2021 143

Chart 10-2. Change in Medicare payments and utilization for 

separately payable Part B drugs, 2009–2019 

2009 2019

Average 

annual 

growth 

2009–2019

Total payments: Separately payable Part B drugs (in billions) $11.9* $37.1* 12.1%

Total payments: All Part B drugs excluding vaccines (in billions) $11.7 $35.8 11.9

 Number of beneficiaries using a Part B drug (in millions) 2.6 4.1 4.6

Average total payments per beneficiary who used a Part B drug $4,420 $8,639 6.9

Average number of Part B drugs per beneficiary 1.39 1.36 –0.2

 Average annual payment per Part B drug per beneficiary $3,182 $6,343 7.1

Total payments: All Part B vaccines (in billions) $0.2 $1.3 19.5

 Number of beneficiaries using a Part B vaccine (in millions) 13.4 16.5 2.1

Average total payments per beneficiary who used a Part B vaccine $16 $78 17.0

Average number of Part B vaccines per beneficiary 1.08 1.18 0.9

Average annual payment per Part B vaccine per beneficiary $15 $66 16.0

Note: This analysis includes Part B drugs paid based on the average sales price as well as the small group of Part B drugs that 

are paid based on the average wholesale price or reasonable cost or that are contractor priced. “Vaccines” refers to three 

Part B–covered preventive vaccines: influenza, pneumococcal, and hepatitis B. Data include Part B drugs furnished by 

physicians, hospitals paid under the outpatient prospective payment system, and suppliers and exclude data for critical 

access hospitals, Maryland hospitals, and dialysis facilities. Yearly figures presented in the table are rounded; the average 

annual growth rate was calculated using unrounded data. 

*For purposes of this analysis, spending on separately payable Part B drugs excludes any drug that was bundled in 2009 or 

2019 (i.e., drugs that were packaged under the outpatient prospective payment system in 2009 or 2019 were excluded from 

both years of the analysis, regardless of the setting where the drug was administered), drugs billed under not-otherwiseclassified billing codes, and blood and blood products (other than clotting factor). Without those exclusions, Part B drug 

spending was $15.4 billion in 2009 and $39.0 billion in 2019, as shown in Chart 10-1.

Source: MedPAC analysis of Medicare claims data for physicians, hospital outpatient departments, and suppliers.

• Total payments by the Medicare program and beneficiaries for separately payable Part B drugs 

increased 12.1 percent per year, on average, between 2009 and 2019.

• Medicare spending on separately payable Part B drugs excluding Part B–covered preventive 

vaccines grew at a similar rate (11.9 percent per year) between 2009 and 2019.

• Price growth accounted for just over half of the growth in separately payable Part B drug 

spending (excluding vaccines) between 2009 and 2019. During that period, the average 

annual payment per drug increased on average by 7.1 percent per year, which reflects 

increases in the prices of existing drugs and changes in the mix of drugs, including the 

adoption of new, higher priced drugs. Growth in the average payment per drug would have 

been even higher if not for the reduction in Medicare’s payment rate for certain Part B drugs 

provided by 340B hospitals beginning in 2018.

(Chart continued next page)
144 

Prescription drugs

Chart 10-2. Change in Medicare payments and utilization for 

separately payable Part B drugs, 2009–2019

(continued)

• Growth in the number of beneficiaries using nonvaccine Part B drugs (about 4.6 percent per 

year on average) also contributed to increased spending. The number of Part B drugs 

received per user declined slightly from about 1.39 in 2009 to 1.36 in 2019, which modestly 

offset spending growth.

• In 2019, Medicare Part B covered three preventive vaccines: influenza, pneumococcal, 

and—for beneficiaries at high or medium risk—hepatitis B. Spending on the three preventive 

vaccines furnished by physicians, hospital outpatient departments, and pharmacy suppliers 

was $702 million for influenza, $572 million for pneumococcal, and $7 million for hepatitis B

(data not shown). (Not included in these data are vaccines furnished in other settings such 

as end-stage renal disease facilities. With other settings included, 2019 vaccine spending 

was $729 million on influenza, $593 million on pneumococcal, and $39 million on hepatitis B 

vaccines.)

• Although vaccines are a relatively small share of overall spending on separately payable 

Part B drugs, vaccine spending grew rapidly, at an average rate of about 19.5 percent per 

year, between 2009 and 2019. 

• The largest driver of increased vaccine spending was price growth, as the average payment 

per vaccine grew at an average rate of 16.0 percent per year between 2009 and 2019. 

Substantial price growth occurred for both pneumococcal and influenza vaccines between 

2009 and 2019, with the average payment per vaccine increasing from $36 to $154 for 

pneumococcal vaccines and from $12 to $44 for influenza vaccines over this period (data 

not shown). The growth in the average payment per vaccine largely reflects higher launch 

prices for new vaccines (e.g., Prevnar-13 for pneumococcal disease and Fluzone High 

Dose, Fluad, and Flublok for influenza). Price growth over time among existing products 

(e.g., new vaccines after launch and certain older products) also contributed to this increase.
A Data Book: Health care spending and the Medicare program, July 2021 145

Chart 10-3. Top 10 Part B drugs paid based on ASP, by type of 

provider, 2018 and 2019

Dollars (in millions)

Total Physician and supplier HOPD

Part B drug spending Part B drug spending Part B drug spending

2018 2019 2018 2019 2018 2019

Eylea $2,577 $2,915 $2,435 $2,763 $142 $152

Keytruda 1,812 2,676 764 1,145 1,048 1,531

Opdivo 1,718 1,784 827 815 891 970

Rituxan 1,701 1,744 866 865 835 879

Prolia/Xgeva 1,420 1,608 909 1,020 511 588

Lucentis 1,217 1,268 1,186 1,238 30 30

Neulasta 1,373 1,170 640 527 733 642

Avastin 1,013 1,037 503 489 511 548

Orencia 801 922 589 696 213 226

Remicade 1,154 912 745 611 409 301

Total spending,

top 10 drugs $14,785 $16,037 $9,463 $10,168 $5,323 $5,869

Total spending, 

all Part B drugs $34,944 $39,014 $21,824 $24,017 $13,120 $14,997

Note: ASP (average sales price), HOPD (hospital outpatient department). The 10 drugs shown in the chart reflect the Part B 

drug billing codes paid under the ASP methodology with the highest Medicare expenditures in 2019. Data for 2018 are 

shown for comparison. Data include Part B–covered drugs furnished by several provider types, including physicians, 

suppliers, and hospital outpatient departments, but exclude those furnished by critical access hospitals, Maryland 

hospitals, and dialysis facilities. “Drug spending” includes Medicare program payments and beneficiary cost sharing. 

“Total spending, all Part B drugs” reflects all products, whether paid based on ASP or another method. Data exclude 

blood and blood products (other than clotting factor). Components may not sum to totals due to rounding.

Source: MedPAC and Acumen LLC analysis of Medicare claims data.

• Part B drugs are billed under more than 800 billing codes, but spending is concentrated. 

Medicare spending (including cost sharing) on the top 10 drugs paid under the ASP system 

totaled about $16 billion in 2019, about 41 percent of all Part B drug spending that year. 

• Since 2016, all of the top 10 Part B drugs have been biologics. In 2019, among the top 10

drugs are a number of products used to treat cancer or its side effects (Keytruda, Opdivo, 

Rituxan, Prolia/Xgeva, Neulasta, Avastin). Drugs used to treat age-related macular 

degeneration (Eylea, Lucentis, Avastin) and rheumatoid arthritis (Rituxan, Orencia, 

Remicade) are also in the top 10. 

• Medicare spending on immune globulin (for which there are several products billed through 

separate billing codes) amounted to about $1.6 billion in 2019 (data not shown).
146 

Prescription drugs

Chart 10-4. Growth in ASP for the 20 highest expenditure Part B 

drugs, 2005–2021

Part B drug

Total

Medicare

payments

in 2019

(in billions)

Average annual ASP growth

Earliest

year of 

ASP data 

if not 2005

2005–

2015

2015–

2020

2020–

2021

2005–

2021

Eylea $2.9 0.0%* –0.7% –2.5% –0.8%* 2013

Keytruda 2.7 N/A 2.4* 0.8 2.1* 2016

Opdivo 1.8 N/A 2.6* 1.3 2.4* 2016

Rituxan 1.7 5.1 5.4 –3.3 4.6

Prolia/Xgeva 1.6 0.6* 5.6 4.3 3.8* 2012

Lucentis 1.3 –0.4* –2.6 –7.0 –1.7* 2008

Neulasta 1.2 4.4 4.0 –27.6 1.9

Avastin 1.0 1.8 3.5 –6.8 1.7

Orencia 0.9 7.4* 10.6 3.7 8.3* 2007

Remicade 0.9 3.4 –5.0 –21.7 –1.0

Herceptin 0.8 4.8 4.6 –7.5 3.9

Darzalex 0.8 N/A 4.8* 3.7 4.5* 2017

Ocrevus 0.6 N/A 0.3* –0.2 0.1* 2018

Soliris 0.5 2.5 1.8 –0.1 2.1* 2008

Alimta 0.5 4.1 3.1 3.4 3.8

Tecentriq 0.5 N/A 1.4* 0.4 1.0* 2018

Imfinzi 0.4 N/A N/A 1.9 1.9* 2020

Cimzia 0.4 10.6* 5.9 –0.3 7.4* 2010

Sandostatin LAR 0.4 5.3 7.5 –0.2 5.6

Velcade 0.4 5.1 –0.7 –0.4 2.9

Consumer price index 

for urban consumers 2.1 2.0 1.4 2.0

Note: ASP (average sales price), N/A (not applicable). Growth rates for ASP are calculated from first quarter to first quarter of each 

year. “Medicare payments” includes Medicare program payments and beneficiary cost sharing for these drugs furnished by 

physicians, suppliers, and hospital outpatient departments, but excludes those furnished by critical access hospitals, 

Maryland hospitals, and dialysis facilities. Vaccines for which Medicare pays 95 percent of the average wholesale price are 

also excluded from this table. See Chart 10-2 and associated bullets for information on vaccine price growth.

*Indicates that ASP payment rates for a specific product were not available for the full period listed and the average 

annual growth rate was calculated based on the earliest year that a first-quarter payment rate was available.

Source: MedPAC analysis of CMS ASP pricing files and consumer price index for all urban consumers data from the Bureau of 

Labor Statistics and MedPAC and Acumen LLC analysis of Medicare claims data.

• Over the period from 2005 to 2021, 17 out of 20 of the top Part B drugs have experienced 

net price increases, with 12 of these products’ ASPs increasing faster than the consumer 

price index for urban consumers on average over the period.

(Chart continued next page)
A Data Book: Health care spending and the Medicare program, July 2021 147

Chart 10-4. Growth in ASP for the 20 highest expenditure Part B 

drugs, 2005–2021 (continued)

• In the most recent year, more products in the top 20 experienced a price decrease than a 

price increase. ASP decreased for 12 products and increased for 8 products between the 

first quarters of 2020 and 2021. Compared with the average annual rate of price growth over 

the prior 5-year period, between first quarter 2020 and 2021, the ASP for 17 of the top 20 

products grew at a slower rate or declined by more than they had in the previous period.

• Biosimilar competition may account for the decreases in ASP between 2020 and 2021 for 

some originator biologics; Rituxan, Neulasta, Remicade, Avastin, and Herceptin have all 

faced biosimilar entry since 2019 or earlier. For these five products, the recent price declines 

have begun to reverse a long period of rising prices, with average price growth over the last 

16 years ranging from –1.0 percent per year for Remicade to 4.6 percent per year for 

Rituxan. 
148 

Prescription drugs

Chart 10-5. Trends in Medicare Part B payment rates for 

originator biologics and their biosimilar products

First 

biosimilar 

entry

Percent change 

in originator 

biologics' ASP 

since biosimilar 

entry

(through

2021 Q1)

Biosimilars’ 

payment rate 

as a percent 

of originator 

biologic's 

payment rate 

(2021 Q1)

Biosimilar 

market share 

(2020 Q3)

Neupogen and biosimilars 2015 Q3 –6% 44%–56% 77%

Remicade and biosimilars 2016 Q4 –46% 94%–115% 16%

Neulasta and biosimilars 2018 Q3 –35% 97%–116% 27%

Procrit/Epogen and biosimilars 2018 Q4 –28% 97% 47%

Avastin and biosimilars 2019 Q3 –8% 75%–79% 41%

Herceptin and biosimilars 2019 Q3 –8% 74%–90% 40%

Rituxan and biosimilars 2019 Q4 –4% 74%–75% 24%

Note: ASP (average sales price), Q1 (first quarter), Q3 (third quarter), Q4 (fourth quarter) An originator biologic is a drug product 

derived from a living organism. A biosimilar product is a follow-on product that is approved by the Food and Drug Administration 

(FDA) based on the product being highly similar to the originator biologic. The biosimilars included in the analysis are Zarxio, 

Nivestym, and Granix for originator Neupogen; Inflectra, Renflexis, and Avsola for originator Remicade; Fulphila, Udenyca, and

Ziextenzo for originator Neulasta; Retacrit for originator Procrit//Epogen; Mvasi and Zirabev for originator Avastin, Ontruzant, 

Herzuma, Ogivri, Trazimera, and Kanjinti for originator Herceptin; and Truxima and Ruxience for originator Rituxan. Although Granix 

is not a biosimilar in the U.S. (because it was approved under the standard FDA approval process for new biologics), we include it 

here because it was approved as a biosimilar to Neupogen in Europe and it functions as a competitor to Neupogen in the U.S. 

market. First biosimilar entry date reflects the earliest market date for a product approved by the FDA as a biosimilar to the 

originator biologic.

Source: MedPAC analysis of payment rates from CMS’s ASP pricing files and product market date information from CMS’s database on 

drug products in the Medicaid Drug Rebate Program and Acumen LLC analysis of Medicare claims data.

• Under Part B, Medicare pays for an originator biologic at 106 percent of its own ASP. For 

biosimilars, Medicare pays 100 percent of the biosimilar’s ASP plus 6 percent of the originator 

product’s ASP. During the first two to three quarters when a biosimilar is new to the market, ASP 

data are unavailable and Medicare pays a rate of wholesale acquisition cost (WAC) plus 3 

percent. 

• Medicare payment rates for biosimilars are generally lower than those of the corresponding 

originator biologics because biosimilars generally have lower prices (as measured by ASP) than 

originator biologics. The extent to which originator biologics have lowered their prices in 

response to biosimilar entry and the extent to which market share has shifted to biosimilars 

varies by product.

(Chart continued next page)
A Data Book: Health care spending and the Medicare program, July 2021 149

Chart 10-5. Trends in Medicare Part B payment rates for

originator biologics and their biosimilar products

(continued)

• Neupogen, the originator biologic that has faced biosimilar competition for the longest period 

(since the third quarter of 2015), has reduced its price, as measured by ASP, only modestly (6 

percent) since biosimilar entry. As of first quarter 2021, biosimilars’ payment rates were roughly 

50 percent lower than the originator’s payment rate. Biosimilars accounted for over three 

quarters of market share as of the third quarter of 2020.

• The originator Remicade’s price has declined substantially (46 percent) since biosimilar entry in 

the fourth quarter of 2016. As of the first quarter of 2021, Medicare’s payment rates for 

Remicade and its biosimilars are relatively close, with two biosimilars’ payment rates ranging 

from 94 percent to 96 percent of Remicade’s payment rate. A third biosimilar that launched in the 

third quarter of 2020 was paid about 115 percent Remicade’s payment that quarter. Remicade 

has continued to retain most of the market share, with biosimilars accounting for 16 percent of 

utilization as of the third quarter of 2020.

• The originator Neulasta has reduced its price by 35 percent since biosimilar entry in the third 

quarter of 2018. As of the first quarter of 2021, Medicare’s payment rates for Neulasta and its 

biosimilars are in a relatively close range. The biosimilars’ payment rates range from 97 percent 

to 116 percent of the Neulasta’s payment rate. Biosimilars accounted for 27 percent of utilization

as of the third quarter of 2020.

• The price of the originators Procrit/Epogen has fallen 28 percent since biosimilar entry in the 

fourth quarter of 2018. Medicare’s payment rate for the biosimilar is slightly lower (3 percent) 

than for the originators, as of the first quarter of 2021. Biosimilars accounted for nearly half of 

utilization as of the third quarter of 2020.

• The originator Avastin has reduced its price 8 percent since biosimilar entry in the third quarter of 

2019. As of the first quarter 2021, Medicare’s payment rates for the biosimilars are 21 percent to 

25 percent below the originator’s payment rate. In the first two years of biosimilar availability, 

their use has grown, accounting for 41 percent of utilization as of the third quarter of 2020.

• The originator Herceptin’s price has declined 8 percent since biosimilar entry in the third quarter 

of 2019. Medicare’s first quarter 2021 payment rates for the biosimilars ranged from 10 percent 

to 26 percent below the originator’s payment rate. As of the third quarter of 2020, Herceptin 

faced the largest number of biosimilar competitors (five) of any originator biologic, and the 

biosimilars’ market share was 40 percent.

• Originator Rituxan’s price has fallen slightly (4 percent) since biosimilar entry in the fourth quarter 

of 2019. Medicare’s payment rates for biosimilars are roughly 25 percent below the originator’s 

payment rate. Biosimilars’ market share reached 24 percent in the third quarter of 2020.
150 

Prescription drugs

Chart 10-6. Price indexes for Medicare Part B drugs, 2005–2019

Note: Q1 (first quarter), Q4 (fourth quarter). The Part B price indexes reflect growth in the average sales price of Part B–covered 

drugs over time, measured for individual drugs at the level of the Healthcare Common Procedure Coding System billing 

code. These measures of price growth reflect growth in the price of individual products but do not reflect changes in price due 

to the introduction of new products or changes in the mix of products used. The Part B price index for biologics in this chart 

and in Chart 10-26 are different due to the different periods of analysis. 

Source: Acumen LLC analysis for MedPAC.

• The Part B price indexes reflect growth in the average sales price (ASP) at the individual 

product level and do not reflect changes in price that occur as a result of changes in the mix 

of drugs used or the introduction of new, higher priced drugs.

• Measured by the change in the ASP of individual Part B–covered drugs, the prices of Part B–

covered drugs rose by an average of about 17 percent cumulatively between 2005 and 2019

(an index of 1.17). 

• Underlying this overall trend in the price index are different patterns by type of product. 

Between 2005 and 2019, the price index for Part B–covered biologics increased by 45

percent, while the price index for nonbiologics declined by 21 percent. 

(Chart continued next page)

1.17

1.45

0.79

0.000

0.200

0.400

0.600

0.800

1.000

1.200

1.400

1.600

2005

Q1

2006

Q1

2007

Q1

2008

Q1

2009

Q1

2010

Q1

2011

Q1

2012

Q1

2013

Q1

2014

Q1

2015

Q1

2016

Q1

2017

Q1

2018

Q1

2019 

Q1

2019 

Q4

Chain-weighted Fisher price index

Biologics

Nonbiologics

All Part B drugs
A Data Book: Health care spending and the Medicare program, July 2021 151

Chart 10-6. Price indexes for Medicare Part B drugs, 2005–2019 

(continued)

• Since 2005, growth in biologics’ prices has driven growth in the Part B drug price index. 

However, recently, between the third quarter of 2018 and the fourth quarter of 2019, the 

biologics’ price index declined about 0.6 percent, due largely to price declines among 

products with biosimilar competition. The decline in the biologics’ price index, coupled with 

the continued decline in the nonbiologics’ price index, resulted in about a 1.1 percent decline 

in the overall Part B drug price index between the third quarter of 2018 and the fourth quarter 

of 2019.

• The nonbiologic group includes single-source drugs and drugs with generic competition. The 

more than decade-long downward price trend for nonbiologics in part reflects patent 

expiration and generic entry for some of these products. It also reflects the design of the 

ASP payment system, which spurs price competition among generics and their associated 

brand-name products by assigning these products to a single billing code and paying them 

the same average rate. 
152 

Prescription drugs

Chart 10-7. In 2021, approximately 88 percent of Medicare 

beneficiaries are enrolled in Part D plans or have

other sources of creditable drug coverage

Note: LIS (low-income [drug] subsidy), PDP (prescription drug plan), MA–PD (Medicare Advantage–Prescription Drug [plan]), 

RDS (retiree drug subsidy). “Creditable coverage” means the value of drug benefits is equal to or greater than that of the 

basic Part D benefit. Enrollment is as of April 13, 2021. Components may not sum to totals due to rounding.

Source: MedPAC analysis of PDP and MA–PD enrollment data and LIS enrollment data from CMS, Medicare enrollment 

projections from the 2020 Medicare Trustees’ report, and analysis of the 2018 Medicare denominator file.

• In 2021, approximately 88 percent of Medicare beneficiaries are enrolled in Part D plans, have

prescription drug coverage through employer-sponsored plans that receive Medicare’s RDS, 

or have other sources of drug coverage that are equal to or greater than the average value of 

Part D’s defined standard benefit (called “creditable coverage”). Twelve percent of Medicare 

beneficiaries have no drug coverage or coverage that is less generous.

• In 2021, nearly three-quarters of Medicare beneficiaries receive prescription drug benefits 

through Part D plans: 37 percent in stand-alone PDPs and 37 percent in MA–PDs. 

• About 18 percent of Medicare beneficiaries receive Part D’s LIS in 2021. Of all LIS 

beneficiaries, half of them (9 percent of all Medicare beneficiaries) are enrolled in standalone PDPs, and the other half are in MA–PDs.

• Non-LIS enrollees in stand-alone PDPs account for 28 percent of all Medicare beneficiaries. 

Another 27 percent of Medicare beneficiaries are enrolled in MA–PDs and do not receive 

low-income subsidies.

(Chart continued next page)

Non-LIS enrollees 

in PDPs

28%

LIS enrollees in 

PDPs

9%

Non-LIS enrollees 

in MA–PDs

27%

LIS enrollees in 

MA–PDs

9%

Primary coverage 

through employers that 

received RDS

2%

Other sources of 

creditable coverage

12%

No creditable 

coverage

12%

PDPs

37%

MA‒PDs 37%
A Data Book: Health care spending and the Medicare program, July 2021 153

Chart 10-7. In 2021, approximately 88 percent of Medicare 

beneficiaries are enrolled in Part D plans or have

other sources of creditable drug coverage

(continued)

• Employer and union health plans continue to be important sources of drug coverage for

Medicare beneficiaries. In 2021, 11 percent of Medicare beneficiaries are in Part D plans 

(including PDPs and MA–PDs) set up by employers or unions for their retirees (data not 

shown). Under these employer group waiver plans (EGWPs), Medicare is the primary payer 

for basic drug benefits, and typically the employer offers wrap-around coverage. Separately, 

Medicare trustees estimate that 2 percent of Medicare beneficiaries are in plans offered by 

employers that receive Medicare’s RDS. (If an employer remains the primary payer of 

creditable drug coverage for its retirees, Medicare provides the employer with a tax-free 

subsidy for 28 percent of each eligible individual’s drug costs that fall within a specified 

range of spending.) Additionally, approximately 12 percent of Medicare beneficiaries have

creditable drug coverage from sources other than Part D, much (but not all) of which is 

related to past employment, for example, through the Federal Employees Health Benefits 

Program, TRICARE, and employers that do not sponsor an EGWP or receive the RDS.
154 

Prescription drugs

Chart 10-8. Changes in parameters of the Part D defined

 standard benefit over time

Cumulative

change

2006 2019 2020 2021 2006–2021

Deductible $250.00 $415.00 $435.00 $445.00 78%

Initial coverage limit 2,250.00 3,820.00 4,020.00 4,130.00 84%

Annual out-of-pocket threshold 3,600.00 5,100.00 6,350.00 6,550.00 82%

Total covered drug spending at annual

out-of-pocket threshold

 Enrollees eligible for manufacturers’ 

 coverage-gap discount 5,100.00 8,139.54 9,719.38 10,048.39 97%

 Other enrollees 5,100.00 7,653.75 9,038.75 9,313.75 83%

Cost sharing above the annual

out-of-pocket threshold is the greater of

5% coinsurance or these amounts:

Copay for generic/preferred 

multisource drugs 2.00 3.40 3.60 3.70 85%

Copay for other prescription drugs 5.00 8.50 8.95 9.20 84%

Note: Under Part D’s defined standard benefit, the enrollee pays the deductible and then 25 percent of covered drug spending 

(75 percent is paid by the plan) until total covered drug spending reaches the initial coverage limit (ICL). Before 2011, 

enrollees exceeding the ICL were responsible for 100 percent of covered drug spending up to the annual out-of-pocket 

(OOP) threshold. Beginning in 2011, certain enrollees pay reduced cost sharing in the coverage gap because 

manufacturers of brand-name drugs must provide a discount. Criteria to be eligible for the coverage-gap discount exclude 

most enrollees who receive Part D’s low-income subsidy as well as enrollees in qualified retiree drug plans. For 2011 and 

later years, the amount of total covered drug spending at the annual OOP threshold depended on the mix of brand-name

and generic drugs filled during the coverage gap. The amounts shown are for individuals who have no source of 

supplemental coverage with the average mix of brand and generic spending. Cost sharing paid by most sources of 

supplemental coverage does not count toward this threshold. Above the OOP limit, the enrollee pays 5 percent 

coinsurance or the respective copay shown above, whichever is greater.

Source: CMS Office of the Actuary.

• The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 specified a 

defined standard benefit structure for Part D. In 2021, the standard benefit has a $445

deductible, 25 percent coinsurance on covered drugs until the enrollee reaches $4,130 in 

total covered drug spending, and then a coverage gap until OOP spending reaches the 

annual threshold. (The total dollar amount of drug spending at which a beneficiary reaches 

the OOP threshold varies from person to person, depending on the mix of brand-name and 

generic prescriptions filled. CMS estimates that in 2021, a person who does not receive 

Part D’s low-income subsidy and has no supplemental coverage would, on average, reach 

the threshold at about $10,048 in total drug spending.) Before 2011, enrollees were

responsible for paying the full discounted price of drugs filled during the coverage gap. 

Subsequently, certain enrollees pay reduced cost sharing for drugs filled in the coverage 

gap because manufacturers of brand-name drugs must provide a discount. In 2021, the cost 

sharing for drugs filled during the gap phase is about 25 percent for brand-name drugs and 

generics. Enrollees with drug spending that exceeds the annual threshold pay the greater of 

$3.70 to $9.20 or 5 percent coinsurance per prescription.

(Chart continued next page)
A Data Book: Health care spending and the Medicare program, July 2021 155

Chart 10-8. Changes in parameters of the Part D defined 

standard benefit over time (continued)

• Most parameters of this defined standard benefit structure have changed over time at the 

same rate as the annual change in average total drug expenses of Medicare beneficiaries

enrolled in Part D, with cumulative changes of 78 percent to 97 percent between 2006 and 

2021. The out-of-pocket threshold for 2020 was much higher than that for 2019 because the 

2019 amount was restrained by a provision in law that limited increases between 2014 and 

2019. In 2020, the OOP threshold reverted to what it otherwise would have been had CMS 

increased it by the same factor as other benefit parameters—that is, annual growth in Part D 

spending per enrollee. The effects of this increase on beneficiaries were somewhat muted 

by the fact that manufacturers provide a 70 percent discount on brand-name drugs in the 

coverage-gap phase, which counts as beneficiary spending toward the threshold.

• Within certain limits, sponsoring organizations may offer Part D plans that have the same 

actuarial value as the defined standard benefit but a different benefit structure, and most 

sponsoring organizations do offer such plans. For example, a plan may use tiered 

copayments rather than 25 percent coinsurance or have no deductible but use cost-sharing 

requirements that are equivalent to a rate higher than 25 percent. Defined standard benefit 

plans and plans that are actuarially equivalent to the defined standard benefit are both 

known as “basic benefits.”

• Once a sponsoring organization offers one plan with basic benefits within a prescription drug 

plan region, it may also offer plans with enhanced benefits—basic and supplemental 

coverage combined.

• Under the Bipartisan Budget Act of 2018, manufacturers of brand-name drugs must provide 

a 70 percent discount in the coverage gap, enrollees pay 25 percent cost sharing, and plan 

sponsors are responsible for covering only 5 percent of the cost of brand-name drugs. 
156 

Prescription drugs

Chart 10-9. Characteristics of stand-alone Medicare PDPs

2020 2021

Enrollees as of Enrollees as of

Plans February 2020 Plans February 2021

Number Number

Number Percent (in millions) Percent Number Percent (in millions) Percent

Total 948 100% 20.5 100% 996 100% 19.7 100%

Type of organization

National 716 76 18.8 92 764 77 18.0 91

Other 232 24 1.7 8 232 23 1.7 9

Type of benefit

Defined standard 0 0 0.0 0 1 <0.5 0.0 0

Actuarially equivalent 382 40 11.3 55 377 38 9.8 50

Enhanced 566 60 9.2 45 618 62 10.0 50

Type of deductible

Zero 133 14 3.0 15 139 14 2.7 14

Reduced 161 17 5.0 25 192 19 4.5 23

Defined standard* 654 69 12.4 61 665 67 12.5 63

Some formulary tiers not subject to a deductible

 Some 504 53 11.5 56 587 59 12.0 61

 None 444 47 9.0 44 409 41 7.7 39

Note: PDP (prescription drug plan). The PDPs and enrollment described here exclude employer-only plans and plans offered in 

U.S. territories. “National” data reflect the total number of plans for organizations with at least 1 PDP in each of the 34 

PDP regions. “Actuarially equivalent” includes both actuarially equivalent standard and basic alternative benefits.

“Enhanced” refers to plans with basic plus supplemental coverage. Components may not sum to totals due to rounding.

*The defined standard benefit’s deductible was $435 in 2020 and is $445 in 2021.

Source: MedPAC analysis of CMS landscape, premium, and enrollment data.

• Plan sponsors are offering 996 stand-alone PDPs in 2021 compared with 948 in 2020—an 

increase of more than 5 percent. Total enrollment in PDPs declined by 3.8 percent to 19.7

million beneficiaries in 2021 from 20.5 million in 2020.

• In 2021, 77 percent of all PDPs are offered by sponsoring organizations that have at least 1 

PDP in each of the 34 PDP regions (shown as “national” organizations in the table). Plans 

offered by those national sponsors account for 91 percent of all PDP enrollment.

• For 2021, 62 percent of PDP offerings include enhanced benefits (basic plus supplemental 

coverage), a small increase over the share in 2020. In 2021, the share of PDPs with

actuarially equivalent benefits (having the same average value as the defined standard benefit 

but with alternative benefit designs) declined slightly to 38 percent. Enhanced plans and 

actuarially equivalent plans have nearly equal shares of PDP enrollees (50 percent each).

• In 2021, 67 percent of PDPs use the same $445 deductible as in Part D’s defined standard 

benefit, compared with 69 percent in 2020. Only 14 percent of PDP enrollees are in plans with 

no deductible. Also in 2021, 59 percent of all PDPs designate certain formulary tiers that are 

not subject to the deductible. If, for example, a PDP used such a designation for preferred 

generic drugs, an enrollee would pay just the plan’s cost sharing for that tier rather than the full 

cost of the prescription up to the amount of the deductible. In 2021, 61 percent of PDP

enrollees were in such plans, up from 56 percent in 2020.
A Data Book: Health care spending and the Medicare program, July 2021 157

Chart 10-10. Characteristics of MA–PDs

2020 2021

Enrollees as of Enrollees as of

Plans February 2020 Plans February 2021

Number Number

Number Percent (in millions) Percent Number Percent (in millions) Percent

Totals 2,799 100% 15.3 100% 3,133 100% 16.9 100%

Type of organization

Local HMO 1,848 66 10.6 69 2,007 64 11.3 67

Local PPO 891 32 4.0 26 1,072 34 4.9 29

PFFS 26 1 0.1 0 21 1 0.0 0

Regional PPO 34 1 0.7 4 33 1 0.6 3

Type of benefit

Defined standard 43 2 0.1 <0.5 31 1 0.1 1

Actuarially equivalent 81 3 0.2 2 66 2 0.1 1

Enhanced 2,675 96 15.0 98 3,036 97 16.6 99

Type of deductible

Zero 1,349 48 7.4 49 1,582 50 9.1 54

Reduced 1,244 44 7.3 48 1,317 42 7.2 43

Defined standard* 206 7 0.5 4 234 7 0.5 3

Some formulary tiers not subject to a deductible 

 Some 1,386 50 7.7 50 1,497 48 7.6 45

 None 1,413 50 7.6 50 1,636 52 9.2 55

Note: MA–PD (Medicare Advantage–Prescription Drug [plan]), HMO (health maintenance organization), PPO (preferred 

provider organization), PFFS (private fee-for-service). The MA–PDs and enrollment described here exclude employer-only 

plans, plans offered in U.S. territories, 1876 cost plans, special needs plans, demonstrations, and Part B–only plans. 

Components may not sum to totals due to rounding. “Actuarially equivalent” includes both actuarially equivalent standard 

and basic alternative benefits. “Enhanced” refers to plans with basic plus supplemental coverage.

*The defined standard benefit’s deductible was $435 in 2020 and is $445 in 2021.

Source: MedPAC analysis of CMS landscape, premium, and enrollment data.

• There are 12 percent more MA–PDs in 2021 than in 2020. Sponsors are offering 3,133 MA–

PDs in 2021 compared with 2,799 the year before. Enrollment in MA–PDs grew from 15.3

million in 2020 to 16.9 million in 2021 (10 percent).

• Between 2020 and 2021, the number of drug plans offered by HMOs grew from 1,848 to 

2,007; HMO drug plans remain the dominant type of MA–PD, making up 64 percent of all 

offerings. Over the same period, the number of drug plans offered by local PPOs also 

increased from 891 plans to 1,072 plans. 

• A much larger share of MA–PDs than stand-alone prescription drug plans (PDPs) offer 

enhanced benefits. In 2021, 97 percent of MA–PDs have enhanced benefits compared with

62 percent of all PDPs (see Chart 10-9). In 2021, enhanced MA–PDs attracted 99 percent of 

total MA–PD enrollment.

• Fifty percent of MA–PDs have no deductible in 2021, and those plans attracted 54 percent of 

all MA–PD enrollees.

• In 2021, 48 percent of MA–PDs designate certain cost-sharing tiers of their formularies that 

are not subject to a deductible. Those plans account for 45 percent of MA–PD enrollment.
158 

Prescription drugs

Chart 10-11. Change in average Part D premiums, 2017–2021

Average monthly premium weighted by enrollment

Cumulative change 

in weighted 

average

premium,

2017–2021

2017 2018 2019 2020 2021

All plans $32 $32 $29 $27 $26 –17%

Basic plans 30 30 32 30 32 4

Enhanced plans

 Basic benefits 27 26 22 20 18 –35

 Supplemental benefits 6 7 6 6 6 6

 Total premium 33 33 28 26 24 –27

All basic coverage 29 28 25 23 22 –23

PDPs 41 41 40 38 38 –6

Basic plans 31 31 32 30 32 2

Enhanced plans

 Basic benefits 43 42 35 33 29 –33

 Supplemental benefits 11 15 15 15 16 42

 Total premium 54 57 50 48 45 –17

All basic coverage 36 35 33 31 30 –16

MA–PDs, including SNPs 19 18 16 15 15 –23

Basic plans 26 28 28 26 31 16

Enhanced plans

 Basic benefits 16 15 13 12 12 –25

 Supplemental benefits 2 1 1 1 1 –29

 Total premium 18 17 14 13 13 –27

All basic coverage 18 17 15 14 14 –21

MA–PD buy-down of basic 

premium 16 16 16 15 19 20

MA–PD buy-down of 

supplemental benefits 15 16 17 20 21 45

Base beneficiary premium 35.63 35.02 33.19 32.74 33.06 –7

Note: PDP (prescription drug plan), MA–PD (Medicare Advantage–Prescription Drug [plan]), SNP (special needs plan). All 

calculations exclude employer-only groups and plans offered in U.S. territories. In addition, MA–PDs exclude Part B–only 

plans, demonstrations, and 1876 cost plans. The MA–PD data reflect the portion of Medicare Advantage plans’ total monthly 

premium attributable to Part D benefits for plans that offer Part D coverage, as well as Part C rebate dollars that were used to 

offset Part D premium costs. The fact that average premiums for enhanced MA–PDs are lower than for basic MA–PDs could 

reflect several factors such as changes in enrollment among plan sponsors and counties of operation and differences in the 

average health status of plan enrollees. Cumulative changes were calculated from unrounded data. Components may not 

sum to totals due to rounding.

Source: MedPAC analysis of CMS landscape, plan report, enrollment data, and bid data.

(Chart continued next page)
A Data Book: Health care spending and the Medicare program, July 2021 159

Chart 10-11. Change in average Part D premiums, 2017–2021

(continued)

• Part D enrollees can select between plans with basic or enhanced benefits (the latter

combine basic and supplemental coverage). Medicare aims to subsidize 74.5 percent of the 

average cost of basic benefits; enrollees pay premiums for the remaining 25.5 percent and 

all of the cost of any supplemental benefits. (For more about how plan premiums are 

determined, see Part D Payment Basics at http://www.medpac.gov/docs/defaultsource/payment-basics/medpac_payment_basics_20_partd_final_sec.pdf?sfvrsn=0.)

• The overall average premium paid by enrollees for any type of Part D coverage declined

from $27 per month in 2020 to $26 per month in 2021. Over the period from 2017 to 2021, 

year-to-year changes in average premiums have varied by type of benefit (basic vs. 

enhanced) and type of plan (PDP vs. MA−PD); the changes have not necessarily 

corresponded to changes observed in the base beneficiary premium.

• Across all basic plans and the basic portion of enhanced plans, the average premium for 

basic benefits fell from $29 in 2017 to $22 per month in 2021, a cumulative decline of 23

percent. This decline occurred despite very rapid growth in spending for Part D’s 

catastrophic phase of the benefit (data not shown). In the catastrophic phase, Medicare 

subsidizes 80 percent of enrollees’ drug spending. (For more information about Medicare’s 

Part D spending, see Chapter 14 of the Commission’s March 2021 report to the Congress at 

http://www.medpac.gov/docs/defaultsource/reports/mar21_medpac_report_ch13_sec.pdf?sfvrsn=0.)

• Over the five-year period, the average enrollee premium for basic coverage in PDPs ranged 

between a low of $30 in 2020 and a high of $32 per month in 2021. Between 2017 and 2021,

the average premium increased by a cumulative 2 percent. Among enhanced plans offered by 

PDPs, the average enrollee premium has ranged from $45 in 2021 to $57 in 2018. Over the 

five-year period, the average premium decreased by a cumulative 17 percent. Of the $45

average premium in 2021 among enhanced PDPs, $29 was for basic benefits and $16 was for 

supplemental benefits. The portion of enhanced premiums attributable to supplemental benefits 

has grown, while the portion for basic benefits has declined.

• The average Part D premium paid by beneficiaries enrolled in MA−PDs with basic coverage 

ranged between a low of $26 in 2020 and a high of $31 per month in 2021. From 2017 to 

2021, the average premium increased by a cumulative 16 percent. The average premium 

paid by beneficiaries enrolled in MA−PDs offering enhanced coverage has decreased from 

$18 in 2017 to $13 in 2021, a cumulative 27 percent decrease. MA−PD sponsors typically 

use a portion of Medicare’s Part C (Medicare Advantage) payments to “buy down” the 

premiums that plan enrollees would otherwise have to pay for Part D basic premiums and 

supplemental benefits. Because of those Part C payment “rebates,” in 2021, MA−PD

enrollees avoided having to pay $19 per month in basic premiums and an additional $21 per 

month for supplemental coverage, on average.
160 

Prescription drugs

Chart 10-12. More premium-free PDPs for LIS enrollees in 2021

Number of PDPs

Number of PDPs that have zero 

premium for LIS enrollees

PDP region State(s) 2020 2021 Difference 2020 2021 Difference

1 ME, NH 26 28 2 6 7 1

2 CT, MA, RI, VT 25 27 2 7 8 1

3 NY 27 28 1 9 7 2

4 NJ 28 30 2 8 7 –1

5 DC, DE, MD 27 27 0 10 9 –1

6 PA, WV 31 33 2 10 10 0

7 VA 29 30 1 7 7 0

8 NC 28 31 3 9 9 0

9 SC 28 29 1 5 5 0

10 GA 28 32 4 6 8 2

11 FL 27 28 1 4 5 1

12 AL, TN 30 32 2 7 8 1

13 MI 30 29 –1 9 9 0

14 OH 28 30 2 2 5 3

15 IN, KY 28 30 2 7 8 1

16 WI 30 31 1 9 9 0

17 IL 28 31 3 8 10 2

18 MO 28 29 1 5 6 1

19 AR 27 31 4 6 7 1

20 MS 25 27 2 7 7 0

21 LA 26 26 0 9 8 –1

22 TX 30 35 5 5 8 3

23 OK 29 30 1 8 9 1

24 KS 28 29 1 6 7 1

25 IA, MN, MT, ND, 

NE, SD, WY 29 28 –1 8 7 –1

26 NM 26 27 1 7 7 0

27 CO 26 27 1 7 8 1

28 AZ 31 32 1 12 10 –2

29 NV 28 29 1 5 7 2

30 OR, WA 28 29 1 8 9 1

31 ID, UT 28 28 0 8 9 1

32 CA 32 32 0 8 7 –1

33 HI 25 26 1 5 5 0

34 AK 24 25 1 7 7 0

Total 948 996 48 244 259 15

Note: PDP (prescription drug plan), LIS (low-income [drug] subsidy).

Source: MedPAC based on 2020 and 2021 Part D plan report file provided by CMS. 

• The total number of stand-alone PDPs increased by 5 percent, from 948 in 2020 to 996 in 2021. The 

median number of plans offered in PDP regions increased to 29 plans from 28 in 2020 (data not 

shown). In 2021, Alaska has the fewest stand-alone PDPs, with 25, and Region 22 (Texas) had the 

most, with 35.

• In 2021, 259 PDPs qualify as premium free to LIS enrollees. At least five premium-free PDPs are 

available in any given region.
A Data Book: Health care spending and the Medicare program, July 2021 161

Chart 10-13. In 2021, about one in two listed drugs are subject to 

some utilization management

PDP enrollees MA–PD enrollees

5-tier formulary structurea(in percent) 100%b 99%

Drugs on formulary as % of all Part D drugsc 72% 78%

Median cost-sharing amounts

 Tier 1: generic drugs $0 $1

 Tier 2: other generic drugs 5 10

 Tier 3: preferred brand-name drugs 40 47

 Tier 4: nonpreferred drugs 40% 100

 Tier 5: specialty-tier drugs 25% 33%

Drugs with utilization management requirement (in percent)

 Prior authorization 28% 26%

 Step therapy 1 1

 Quantity limits 37 36

 Any utilization management 51 48

Note: PDP (prescription drug plan), MA–PD (Medicare Advantage–Prescription Drug [plan]). Calculations are weighted by 

enrollment. All calculations exclude employer-only groups and plans offered in U.S. territories. In addition, MA–PDs

exclude demonstration programs, special needs plans, and 1876 cost plans. Values reflect the share of listed chemical 

entities that are subject to utilization management, weighted by plan enrollment. “Prior authorization” means that the 

enrollee must get preapproval from the plan before coverage. “Step therapy” refers to a requirement that the enrollee try 

specified drugs before being prescribed other drugs in the same therapeutic category. “Quantity limits” means that plans 

limit the number of doses of a drug available to the enrollee in a given time period. Generic drugs placed on Tier 1 are 

“preferred” (i.e., lowest cost sharing) relative to generic drugs placed on higher tiers, including Tier 2.

a

Includes formularies with an additional (sixth) tier used for certain types of drugs, such as over-the-counter medications.

b Less than 1 percent of enrollees were in a plan that did not use a tiered formulary structure.

c Number of all Part D drugs is based on the counts of unique chemical entities listed on CMS’s formulary reference file 

for 2021 benefit year.

Source: MedPAC analysis of formularies submitted to CMS.

• Most Part D enrollees choose plans that have a five-tier structure: two generic, one 

preferred brand-name tier, and one nonpreferred drug tier (which may include both brandname and generic drugs), plus a specialty tier. In 2021, nearly all enrollees are enrolled in 

plans with this five-tier structure, including plans with an additional (sixth) tier for certain 

types of drugs, such as over-the-counter medications.

• The number of drugs listed on a plan’s formulary affects a beneficiary’s access to 

medications. In 2021, on average, PDP enrollees have access to 72 percent of all Part D 

covered drug products compared with 78 percent among MA–PD enrollees.

(Chart continued next page)
162 

Prescription drugs

Chart 10-13. In 2021, about one in two listed drugs are subject to 

some utilization management, 2021 (continued)

• For enrollees in PDPs with a five-tier structure, the median copay in 2021 is $0 for a generic 

drug on a lower tier and $5 for other generic drugs. The median copay is $40 for a preferred 

brand-name drug and 40 percent coinsurance for a nonpreferred drug. For MA–PD 

enrollees, in 2021, the median copays for generic drugs are $1 and $10 for the two generic 

tiers, respectively. The median copay is $47 for a preferred brand and $100 for a 

nonpreferred drug. (About 14 percent of MA–PDs use 45 percent coinsurance for 

nonpreferred drugs.) Both PDPs and MA–PDs use coinsurance for specialty-tier drugs (25 

percent and 33 percent, respectively).

• In addition to the number of drugs listed on a plan’s formulary, plans’ processes for 

nonformulary exceptions and use of utilization management tools—prior authorization 

(preapproval for coverage), quantity limits (limitations on the number of doses of a particular 

drug covered in a given period), and step therapy requirements (enrollees being required to 

try specified drugs before being prescribed other drugs in the same therapeutic category)—

can affect access to certain drugs. 

• In 2021, the use of some form of utilization management, on average, increased to 51 

percent of drugs listed on a plan’s formulary in stand-alone PDPs and 48 percent in MA–

PDs. Part D plans typically use quantity limits or prior authorization to manage enrollees’ 

prescription drug use.

• Among the drugs listed on plan formularies, on average, the share that requires prior 

authorization in 2021 increased for both stand-alone PDPs and MA–PDs (to 28 percent and 

26 percent, respectively). The share with quantity limits increased for both types of plans. In 

2021, on average, quantity limits apply to 37 percent and 36 percent of drugs listed on 

formularies of stand-alone PDPs and MA–PDs, respectively. The share of drugs listed on 

plan formularies that require the use of step therapy remains very low for both stand-alone 

PDPs and MA–PDs.
A Data Book: Health care spending and the Medicare program, July 2021 163

Chart 10-14. Characteristics of Part D enrollees, 2019

All 

Medicare Part D

Plan type Subsidy status

PDP MA–PD LIS Non-LIS

Beneficiariesa(in millions) 65.4 48.4 27.2 21.2 14.1 34.2

Percent of all Medicare 100% 74% 42% 32% 22% 52%

Gender

Male 46% 43% 43% 43% 41% 44%

Female 54 57 57 57 59 56

Race/ethnicityb

White, non-Hispanic 74 73 78 66 53 81

African American, 

non-Hispanic 10 11 9 13 20 7

Hispanic 9 10 6 15 17 7

Asian 3 4 3 4 6 2

Other 3 3 3 2 3 3

Age (years)

c

<65 14 14 15 14 36 5

65–69 24 22 22 22 18 24

70–74 23 23 23 24 15 27

75–79 16 17 16 17 11 19

80+ 23 23 24 22 20 25

Note: PDP (prescription drug plan), MA–PD (Medicare Advantage–Prescription Drug [plan]), LIS (low-income [drug] subsidy). 

Components may not sum to totals due to rounding. 

a Figures for “All Medicare” and “Part D” include all beneficiaries with at least one month of enrollment in the respective 

program. A beneficiary was classified as “LIS” if that individual received Part D’s LIS at some point during the year. For 

individuals who switched plan types during the year, classification into plan types was based on the greater number of 

months of enrollment.

b Because we did not have race and ethnicity information for 2019 that was adjusted for undercounting Hispanic 

population, the figures shown are distributions based on 2018 data.

c Age as of July 2019.

Source: MedPAC analysis of the common Medicare environment file from CMS. 

• In 2019, 48.4 million Medicare beneficiaries (74 percent) were enrolled in Part D at some 

point in the year. About 27 million were in stand-alone PDPs, and the remaining 21 million

were in MA–PDs. Just over 14 million enrollees received Part D’s LIS.

• Demographic characteristics of Part D enrollees are generally similar to the overall Medicare 

population, with the exception of gender (Part D enrollees are more likely to be female). 

MA–PD enrollees are more likely to be Hispanic or African American compared with PDP 

enrollees; LIS enrollees are more likely to be female, minority, and disabled beneficiaries 

under age 65 compared with non-LIS enrollees.
164 

Prescription drugs

Chart 10-15. Part D enrollment trends, 2007–2019

Average annual growth rate

2007 2010 2014 2019

2007−

2010

2010−

2014

2014−

2019

Part D enrollment (in millions)*

Total 26.1 29.7 40.0 48.4 4.4% 7.7% 3.9%

Employer group waiver plans 2.0 2.6 7.0 7.5 9.2 27.4 1.5

By plan type

PDP 18.3 18.9 25.1 27.2 1.1 7.3 1.6

MA–PD 7.8 10.6 14.9 21.2 10.9 8.9 7.2

By subsidy status

LIS 10.4 11.3 12.8 14.1 2.7 3.1 2.0

Non-LIS 15.7 18.4 27.2 34.2 5.5 10.2 4.7

By age (years)

b

<65 5.5 6.3 7.8 6.8 4.7 5.5 –2.5

65–69 5.4 6.6 9.5 10.8 6.5 9.9 2.5

70–79 8.8 9.9 13.9 19.5 3.8 8.9 7.0

80+ 6.4 7.1 8.8 11.3 3.2 5.7 5.1

Part D enrollment (in percent)

Total 100% 100% 100% 100%

Employer group waiver plans 8 9 17 15

By plan type

PDP 70 64 63 56

MA–PD 30 36 37 44

By subsidy status

LIS 40 38 32 29

Non-LIS 60 62 68 71

By age (years)**

<65 21 21 19 14

65–69 21 22 24 22

70–79 34 33 35 40

80+ 25 24 22 23

Note: PDP (prescription drug plan), MA–PD (Medicare Advantage–Prescription Drug [plan]), LIS (low-income [drug] subsidy). A 

beneficiary was classified as “LIS” if that individual received Part D’s LIS at some point during the year. If a beneficiary was 

enrolled in both a PDP and an MA–PD during the year, that individual was classified into the type of plan with the greater 

number of months of enrollment. Components may not sum to totals due to rounding. Average annual growth rate is 

calculated on unrounded numbers.

*Figures include all beneficiaries with at least one month of enrollment.

**Age as of July of the respective year. Changes in the distribution of enrollment by age for 2019 are largely due to the 

changes in the data source.

Source: MedPAC analysis of common Medicare environment file from CMS.

• Part D enrollment grew faster between 2010 and 2014 (average annual growth rate (AAGR) 

of 7.7 percent) than between 2007 and 2010 (AAGR of 4.4 percent) or between 2014 and 

2019 (AAGR of 3.9 percent). The faster enrollment growth between 2010 and 2014 largely 

reflects the growth in enrollment in Part D plans operated by employers for their retirees 

(employer group waiver plans, or EGWPs). Enrollment in EGWPs grew from 2.6 million to 

7.0 million (AAGR of 27.4 percent) during this period.

(Chart continued next page)
A Data Book: Health care spending and the Medicare program, July 2021 165

Chart 10-15. Part D enrollment trends, 2007–2019 (continued)

• The number of enrollees receiving the LIS grew modestly between 2007 and 2019, with an 

AAGR of between 2 percent (from 2014 to 2019) and 3.1 percent (from 2010 to 2014). 

During the same period, the number of non-LIS enrollees grew faster than LIS enrollees, 

with an AAGR of 10.2 percent between 2010 and 2014 and an AAGR of 4.7 percent or 

greater before 2010 and after 2014. Faster enrollment growth among non-LIS enrollees is 

partly attributable to the recent growth in EGWPs that shifted beneficiaries into Part D plans 

from employer plans that had previously received Medicare’s retiree drug subsidy (RDS) 

(see Chart 10-7 for information on the RDS).

• Between 2014 and 2019, the largest growth in enrollment was observed for beneficiaries 

ages 70 to 79 (7 percent annually, on average), reflecting the aging of the baby-boom 

cohort.

• While MA–PD enrollment growth decelerated in recent years from the nearly 11 percent 

AAGR observed between 2007 and 2010, enrollment in MA–PDs continued to exceed that 

of PDPs between 2014 and 2019 (AAGR of 7.2 percent and 1.6 percent, respectively).
166 

Prescription drugs

Chart 10-16. Part D enrollment by region, 2019

PDP 

region State(s)

Share of 

Medicare enrollment

Share of Part D enrollment*

 Plan type Subsidy status

Part D* EGWP PDP MA–PD LIS Non-LIS

1 ME, NH 72% 9% 67% 33% 31% 69%

2 CT, MA, RI, VT 78 15 64 36 33 67

3 NY 79 19 52 48 37 63

4 NJ 75 17 76 24 24 76

5 DE, DC, MD 65 15 83 17 31 69

6 PA, WV 78 14 54 46 27 73

7 VA 66 9 71 29 27 73

8 NC 76 12 54 46 29 71

9 SC 74 13 62 38 29 71

10 GA 74 12 49 51 34 66

11 FL 78 7 43 57 29 71

12 AL, TN 75 9 48 52 33 67

13 MI 80 26 68 32 25 75

14 OH 80 13 56 44 25 75

15 IN, KY 77 12 65 35 29 71

16 WI 74 9 54 46 23 77

17 IL 75 12 68 32 28 72

18 MO 77 9 57 43 26 74

19 AR 72 3 66 34 36 64

20 MS 73 3 75 25 43 57

21 LA 77 10 52 48 39 61

22 TX 74 11 56 44 31 69

23 OK 69 9 72 28 30 70

24 KS 73 4 78 22 22 78

25 IA, MN, MT, NE, 

ND, SD, WY 76 6 69 31 21 79

26 NM 73 13 52 48 38 62

27 CO 74 10 53 47 23 77

28 AZ 75 8 48 52 27 73

29 NV 71 6 49 51 25 75

30 OR, WA 70 7 49 51 26 74

31 ID, UT 72 7 53 47 21 79

32 CA 79 13 47 53 34 66

33 HI 72 25 37 63 26 74

34 AK 66 27 99 1 33 67

Mean 74 11 56 44 29 71

Minimum 65 3 37 1 21 57

Maximum 80 27 99 63 43 79

Note: PDP (prescription drug plan), EGWP (employer group waiver plans), MA–PD (Medicare Advantage–Prescription Drug 

[plan]), LIS (low-income [drug] subsidy). Definition of regions is based on PDP regions used in Part D.

*Includes enrollment in Part D plans operated for EGWPs.

Source: MedPAC analysis of Medicare Part D denominator and common Medicare environment files from CMS. 

• Among Part D regions in 2019, all regions had 65 percent or more of all Medicare beneficiaries 

enrolled in Part D. In some regions with lower than average enrollment in Part D (Region 5 and 

Region 7), many beneficiaries likely received their drug coverage through the Federal Employees 

Health Benefits Program.

• Since 2010, many employers have switched from operating retiree drug subsidy (RDS)–eligible 

employer plans to sponsoring Part D plans for their retirees (EGWPs). In 2019, 11 percent of 

Medicare beneficiaries were enrolled in EGWPs compared with 5 percent or less before 2010 (see 

Chart 10-7 for information on the RDS).

(Chart continued next page)
A Data Book: Health care spending and the Medicare program, July 2021 167

Chart 10-16. Part D enrollment by region, 2019 (continued)

• Before 2019, beneficiaries in Alaska were less likely to enroll in Part D because alternative employersponsored drug coverage was more widely available: The share of Medicare beneficiaries enrolled in 

employer-sponsored plans that received the RDS was 26 percent, compared with an average of 2 

percent nationwide. In 2019, those beneficiaries were moved to Part D as employers switched from 

operating RDS-eligible plans to operating EGWPs.

• The share of Medicare beneficiaries in EGWPs varied from 3 percent in Region 19 (AR) and Region 

20 (MS) to 25 percent or more in Region 13 (MI), Region 33 (HI), and Region 34 (AK). 

• Wide variation was seen in the shares of Part D beneficiaries who enrolled in PDPs and MA–PDs

across PDP regions. The pattern of MA–PD enrollment is generally consistent with availability of and 

enrollment in Medicare Advantage plans.

• The share of Part D enrollees receiving the LIS ranged from 21 percent in Region 25 (IA, MN, MT, 

NE, ND, SD, and WY) and Region 31 (ID and UT) to 43 percent in Region 20 (MS). 
168 

Prescription drugs

Chart 10-17. Components of Part D spending growth

2009 2019

Average 

annual growth 

2009–2019

Total gross spending (in billions) $73.7 $183.1 9.5%

 High-cost beneficiaries 29.2 116.6 14.9%

 Lower cost beneficiaries 44.6 66.5 4.1%

Number of beneficiaries using a Part D drug (in millions) 26.5 45.1 5.4%

 High-cost beneficiaries 2.4 4.3 6.2%

 Lower cost beneficiaries 24.1 40.8 5.4%

Amount per beneficiary who used Part D drugs

 Gross drug spending per year $2,781 $4,062 3.9%

 Average price per 30-day prescription $55 $72 2.7%

 Number of 30-day prescriptions 50.4 56.3 1.1%

Amount per high-cost beneficiary who used Part D drugs

 Gross drug spending per year $12,294 $26,983 8.2%

 Average price per 30-day prescription $110 $236 7.9%

 Number of 30-day prescriptions 111.4 114.4 0.3%

Amount per lower cost beneficiary who used Part D drugs

 Gross drug spending per year $1,846 $1,632 –1.2%

 Average price per 30-day prescription $42 $33 –2.4%

 Number of 30-day prescriptions 44.5 50.1 1.2%

Note: “High-cost beneficiaries” refers to individuals who incurred spending high enough to reach the catastrophic phase of the 

benefit. “Gross spending” reflects payments to pharmacies from all payers, including beneficiary cost sharing, but does 

not include rebates and discounts from pharmacies and manufacturers that are not reflected in prices at the pharmacies.

Changes in the average price per prescription reflect both price inflation and changes in the mix of drugs used.

Components may not sum to totals due to rounding.

Source: MedPAC analysis of Part D prescription drug event data and denominator files from CMS.

• Between 2009 and 2019, gross spending on drugs under the Part D program grew by an annual 

average rate of 9.5 percent. The annual growth in spending was considerably higher (14.9 percent) 

among high-cost beneficiaries (individuals who incurred spending high enough to reach the 

catastrophic phase of the benefit) compared with 4.1 percent for lower cost beneficiaries. 

• During the 2009 through 2019 period, the number of beneficiaries who used Part D drugs grew by an 

annual average rate of 5.4 percent. The number of high-cost beneficiaries grew more rapidly (6.2

percent) compared with lower cost beneficiaries (5.4 percent).

• The average price per 30-day prescription covered under Part D rose from $55 in 2009 to $72 in 

2019. Overall, growth in price per prescription accounted for more than two-thirds (2.7 percentage 

points) of the 3.9 percent average annual growth in spending per beneficiary among beneficiaries 

who used Part D drugs. 

• The average annual growth rate in overall spending per beneficiary reflects two distinct patterns of 

price and spending growth, one for high-cost beneficiaries and another for lower cost beneficiaries.

Among high-cost beneficiaries, annual growth in prices (7.9 percent) accounted for nearly all of the 

spending growth (8.2 percent) during this period. In contrast, among lower cost beneficiaries, the 

average annual decrease in prices (–2.4 percent) resulted in an overall decrease in spending (–1.2

percent annually), despite an increase in the number of prescriptions filled during the same period.
A Data Book: Health care spending and the Medicare program, July 2021 169

Chart 10-18. The majority of Part D spending was incurred by just

over one-fifth of all Part D enrollees, 2019

Note: “Spending” (gross) reflects payments from all payers, including beneficiaries (cost sharing) but does not include rebates 

and discounts from pharmacies and manufacturers that are not reflected in prices at the pharmacies. In 2019, the defined 

standard basic benefit included a $415 deductible and 25 percent coinsurance until the enrollee reached $3,820 in total 

covered drug spending. An individual with an average mix of drugs who did not receive Part D’s low-income subsidy and 

who had no other supplemental coverage would have reached the catastrophic phase of the benefit at about $8,140 in 

total drug spending. In 2019, among those who reached the catastrophic phase of the benefit, an enrollee at the 75th

percentile of the distribution had drug spending totaling $26,469. Components may not sum to totals due to rounding.

Source: MedPAC analysis of Medicare Part D prescription drug event data from CMS. 

• Medicare Part D spending is concentrated in a subset of beneficiaries. In 2019, about 22 percent of Part D 

enrollees had annual spending exceeding the initial coverage limit (ICL) (typically set at $3,820 in gross 

drug spending). For spending exceeding the ICL until they reached the catastrophic phase of the benefit 

(at about $8,140 in gross drug spending under the defined standard benefit for beneficiaries not receiving 

Part D’s low-income subsidy (LIS)), enrollees were responsible for a coinsurance 25 percent or greater.

(For LIS enrollees, Part D’s LIS paid the difference between the 100 percent coinsurance and the 

applicable maximum copay amounts of no more than $8.50.) These beneficiaries accounted for 84 percent 

of total Part D spending.

• Spending on prescription drugs has become more concentrated over time. The costliest 9 percent of 

beneficiaries, those with drug spending above the catastrophic threshold, accounted for about 64 percent of 

total Part D spending. Before 2011, the costliest 8 percent of beneficiaries accounted for 40 percent or less of 

total Part D spending (data not shown). Just 2 percent of Part D enrollees with the highest spending (annual 

spending at or above $26,469) accounted for 39 percent of total Part D spending. In comparison, for 

Medicare Part A and Part B spending, Medicare fee-for-service spending accounted for by the costliest 5 

percent of beneficiaries was 43 percent in 2018 (data not shown; see Chart 1-14).

• While the majority (65 percent) of beneficiaries with the highest spending continues to be those who receive 

the LIS, those who do not receive the LIS are increasingly reaching the catastrophic phase of the benefit 

(data not shown; see Chart 10-19).

7

11

1

60

15

13

20

7

24

2

39

0

10

20

30

40

50

60

70

80

90

100

Percent of enrollees Percent of spending

Percent

Catastrophic phase 

(≥$26,469)

Catastrophic phase

(<$26,469)

Coverage gap

phase

Initial coverage

phase

Deductible

$0

84

Total annual drug 

spending, by benefit 

phase reached in 2019
170 

Prescription drugs

Chart 10-19. Characteristics of Part D enrollees, by benefit phase 

reached, 2019

Annual drug spending

Below initial

coverage limit

Coverage-gap 

phase Catastrophic phase

Sex

Male 43% 43% 43%

Female 57 57 57

Age (years)

<65 12 14 32

65–69 24 17 18

70–74 24 22 19

75–80 17 19 14

80+ 23 29 18

LIS status*

LIS 25 32 65

Non-LIS 75 68 35

Plan type**

PDP 55 60 62

MA–PD 45 40 38

Note: LIS (low-income [drug] subsidy), PDP (prescription drug plan), MA−PD (Medicare Advantage−Prescription Drug [plan]). 

“Spending” (gross) reflects payments from all payers, including beneficiaries (cost sharing) but does not include rebates 

and discounts from pharmacies and manufacturers that are not reflected in prices at the pharmacies. In 2019, the defined 

standard basic benefit included a $415 deductible and 25 percent coinsurance until the enrollee reached $3,820 in total 

covered drug spending, and then a coverage gap until out-of-pocket (OOP) spending reached the annual OOP threshold

of $5,100. (The total dollar amount of drug spending at which a beneficiary reaches the OOP threshold varies from person 

to person, depending on the mix of brand-name and generic prescriptions filled. CMS estimated that in 2019, a person 

who did not receive Part D’s LIS and had no supplemental coverage would, on average, have reached the threshold at 

about $8,140 in total drug spending.) A small number of beneficiaries were excluded from the analysis because of missing 

data. Components may not sum to 100 due to rounding. 

*A beneficiary was assigned LIS status if that individual received Part D’s LIS at some point during the year.

**If a beneficiary was enrolled in both a PDP and an MA–PD during the year, that individual was classified in the type of

plan with the greater number of months of enrollment.

Source: MedPAC analysis of Medicare Part D prescription drug event data and common Medicare environment file from CMS. 

• In 2019, Part D enrollees who reached the catastrophic phase of the benefit were more likely to

be disabled and under age 65, and receiving the LIS compared with Part D enrollees with annual

spending below the catastrophic threshold.

• While LIS enrollees are more likely to reach the catastrophic phase of the benefit, their share has

been declining, from more than 80 percent in 2010 and earlier years (data not shown) to 65

percent in 2019. This decline reflects more rapid growth in enrollment of individuals who do not

receive the LIS as well as the growth in average prices of drugs taken by those individuals.

• Part D enrollees who reached the catastrophic phase of the benefit were more likely to be

enrolled in stand-alone PDPs (62 percent) compared with enrollees whose spending was below

the initial coverage limit (55 percent) or enrollees in the coverage gap who did not reach the

catastrophic threshold (60 percent). Some of this difference likely reflects the facts that LIS

enrollees are more costly on average and were more likely to be in PDPs in 2019.
A Data Book: Health care spending and the Medicare program, July 2021 171

Chart 10-20. Part D spending and use per enrollee, 2019

Part D

Plan type LIS status

PDP MA–PD LIS Non-LIS

Total gross spending (billions)* $183.1 $111.0 $72.1 $87.5 $95.6

Total number of prescriptions

(millions) 2,538 1,429 1,108 897 1,640

Average spending per prescription $72 $78 $65 $97 $58

Per enrollee per month

Total spending $333 $362 $297 $554 $244

OOP spending 31 36 26 5 42

Manufacturer gap discount 18 21 15 N/A 26

Plan liability 223 239 204 384 158

Low-income cost-sharing subsidy 47 50 43 164 N/A

Other** 13 16 9 <1 18

Number of prescriptions 4.6 4.7 4.6 5.7 4.2

Note: PDP (prescription drug plan), MA–PD (Medicare Advantage–Prescription Drug [plan]), LIS (low-income [drug] subsidy), OOP 

(out-of-pocket), N/A (not applicable). “Total gross spending” reflects payments from all payers, including beneficiaries (cost 

sharing) but does not include rebates and discounts from pharmacies and manufacturers that are not reflected in prices at the

pharmacies. Part D prescription drug event (PDE) records are classified into plan types based on the contract identification on 

each record. For purposes of classifying the PDE records by LIS status, monthly LIS eligibility information in Part D’s 

denominator file was used. Estimates are sensitive to the method used to classify PDE records to each plan type and LIS 

status. “Plan liability” includes plan payments for drugs covered by both basic and supplemental (enhanced) benefits. In 

addition to the major categories shown in the chart, total spending includes amounts paid by other relatively minor payers 

such as group health plans, workers’ compensation, and charities. “Number of prescriptions” is standardized to a 30-day 

supply. Components may not sum to totals due to rounding.

*“Total gross spending” includes slightly over $10 billion in manufacturer discounts for brand-name drugs and biologics filled 

by non-LIS enrollees during the coverage gap.

**“Other” amount includes payments by patient assistance organizations and third-party payers other than Part D plans that 

reduce the patient cost-sharing liability.

Source: MedPAC analysis of Medicare Part D PDE data and Part D denominator file from CMS. 

• In 2019, gross spending on drugs for the Part D program totaled $183.1 billion, with more than 60 percent ($111

billion) accounted for by Medicare beneficiaries enrolled in stand-alone PDPs. Part D enrollees receiving the LIS 

accounted for about 48 percent ($87.5 billion) of the total. Manufacturer discounts for brand-name drugs filled by 

non-LIS enrollees while they were in the coverage gap accounted for 5.5 percent of the total, or 10.5 percent of the 

gross spending by non-LIS enrollees (up from 4.1 percent and 8 percent, respectively, in 2018; data not shown).

• The number of prescriptions filled by Part D enrollees totaled over 2.5 billion, with 56 percent (over 1.4 billion) 

accounted for by PDP enrollees. The 29 percent of enrollees who received the LIS accounted for about 35 percent 

(897 million) of the total number of prescriptions filled.

• In 2019, Part D enrollees filled 4.6 prescriptions at $333 per month on average, an increase from $317 per month 

(for 4.6 prescriptions) in 2018 (2018 data not shown). The average monthly plan liability for PDP enrollees ($239) 

was considerably higher than that of MA–PD enrollees ($204). The average monthly OOP spending was smaller for 

MA–PD enrollees than PDP enrollees ($36 vs. $26, respectively). The average monthly low-income cost-sharing 

subsidy among PDP enrollees ($50) continues to exceed that for MA–PD enrollees ($43), although that difference 

has been decreasing as an increasing share of LIS beneficiaries have enrolled in MA–PDs.

• Average monthly spending per LIS enrollee ($554) was more than double that of a non-LIS enrollee ($244), and the 

average number of prescriptions filled per month by an LIS enrollee was 5.7 compared with 4.2 for a non-LIS 

enrollee. LIS enrollees had much lower monthly OOP spending, on average, than non-LIS enrollees ($5 vs. $42, 

respectively). Part D’s LIS pays for most of the cost sharing for LIS enrollees, averaging $164 per month in 2019.
172 

Prescription drugs

Chart 10-21. Trends in Part D spending and use per enrollee per 

month, 2007–2019

Note: PDP (prescription drug plan), LIS (low-income [drug] subsidy), MA–PD (Medicare Advantage–Prescription Drug [plan]).

“Spending” (gross) reflects payments from all payers, including beneficiaries (cost sharing) but does not include rebates 

and discounts from pharmacies and manufacturers that are not reflected in prices at the pharmacies. Part D prescription 

drug event (PDE) records are classified into plan types based on the contract identification on each record. For purposes 

of classifying the PDE records by LIS status, monthly LIS eligibility information in Part D’s denominator file was used. 

Figures are sensitive to the method used to classify PDE records to each plan type and LIS status.

Source: MedPAC analysis of Medicare Part D PDE data and Part D denominator file from CMS. 

• Between 2007 and 2019, average per capita spending per month for Part D–covered drugs grew 

from $212 to $333, an average growth rate of 3.8 percent annually, or about 57 percent 

cumulatively. The rate of growth in average per capita spending more than doubled after 2013, in 

part reflecting the introduction of new hepatitis C treatments in 2014 and other new expensive 

therapies in subsequent years.

• Between 2007 and 2019, monthly per capita spending for LIS enrollees grew faster than that for 

non-LIS enrollees, increasing from $301 to $554 (a cumulative growth of 84 percent) compared 

with an increase from $156 to $244 for non-LIS enrollees (a cumulative growth of 56 percent). The 

number of prescriptions filled by both LIS and non-LIS enrollees grew by just under 2 percent 

annually during this period (data not shown).

• The growth in monthly per capita drug spending among MA−PD enrollees exceeded that of PDP 

enrollees during the 2007 to 2019 period (annual average growth of 5.8 percent and 3.5 percent, 

respectively). The average per capita spending for MA−PD enrollees continued to be lower than

that of PDP enrollees (by $65 per month in 2019); however, that difference has been declining 

since 2014.

$212

$242

$333

$239

$275

$362

$151

$185

$297

$301

$377

$554

$156

$179

$244

$0

$100

$200

$300

$400

$500

$600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Gross Part D spending per enrollee per month

All Part D PDP

MA-PD LIS

Non-LIS
A Data Book: Health care spending and the Medicare program, July 2021 173

Chart 10-22. Top 15 therapeutic classes of drugs covered under 

Part D, by spending and volume, 2019

Top 15 therapeutic classes by spending Top 15 therapeutic classes by volume

Dollars Prescriptions

Billions Percent Millions Percent

Diabetic therapy $30.7 16.8% Antihyperlipidemics 273.6 10.8%

Asthma/COPD therapy agents 13.3 7.3 Antihypertensive therapy 

 agents

260.1 10.3

Anticoagulants 12.4 6.8 Diabetic therapy 173.6 6.8

Antineoplastics (enzyme 

inhibitors)

11.5 6.3 Antidepressants 160.3 6.3

Antivirals 9.3 5.1 Beta-adrenergic blockers 155.6 6.1

Analgesics (anti-inflammatory/ 

 antipyretic, non-narcotic)

8.8 4.8 Peptic ulcer therapy 128.9 5.1

Antipsychotics 6.6 3.6 Diuretics 121.9 4.8

Antineoplastics 

 (immunomodulators)

5.9 3.2 Calcium channel blockers 117.4 4.6

Anticonvulsants 5.7 3.1 Thyroid therapy 100.8 4.0

Antihypertensive therapy 

agents

5.5 3.0 Anticonvulsants 98.1 3.9

Antihyperlipidemics 4.7 2.5 Asthma/COPD therapy agents 74.0 2.9

Antineoplastics (hormone 

 antagonists)

3.2 1.8 Analgesics (narcotic) 67.0 2.6

Analgesics (narcotic) 2.8 1.5 Antibacterial agents 59.2 2.3

Antidepressants 2.8 1.5 Prostatic hypertrophy agents 52.1 2.1

Urinary incontinence treatment 

 agents

2.5 1.4 Anticoagulants 48.5 1.9

Subtotal, top 15 classes 125.6 68.6 Subtotal, top 15 classes 1,891.2 74.5

Total, all classes 183.1 100.0 Total, all classes 2,537.1 100.0

Note: COPD (chronic obstructive pulmonary disease). “Spending” (gross) reflects payments from all payers, including 

beneficiaries (cost sharing) but does not include rebates and discounts from pharmacies and manufacturers that are not 

reflected in prices at the pharmacies. “Volume” is the number of prescriptions, standardized to a 30-day supply. 

Therapeutic classification is based on the First DataBank Enhanced Therapeutic Classification System 1.0. Components 

may not sum to totals due to rounding.

Source: MedPAC analysis of Medicare Part D prescription drug event data from CMS. 

• In 2019, the top 15 therapeutic classes by spending accounted for more than two-thirds of the $183.1

billion spent on prescription drugs covered by Part D plans. The top 15 therapeutic classes by volume 

accounted for nearly three-quarters of the over 2.5 billion prescriptions dispensed in 2019.

• While many of the same therapeutic classes on the top-15 list appear year after year, the ranking has 

changed from time to time. For example, market entries of new hepatitis C therapies more than tripled 

Part D spending on antivirals between 2013 and 2015 (data not shown). In 2019, antivirals accounted

for $9.3 billion, down from $11.7 billion in 2016 (2016 data not shown). The growth in spending for 

drugs to treat cancer resulted in three classes of antineoplastic therapies (enzyme inhibitors, 

immunomodulators, and hormone antagonists) appearing on the top-15 list for the first time in 2018,

compared with just one class between 2012 and 2014 and none before 2012 (data not shown). In 

2019, these three classes of antineoplastics accounted for about $21 billion, or 11.2 percent of 

spending for the top 15 therapeutic classes.

(Chart continued next page)
174 

Prescription drugs

Chart 10-22. Top 15 therapeutic classes of drugs covered under 

Part D, by spending and volume, 2019 (continued)

• Spending on drugs to treat diabetes has grown at a double-digit rate since 2007 (data not shown). In 

2019, spending on diabetic therapy totaled $30.7 billion, an increase of about 15 percent from $26.8

billion in 2018 (2018 data not shown). The number of prescriptions filled for diabetic therapy totaled 

173.6 million, an increase of about 6 percent from 163.9 million in 2018.

• Eight therapeutic classes are among the top 15 in both spending and volume. Diabetic therapy 

dominates the list by spending, accounting for almost 17 percent of total spending and nearly a 

quarter of spending for the top 15 therapeutic classes, followed by asthma/COPD therapy agents.

Cardiovascular agents (antihyperlipidemics, antihypertensive therapy agents, beta-adrenergic 

blockers, diuretics, and calcium channel blockers) dominate the list by volume, accounting for about

37 percent of all prescriptions and nearly 50 percent of the prescriptions in the top 15 therapeutic 

classes.
A Data Book: Health care spending and the Medicare program, July 2021 175

Chart 10-23. Part D patterns of prescribing by provider type, 2018

Part D

Provider type

Primary 

care*

Specialty/

others

NP/PA/ 

CNS

Number of individual prescribers (thousands) 1,205 251 683 271

 Share of all individual prescribers 21% 57% 23%

Average beneficiary count 161 264 126 151

Average per beneficiary

 Gross spending $780 $947 $775 $645

 Number of prescriptions 5.8 10.9 4.0 5.4

Top 1 percent of prescribers based on 

number of prescriptions filled per beneficiary

Number of individual prescribers 9,531 6,415 1,802 1,314

 Share of top 1 percent of prescribers 67% 19% 14%

Total gross spending (billions) $9.4 $7.1 $1.5 $0.8

 Share of provider type’s total gross spending 6% 12% 2% 3%

Total number of prescriptions (millions) 129 104 16 9

Share of provider type’s total prescriptions filled 9% 13% 4% 4%

Average per beneficiary

 Gross spending $4,028 $3,428 $5,521 $4,910

 Number of prescriptions 42 43 42 41

Note: NP (nurse practitioner), PA (physician assistant), CNS (clinical nurse specialist). “Gross spending” reflects payments from 

all payers, including beneficiaries (cost sharing) but does not include rebates and discounts from pharmacies and 

manufacturers that are not reflected in prices at the pharmacies. “Number of prescriptions” is a count of prescription drug 

events and is not adjusted for the size (number of days’ supply) of the prescriptions. As such, these figures are not 

comparable with the prescription counts shown in Chart 10-17, Chart 10-20, and Chart 10-22. Components may not sum 

to totals due to rounding.

*The definition of “primary care” used here includes practitioners who have a primary Medicare specialty designation of 

family practice, internal medicine, pediatrics, or geriatrics.

Source: MedPAC analysis of Medicare Part D prescriber-level public use file from CMS. 

• In 2018, over 1.2 million individual providers wrote prescriptions for Medicare beneficiaries that 

were filled under Part D. Of those, about 21 percent were primary care providers, 57 percent 

were specialty or other types of providers, and 23 percent were NPs, PAs, or CNSs in primary 

and specialty care. While historically, NPs and PAs have been concentrated in primary care, 

more recent patterns suggest that they are increasingly practicing in specialty fields.

• The average count of Medicare beneficiaries was higher among primary care providers 

compared with specialty and other types of providers and with NPs, PAs, and CNSs—264

beneficiaries versus 126 beneficiaries and 151 beneficiaries, respectively.

(Chart continued next page)
176 

Prescription drugs

Chart 10-23. Part D patterns of prescribing by provider type, 2018

(continued)

• On a per beneficiary basis, average gross spending for Part D prescriptions was much higher 

for prescriptions written by primary care providers ($947) compared with the average for 

specialty and other providers ($775) and for NPs, PAs, and CNSs ($645). Primary care 

providers also wrote more prescriptions per beneficiary, on average: 10.9 compared with 4.0

for specialty and other providers and 5.4 for NPs, PAs, and CNSs.

• More than 9,500 prescribers were among the top 1 percent of all prescribers, as ranked by the 

average number of Part D prescriptions filled per beneficiary in 2018. The top prescribers 

were much more likely than all providers to be practicing in primary care: 67 percent were 

primary care providers, 19 percent were specialty and other providers, and 14 percent were 

NPs, PAs, and CNSs.

• The top 1 percent of prescribers accounted for 6 percent of total gross spending and 9 percent 

of all prescriptions filled. Among primary care prescribers who were within the top 1 percent, 

results were more concentrated: They accounted for 12 percent of gross prescription spending 

and 13 percent of all prescriptions written by primary care providers.

• Among the prescriptions that were written by prescribers in the top 1 percent of all prescribers 

in 2018, per beneficiary Part D spending averaged $4,028 for 42 prescriptions filled.
A Data Book: Health care spending and the Medicare program, July 2021 177

Chart 10-24. Part D patterns of prescribing for selected

specialties, 2018

Number of 

individual Part D 

prescribers 

(thousands)

Share of all 

Part D 

prescribers 

(percent)

Average per beneficiary

Gross spending 

(in dollars)

Number of 

prescriptions

All Part D 1,204.9 100% $780 5.8

All specialty/others 683.0 57 775 4.0

Selected specialties:

Psychiatry 25.3 4 1,327 13.1

Cardiology 19.8 3 839 7.9

Ophthalmology 19.8 3 476 4.0

Psychiatry & neurology 14.4 2 1,255 11.0

Neurology 14.1 2 3,148 7.2

Gastroenterology 13.9 2 1,486 3.5

Urology 10.8 2 479 3.8

Pulmonary disease 9.5 1 3,357 6.7

Nephrology 8.8 1 1,209 7.8

Hematology & oncology 8.5 1 9,376 6.0

Endocrinology 6.1 1 2,640 7.9

Infectious disease 5.5 1 6,728 8.6

Rheumatology 4.8 1 3,717 7.6

Medical oncology 3.2 <0.5 8,571 5.6

Note: “Gross spending” reflects payments from all payers, including beneficiaries (cost sharing) but does not include rebates 

and discounts from pharmacies and manufacturers that are not reflected in prices at the pharmacies. “Number of 

prescriptions” is a count of prescription drug events and is not adjusted for the size (number of days’ supply) of the 

prescriptions. As such, they are not comparable with the prescription counts shown in Chart 10-17, Chart 10-20, and 

Chart 10-22.

Source: MedPAC analysis of Medicare Part D prescriber-level public use file from CMS. 

• Of specialty care prescribers, psychiatrists were among the most numerous, making up 4 

percent of all Part D prescribers in 2018. Cardiologists, ophthalmologists, 

psychiatrists/neurologists, neurologists, gastroenterologists, and urologists each made up 

another 2 percent to 3 percent of Part D prescribers. 

• Psychiatrists wrote an average of 13.1 prescriptions per beneficiary, with an average of

$1,327 in gross spending per patient. Those averages were higher than the overall Part D 

averages of 5.8 prescriptions and $780 in average gross spending per beneficiary. Other 

specialties with comparatively high average gross spending per beneficiary include 

psychiatry/neurology, neurology, gastroenterology, pulmonary disease, nephrology, 

hematology/oncology, endocrinology, infectious disease, rheumatology, and medical 

oncology.

(Chart continued next page)
178 

Prescription drugs

Chart 10-24. Part D patterns of prescribing for selected

specialties, 2018 (continued)

• Other specialties such as ophthalmology and urology had lower average gross spending per 

beneficiary. Cardiologists had average gross spending per beneficiary slightly higher than

that of all Part D specialty prescribers ($839 vs. $775 respectively) but wrote an average of 

7.9 prescriptions per beneficiary—considerably more than the average of 4.0 per beneficiary 

for all Part D specialty prescribers.
A Data Book: Health care spending and the Medicare program, July 2021 179

Chart 10-25. Price growth for Part D–covered drugs, 2006–2019

Note: Q1 (first quarter), Q4 (fourth quarter). Part D indexes reflect total amounts paid to pharmacies and do not reflect 

retrospective rebates or discounts from manufacturers and pharmacies. These measures of price growth reflect growth in 

the price of individual products but do not reflect changes in price due to the introduction of new products or to changes in 

the mix of products used.

Source: Acumen LLC analysis for MedPAC.

• Measured by individual national drug codes, prices of drugs and biologics covered under Part D rose 

95 percent cumulatively between 2006 and 2019 (an index of 1.95). (Prices reflect total amounts paid 

to pharmacies and do not reflect retrospective rebates or discounts from manufacturers and 

pharmacies.)

• As measured by a price index that takes generic substitution into account, Part D prices decreased by 

2.1 percent between December of 2018 and December of 2019, reversing the inflationary trend that 

began after 2012. As a result, cumulative increase in prices at the end of 2019 were lower (11

percent, or an index of 1.11) compared with cumulative increase in prices at the end of 2018 (14 

percent, or an index of 1.14). New and increased generic competition for selected therapeutic 

classes, such as anticonvulsants, antineoplastics, and drugs for multiple sclerosis, played a key role 

in the decline in the overall Part D prices in 2019.

• Overall, between 2006 and 2019, prices of generic drugs covered under Part D decreased to 21

percent of the average price observed at the beginning of 2006. In comparison, prices of singlesource, brand-name drugs (drugs with no generic substitutes) grew by a cumulative 265 percent (an

index of 3.65) during the same period.

All Part D–covered 

drugs

1.95

All Part D–covered drugs accounting for 

generic substitution

1.11

Single-source brandname drugs

3.65

Generic drugs 0.21

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

3.50

3.75

4.00

2006

Q1

2007

Q1

2008

Q1

2009

Q1

2010

Q1

2011

Q1

2012

Q1

2013

Q1

2014

Q1

2015

Q1

2016

Q1

2017

Q1

2018

Q1

2019

Q1

Chain-weighted Fisher price index

2019 

Q4
180 

Prescription drugs

Chart 10-26. Comparison of price growth for Part B and Part D 

biologics, 2006–2019

Note: Q1 (first quarter), Q4 (fourth quarter). Part D indexes reflect total amounts paid to pharmacies and do not reflect retrospective 

rebates or discounts from manufacturers and pharmacies. The Part B index reflects growth in the average sales price of Part 

B–covered biologics over time, measured for individual biologics at the Healthcare Common Procedure Coding System billing 

code level. These measures of price growth reflect growth in the price of individual products but do not reflect changes in 

price due to the introduction of new products or the changes in the mix of products used. The Part B price index for biologics 

in this chart and in Chart 10-6 are different due to the different periods of analysis.

Source: Acumen LLC analysis for MedPAC.

• Measured by the change in the average sales price of individual Part B–covered biologics, the 

prices of Part B–covered biologics rose by an average of 53 percent cumulatively between 2006 

and 2019 (an index of 1.53). Measured by individual national drug codes, prices of biologics 

covered under Part D rose 270 percent cumulatively during the same period (an index of 3.70).

(Prices reflect total amounts paid to pharmacies and do not reflect retrospective rebates or 

discounts from manufacturers and pharmacies).

• The price index for Part B biologics, which had increased for more than a decade, declined 0.6 

percent between third quarter 2019 and fourth quarter 2019, largely due to price declines 

among products with biosimilar competition. (See Chart 10-5 for more information on 

biosimilars.)

• Prices of noninsulin biologics covered under Part D grew less rapidly (by an average of 232

percent cumulatively, an index of 3.32) compared with the growth in prices of all Part D biologics 

during the same period. 

(Chart continued next page)

Part B biologics

1.53

Part D biologics

3.70

Part D biologics 

excluding insulin

3.32

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2006

Q1

2007

Q1

2008

Q1

2009

Q1

2010

Q1

2011

Q1

2012

Q1

2013

Q1

2014

Q1

2015

Q1

2016

Q1

2017

Q1

2018

Q1

2019

Q1

Chain-weighted Fisher price index

2019

Q4
A Data Book: Health care spending and the Medicare program, July 2021 181

Chart 10-26. Comparison of price growth for Part B and Part D 

biologics, 2006–2019 (continued)

• These measures of price growth reflect growth in price at the individual product level and do not 

reflect changes in price that occur as a result of shifts in the mix of biologics used or the 

introduction of new, higher priced biologics.

• Currently, biologics that may be covered under either Part B or Part D are limited to a subset of 

drugs within therapeutic classes such as therapies to treat inflammatory conditions (e.g.,

rheumatoid arthritis) and certain types of cancer.

 

110

A Data Book: Health care spending and the Medicare program, July 2021 185

Chart 11-1. Number of dialysis facilities is growing, and most 

facilities are for profit and freestanding 

Average annual

percent change

2019 2014–2019 2018–2019

Total number of:

Dialysis facilities 7,657 4% 3%

Hemodialysis stations 134,159 4 3

Mean number of 

hemodialysis stations per facility 18 –0.1 0.1

 Share of total facilities

Hospital based 5% –3 –1

Freestanding 95 3 3

Urban 83 4 3

Rural, micropolitan 10 2 1

Rural, adjacent to urban 4 2 2

Rural, not adjacent to urban 2 1 –2

Frontier 0.4 1 0

For profit 89 4 3

Nonprofit 11 −1 −0.1

Note: “Nonprofit” includes facilities designated as either nonprofit or government. “Average annual percent change” is based on 

comparing 2014, 2018, and 2019 end-of-year files. Components may not sum to totals due to rounding.

Source: Compiled by MedPAC from the institutional outpatient claims files and the Dialysis Compare files from CMS.

• Between 2014 and 2019, the number of facilities increased, on average, 4 percent per year. 

The average size of a facility has remained relatively constant, averaging nearly 18 dialysis 

treatment stations per facility.

• Since 2014, facilities’ capacity to provide care—as measured by hemodialysis treatment 

stations—grew 4 percent annually on average. Capacity at urban facilities grew by 4 percent 

per year, while capacity at rural facilities grew at a rate of 2 percent per year.

• Since 2014, the number of freestanding and for-profit facilities increased, while hospitalbased facilities decreased. Freestanding facilities increased by 3 percent per year to nearly 

7,270 facilities while for-profit facilities increased by 4 percent per year to nearly 6,800

facilities.
186 Other services

Chart 11-2. Medicare spending for outpatient dialysis services 

furnished by freestanding and hospital-based 

dialysis facilities, 2018 and 2019

Note: ESRD (end-stage renal disease).

Source: Compiled by MedPAC from the institutional outpatient claims files from CMS. 

• In 2019, total spending for dialysis, dialysis drugs, and ESRD-related clinical laboratory tests 

was $12.9 billion. Medicare paid all facilities under a prospective payment system (PPS) that 

includes in the payment bundle certain dialysis drugs and ESRD-related clinical laboratory 

tests that were separately paid before 2011. 

• Between 2018 and 2019, total ESRD expenditures increased by 2 percent. Ten percent of 

total spending in 2019 consisted of payments for two calcimimetics paid under the ESRD 

PPS’s transitional drug add-on payment adjustment; this policy pays providers according to 

the number of units of a drug and the drug’s average sales price.

• Freestanding dialysis facilities treated most dialysis beneficiaries and accounted for 96

percent of expenditures in 2018 and 2019. 

0

2

4

6

8

10

12

14

2018 2019

Spending on dialysis, dialysis drugs, 

and other ESRD-related services 

(in billions of dollars)

Freestanding Hospital-based

$12.7 $12.9

4% 4%

96% 96%
A Data Book: Health care spending and the Medicare program, July 2021 187

Chart 11-3. The ESRD population is growing, and most patients 

with ESRD undergo dialysis

2008 2014 2018

Patients Patients Patients

(thousands) Percent (thousands) Percent (thousands) Percent

Total 550.8 100% 689.1 100% 785.9 100%

Dialysis 386.8 70 488.5 71 556.0 71

In-center hemodialysis 351.6 64 430.5 62 485.1 62

Home hemodialysis* 4.4 0.8 8.5 1 10.4 1

Peritoneal dialysis* 29.1 5 47.2 7 58.6 7

Unknown 1.7 0.3 2.2 0.3 2.0 0.2

Functioning graft and 

kidney transplant 164.0 30 200.7 29 229.9 29

Note: ESRD (end-stage renal disease). Totals may not equal sum of components due to rounding. Data include both Medicare 

(fee-for-service and Medicare Advantage) and non-Medicare patients. The “functioning graft and kidney transplant”

category includes patients who have a functioning graft at the start of the year in question (i.e., 2008, 2014, or 2018), or 

who receive a transplant during the year in question.

*Home dialysis methods.

Source: Compiled by MedPAC from the U.S. Renal Data System.

• People with ESRD require either dialysis or a kidney transplant to maintain life. The total 

number of ESRD patients increased by nearly 4 percent annually between 2008 and 2018.

• In hemodialysis, a patient’s blood flows through a machine with a special filter that removes 

wastes and extra fluids. In peritoneal dialysis, the patient’s blood is cleansed by using the 

lining of his or her abdomen as a filter. Peritoneal dialysis is the most common form of home 

dialysis.

• Most people with ESRD undergo hemodialysis administered in a dialysis facility three times 

a week. Between 2008 and 2018, the total number of in-center hemodialysis patients grew 

by 3 percent annually, while the total number of peritoneal dialysis patients increased by 

about 7 percent annually. Although a smaller proportion of all dialysis patients undergo 

home hemodialysis, the number of these patients grew 9 percent per year during this period.

• Patients with functioning grafts have had a successful kidney transplant. Patients 

undergoing a kidney transplant may receive either a living kidney or a cadaveric kidney 

donation. In 2018, 29 percent of transplanted kidneys were from living donors and the 

remainder were from cadaver donors (data not shown).
188 Other services

Chart 11-4. Asian Americans and Hispanics are among the 

fastest growing segments of the ESRD population

Share Average annual

of total percent change

in 2018 2013–2018

Total (N = 785,883) 100% 3%

Age (years)

0–17 1 2

18–44 14 1

45–64 43 3

65–79 33 5

80+ 9 4

Sex

Male 58 4

Female 42 3

Race/ethnicity

White 62 4

Black 30 2

Native American 1 2

Asian American 7 6

Hispanic 18 5

Non-Hispanic 80 3

 Unknown 2 1

Underlying cause of ESRD

Diabetes 39 4

Hypertension 26 4

Glomerulonephritis 15 2

Other causes 20 3

Note: ESRD (end-stage renal disease). Totals may not equal sum of the components due to rounding. ESRD patients include 

those who undergo maintenance dialysis and those who have a functioning kidney transplant. Data include both Medicare

(fee-for-service and Medicare Advantage) and non-Medicare patients.

Source: Compiled by MedPAC from the U.S. Renal Data System.

• Among patients with ESRD, nearly 42 percent are over age 65. About 62 percent are White.

• Diabetes is the most common cause of renal failure.

• The number of patients with ESRD increased by 3 percent annually between 2013 and 

2018. Among the fastest growing groups are patients between the ages of 65 and 79 and 

patients of Asian and Hispanic origins.
A Data Book: Health care spending and the Medicare program, July 2021 189

Chart 11-5. Characteristics of Medicare fee-for-service dialysis 

patients, 2019

Share of all FFS dialysis patients

Age (years)

Under 45 10%

45–64 37

65–74 28

75–84 18

85+ 6

Sex

Male 56

Female 44

Race

White 47

Black 35

All other 18

Residence

Urban county 83

Rural county, micropolitan 10

Rural county, adjacent to urban 5

Rural county, not adjacent to urban 2

Frontier county 1

Prescription drug coverage status

Enrolled in Part D plan or other source of creditable drug coverage 89*

LIS 58

Dually eligible for Medicare and Medicaid 52

Note: FFS (fee-for-service), LIS (low-income [drug] subsidy). Urban counties contain a core area with 50,000 or more people, 

rural micropolitan counties contain at least one cluster of at least 10,000 and fewer than 50,000 people, rural counties 

adjacent to urban areas do not have a city of 10,000 people in the county, and rural counties not adjacent to urban areas 

do not have a city of 10,000 people. Frontier counties are counties with six or fewer people per square mile. Totals may 

not sum to 100 percent due to rounding.

*Part D enrollment data for 2018. 

Source: MedPAC analysis of dialysis claims files and denominator files from CMS.

• Compared with all Medicare patients, FFS dialysis patients are disproportionately younger 

and Black (see Chart 2-5). 

• In 2019, about 17 percent of FFS dialysis patients resided in a rural county.

• More than half of all dialysis patients were dually eligible for Medicare and Medicaid 

services. 

• In 2018, nearly 90 percent of FFS dialysis patients were enrolled in Part D plans or had

other sources of creditable drug coverage.
190 Other services

Chart 11-6. Aggregate margins varied by type of freestanding 

dialysis facility, 2019

Share of freestanding

Type of facility dialysis treatments Aggregate margin

All facilities 100% 8.4%

Urban 88 9.0

Rural 12 5.0

Treatment volume (quintile)

Lowest 7 –14.4

Second 13 –1.4

Third 18 6.4

Fourth 24 10.4

Highest 39 15.2

Note: Margins include payments and costs for dialysis services commonly provided under treatment, including injectable drugs

and laboratory tests that were separately paid before 2011. Totals may not sum to 100 percent due to rounding. The 

Commission’s longstanding approach to calculating the Medicare end-stage renal disease (ESRD) prospective payment 

system (PPS) margin uses only Medicare-allowable costs for ESRD services. Such an approach is consistent with the 

methods we use to calculate the Medicare margin for other fee-for-service sectors. Our ESRD margin analysis relies on 

the cost data that freestanding dialysis facilities report on the cost reports that they submit to CMS. In 2019, there was an 

anomalous increase in non-ESRD drug costs compared with prior years. Consistent with our longstanding approach, nonESRD drug costs are not included in the Commission’s analysis of ESRD PPS costs incurred by freestanding dialysis 

facilities or in our calculation of the ESRD PPS margin.

Source: Compiled by MedPAC from 2019 cost reports and the 2019 institutional outpatient file from CMS.

• For 2019, the aggregate Medicare margin for dialysis-related services, including ESRDrelated drugs and laboratory tests that were separately paid before 2011, was 8.4 percent. 

• Between 2018 and 2019, the aggregate Medicare margin increased (from 2.1 percent to 8.4

percent) due to the profitability of the drugs paid under the transitional drug add-on payment 

adjustment (TDAPA) policy. Excluding the payments and costs of the drugs paid under the 

TDAPA (calcimimetics), we estimate that the 2019 aggregate Medicare margin would have 

been about 0.5 percent.

• Generally, freestanding dialysis facilities’ margins vary by the size of the facility; facilities 

with greater treatment volume have higher margins on average. Differences in capacity and 

treatment volume explain some of the differences observed between the margins of urban

facilities versus rural facilities. Urban facilities are larger on average than rural facilities with 

respect to the number of dialysis treatment stations and Medicare treatments provided. 

Some rural facilities have benefited from the ESRD prospective payment system’s lowvolume adjustment.
A Data Book: Health care spending and the Medicare program, July 2021 191

Chart 11-7. Dialysis quality of care: Some measures show 

progress, others need improvement, 2013–2018

Outcome measure 2013 2017 2018

Share of in-center hemodialysis patients:

Receiving adequate dialysis 97% 98% 98%

Dialyzed with an AV fistula 62 N/A* 66

Share of peritoneal dialysis patients

receiving adequate dialysis 91 93 92

Share of all dialysis patients managing anemia

Mean hemoglobin <10 g/dL 26 28 29

Mean hemoglobin 10 to <12 g/dL 69 67 66

Mean hemoglobin ≥12 g/dL 5 5 5

Share of all dialysis patients wait-listed for a kidney 17.5 14.1 13.5

Renal transplant rate per 100 patient years 3.5 3.5 3.6

Annual mortality rate per 100 patient years** 16.9 16.6 16.4

Total hospital admissions per patient year** 1.8 1.7 1.7

Hospital days per patient year** 11.5 11.3 11.3

Note: AV (arteriovenous), g/dL (grams per deciliter [of blood]). The rate per patient year is calculated by dividing the total 

number of events by the fraction of the year that patients were followed. Data on dialysis adequacy, anemia management, 

and fistula utilization represent the share of patients meeting CMS’s clinical performance measures. The U.S. Renal Data 

System (USRDS) adjusts hospitalization and mortality measures by age, gender, race, and primary diagnosis of endstage renal disease. 

*Data on 2017 AV fistula use not available from USRDS.

**Lower values suggest higher quality.

Source: All measures except for share of patients receiving adequate dialysis and anemia management compiled by MedPAC 

using data from the USRDS. Measure of share of patients receiving adequate dialysis and anemia management compiled 

by MedPAC using data from CMS’s 100 percent institutional outpatient files. 

• Quality of dialysis care is mixed. Performance has improved on some measures, but 

performance on others remains unchanged or has declined.

• Between 2013 and 2018, overall adjusted mortality rates decreased from 16.9 percent to 16.4

percent. During this period, the proportion of hemodialysis patients receiving adequate dialysis 

remained high, and rates of hospitalization have held steady.

• All hemodialysis patients require vascular access—the site on the patient’s body where blood is 

removed and returned during dialysis. Use of arteriovenous fistulas, considered the best type of 

vascular access, has modestly increased from 62 percent to 66 percent of hemodialysis patients

between 2013 and 2018.

• Other measures suggest that improvements in dialysis quality are still needed. We look at access 

to kidney transplantation because it is widely believed to be the best treatment option for 

individuals with end-stage renal disease. Between 2013 and 2018, the share of dialysis patients 

accepted on the kidney transplant waiting list declined from 17.5 to 13.5, and the renal transplant 

rate per 100 dialysis-patient years remained relatively constant at 3.6.
192 Other services

Chart 11-8. Hospice spending and use increased in 2019

Average annual

change, Change,

2010 2018 2019 2010–2018 2018–2019

Medicare payments (in billions) $12.9 $19.2 $20.9 5.1% 8.5%

Beneficiaries in hospice 1.15 1.55 1.61 3.8% 3.7%

(in millions)

Number of hospice days for all 81.6 113.5 121.8 4.2% 7.3%

hospice beneficiaries (in millions)

Average length of stay 87.0 90.3 92.6 0.5% 2.5%

among decedents (in days)

Median length of stay 18 18 18 0 days 0 days

among decedents (in days)

Note: Lifetime length of stay is calculated for decedents who were using hospice at the time of death or before death and 

reflects the total number of days the decedent was enrolled in the Medicare hospice benefit during his or her lifetime. 

Total spending, number of hospice users, number of hospice days, and average length of stay displayed in the table are 

rounded; the percentage change for number of users and total spending is calculated using unrounded data. The lengthof-stay estimates in this table may differ from those published in prior data books because this analysis uses the data from 

the Common Medicare Enrollment file instead of the denominator file (which was used in past years) and because we 

have made some refinements to our methodology (e.g., beneficiaries residing in U.S. territories are included in this table, 

whereas they were not in prior reports).

Source: MedPAC analysis of the Common Medicare Enrollment file and the Medicare Beneficiary Database from CMS.

• Total Medicare payments to hospices were about $20.9 billion in 2019, about 8.5 percent 

higher than the prior year. 

• The number of Medicare beneficiaries receiving hospice services, total number of days of 

hospice care, and average length of stay continued to grow in 2019.
A Data Book: Health care spending and the Medicare program, July 2021 193

Chart 11-9. Hospice use increased across beneficiary groups 

from 2010 to 2019

Average annual

Share of decedents using hospice percentage Percentage

point change point change

2010 2018 2019 2010–2018 2018–2019

All 43.8% 50.6% 51.6% 0.9 1.0%

FFS beneficiaries 42.8 49.7 50.7 0.9 1.0

MA beneficiaries 47.2 52.3 53.2 0.6 0.9

Dual eligible 41.5 47.5 49.2 0.8 1.7

Non–dual eligible 44.5 51.5 52.3 0.9 0.8

Age (years)

<65 25.7 28.8 29.4 0.4 0.6

65–84 42.1 46.5 47.3 0.6 0.8

85+ 50.2 61.1 62.7 1.4 1.6

Race/ethnicity

White 45.5 52.7 53.8 0.9 1.1

Non-White 33.9 40.0 40.9 0.8 0.9

Gender

Male 40.1 45.9 46.7 0.7 0.8

Female 47.0 55.0 56.1 1.0 1.2

Residence

Urban county 45.6 51.8 52.7 0.8 0.9

Rural county, micropolitan 39.2 48.2 49.7 1.1 1.5

Rural county, adjacent to urban 39.0 47.9 49.5 1.1 1.5

Rural county, nonadjacent 

 to urban 33.8 42.4 43.8 1.2 1.4 

Frontier county 29.2 35.3 36.2 1.1 1.6

Note: FFS (fee-for-service), MA (Medicare Advantage). Beneficiary location reflects the beneficiary’s county of residence in one 

of four categories (urban, micropolitan, rural adjacent to urban, or rural nonadjacent to urban) based on an aggregation of 

the Urban Influence Codes (UICs). This chart uses the 2013 UIC definition. The frontier category is defined as population 

density equal to or less than six people per square mile and overlaps with the beneficiary county of residence categories. 

Yearly figures presented in the table are rounded, but figures in the percentage point change columns were calculated 

using unrounded data. The estimates in this table may differ from those published in prior data books because this 

analysis uses the data from the Common Medicare Enrollment file instead of the denominator file (which was used in past 

years) and because we have made some refinements to our methodology (e.g., beneficiaries residing in U.S. territories 

are included in this table, whereas they were not in prior reports).

Source: MedPAC analysis of data from the Common Medicare Enrollment file and hospice claims data from CMS.

• Hospice use grew across beneficiary groups in 2019, continuing the trend of a growing 

proportion of beneficiaries using hospice at the end of life. 

• Despite this growth, hospice use continued to vary by demographic and beneficiary 

characteristics. Medicare decedents who were not dual eligible, who were MA enrollees, 

older, White, female, or living in an urban area were more likely to use hospice than their 

respective counterparts.
194 Other services

Chart 11-10. Number of Medicare-participating hospices has 

increased due to growth in for-profit hospices

2010 2017 2018 2019

All hospices 3,498 4,488 4,639 4,840

For profit 1,958 3,101 3,233 3,437

Nonprofit 1,316 1,226 1,246 1,248

Government 224 161 159 150

Freestanding 2,401 3,525 3,699 3,932

Hospital based 609 470 454 433

Home health based 465 471 464 456

SNF based 23 22 22 19

Urban 2,485 3,603 3,760 3,952

Rural 950 879 872 859

Note: SNF (skilled nursing facility). Numbers may not sum to totals because of missing data for a small number of providers.

The rural and urban definitions in this chart are based on updated definitions of the core-based statistical areas (which 

rely on data from the 2010 census). 

Source: MedPAC analysis of Medicare cost reports, Provider of Services file, and the standard analytic file of hospice claims from 

CMS.

• There were 4,840 Medicare-participating hospices in 2019. About 71 percent of them were 

for-profit hospices.

• The number of Medicare-participating hospices grew by about 200 providers between 2018 

and 2019 and has increased about 38 percent since 2010. For-profit hospices accounted for 

almost all of the net growth in providers between 2018 and 2019.

• Growth in the number of providers has occurred predominantly among freestanding 

providers. Between 2010 and 2019, the number of hospital-based providers declined 

substantially while the number of home health–based providers has oscillated over the 

period and declined in the last few years. The number of SNF-based providers is small and 

has changed little over the years. (A hospice’s status as freestanding versus hospital based, 

home health based, or SNF based reflects the type of cost report submitted by the provider 

and does not necessarily reflect the location of care.)

• The number of hospices located in rural areas has declined in the last several years, 

decreasing about 2 percent between 2017 and 2019. The number of providers located in 

rural areas is not necessarily an indicator of access to care. The share of rural decedents 

using hospice has been increasing since 2010 (see Chart 11-9). 
A Data Book: Health care spending and the Medicare program, July 2021 195

Chart 11-11. Hospice cases by diagnosis, 2019

Share

Diagnosis of total cases

Cancer 25%

Alzheimer’s, nervous system disorders, 

 organic psychosis 24

Circulatory, except heart failure 21

Heart failure 9

Other 6

Respiratory disease 6

Chronic airway obstruction, NOS 5

Genitourinary disease 2

Digestive disease 2

All 100

Note: NOS (not otherwise specified). Cases include all patients who received hospice care in 2019, not just decedents.

“Diagnosis” reflects primary diagnosis on the beneficiary’s last hospice claim in 2019.

Source: MedPAC analysis of 100 percent hospice claims standard analytic file from CMS and the Medicare Beneficiary Database.

• In 2019, the most common primary diagnoses among Medicare hospice patients were

cancer (25 percent), neurological conditions (Alzheimer’s disease, nervous system 

disorders, and organic psychosis) (24 percent of cases), circulatory conditions other than 

heart failure (21 percent), and heart failure (9 percent).
196 Other services

Chart 11-12. Hospice average length of stay among decedents

increased slightly in 2019

Average 

length 

of stay Percentiles of length of stay (in days)

Year (in days) 10th 25th 50th 75th 90th

2010 87.0 3 6 18 78 242

2017 89.3 2 5 18 80 251

2018 90.3 2 5 18 82 255

2019 92.6 2 5 18 85 266

Note: Lifetime length of stay is calculated for decedents who were using hospice at the time of death or before death and 

reflects the total number of days the decedent was enrolled in the Medicare hospice benefit during his or her lifetime. The 

length-of-stay estimates in this table may differ from those published in prior data books because this analysis uses the 

data from the Common Medicare Enrollment file instead of the denominator file (which was used in past years) and 

because we have made some refinements to our methodology (e.g., beneficiaries residing in U.S. territories are included 

in this table, whereas they were not in prior reports).

Source: MedPAC analysis of the Common Medicare Enrollment file and the Medicare Beneficiary Database from CMS. 

• Average length of stay among decedents was 92.6 days in 2019, an increase from 2018 of 

about two days. 

• There is wide variation in hospice length of stay. In 2019, hospice length of stay among 

decedents ranged from 2 days at the 10th percentile to 266 days at the 90th percentile. 

• Between 2010 and 2019, growth in average length of stay among decedents has largely 

been the result of increases in length of stay for patients with the longest stays. Length of 

stay grew from 78 days to 85 days at the 75th percentile and from 242 days to 266 days at 

the 90th percentile.

• Short stays in hospice have changed little since 2000. For example, among decedents, 

median length of stay was 18 days in 2019 and 2010. Hospice length of stay at the 25th 

percentile was 5 days in 2019 and 6 days in 2010. 
A Data Book: Health care spending and the Medicare program, July 2021 197

Chart 11-13. Hospice length of stay among decedents, by

beneficiary and hospice characteristics, 2019

Average length Length-of-stay percentiles (in days)

of stay (in days) 10th 50th 90th

Beneficiary

Diagnosis

Cancer 52 3 17 129

Neurological 155 4 40 459

Heart/circulatory 99 2 18 297

COPD 124 2 30 362

Other 57 2 8 158

Site of service

Home 95 4 27 257

Nursing facility 109 3 22 324

Assisted living facility 161 5 56 457

Hospice

For profit 112 3 24 332

Nonprofit 71 2 14 195

Freestanding 95 2 19 275

Home health based 72 2 15 199

Hospital based 59 2 12 163

Note: COPD (chronic obstructive pulmonary disease). Length of stay is calculated for Medicare beneficiaries who died in 2019 

and used hospice that year and reflects the total number of days the decedent was enrolled in the Medicare hospice 

benefit during his or her lifetime. This year, we made some refinements to our methodology (e.g., beneficiaries residing in 

U.S. territories are included in this table, whereas they were not in prior reports), which makes the numbers not fully 

comparable with those in past reports. The location categories reflect where the beneficiary spent the largest share of his 

or her days while enrolled in hospice. “Diagnosis” reflects primary diagnosis on the beneficiary’s last hospice claim. 

Source: MedPAC analysis of 100 percent hospice claims standard analytic file data, Medicare Beneficiary Database, Medicare 

hospice cost reports, and Provider of Services file data from CMS.

• Hospice average length of stay among decedents varies by both beneficiary and provider 

characteristics. Most of this variation reflects differences in length of stay among patients 

with the longest stays (i.e., at the 90th percentile). Length of stay varies much less for 

patients with shorter stays (i.e., at the 10th or 50th percentile).

• Beneficiaries with neurological conditions and COPD have the longest stays, while 

beneficiaries with cancer have the shortest stays, on average.

• Beneficiaries who receive hospice services in assisted living facilities have longer stays on 

average than beneficiaries who receive care at home or in a nursing facility.

• For-profit and freestanding hospices have longer average lengths of stay than nonprofit and 

provider-based (home health−based and hospital-based) hospices. 
198 Other services

Chart 11-14. More than half of Medicare hospice spending in

2019 was for patients with stays exceeding

180 days

Medicare hospice spending, 2019

(in billions)

All hospice users in 2019 $20.9

Beneficiaries with LOS > 180 days 12.3

Days 1–180 4.1

Days 181–365 3.8

Days 366+ 4.3

Beneficiaries with LOS ≤ 180 days 8.6

Note: LOS (length of stay). LOS reflects the beneficiary’s lifetime LOS as of the end of 2019 (or at the time of death or discharge 

in 2019 if the beneficiary was not enrolled in hospice at the end of 2019). All spending reflected in the chart occurred only 

in 2019. Break-out groups do not sum to total because of rounding.

Source: MedPAC analysis of 100 percent hospice claims standard analytical file and an Acumen LLC data file on hospice lifetime 

length of stay (which is based on an analysis of historic claims data).

• In 2019, Medicare hospice spending on patients with stays exceeding 180 days was about 

$12.3 billion, nearly 60 percent of all Medicare hospice spending that year.

• About $4.3 billion, or about 20 percent, of Medicare hospice spending in 2019 was on 

hospice care for patients who had already received at least one year of hospice.
A Data Book: Health care spending and the Medicare program, July 2021 199

Chart 11-15. Hospice aggregate Medicare margins, 2014–2018

Share of Medicare margin

hospices

(2018) 2014 2015 2016 2017 2018

All 100% 8.2% 9.9% 10.9% 12.5% 12.4%

Freestanding 80 11.6 13.8 14.0 15.3 15.1

Home health based 10 3.5 3.3 6.2 8.1 8.4

Hospital based 10 –20.8 –23.8 –16.7 –13.8 –16.5

For profit 70 15.3 17.7 17.9 20.0 19.0

Nonprofit 27 –0.4 0.1 2.2 2.5 3.8

Government 3 N/A N/A N/A N/A N/A

Urban 81 8.7 10.4 11.4 12.9 12.6

Rural 19 3.3 4.8 6.3 8.9 10.3

Below cap 83.7 8.4 9.9 10.7 12.6 12.5

Above cap 16.3 6.0 9.8 12.6 12.1 10.1

Above cap (including 

cap overpayments) 16.3 18.8 21.4 20.2 21.9 21.8

Note: N/A (not available). Margins for all provider categories exclude overpayments to above-cap hospices except where 

specifically indicated. Margins are calculated based on Medicare-allowable, reimbursable costs.

Source: MedPAC analysis of Medicare hospice cost reports, 100 percent hospice claims standard analytic file, and Medicare 

Provider of Services data from CMS.

• The aggregate Medicare margin was 12.4 percent in 2018, similar to 12.5 percent in 2017.

• In 2018, freestanding hospices had higher margins (15.1 percent) than home health–based 

(8.4 percent) and hospital-based hospices (–16.5 percent).

• The 2018 margin among for-profit hospices was high at 19.0 percent. Nonprofit hospices as 

a group had a margin of 3.8 percent in 2018, but the subset of nonprofit hospices that were 

freestanding had a higher margin, 7.6 percent (latter figure not shown in chart).

• The aggregate 2018 margin was slightly higher for urban hospices (12.6 percent) than rural 

hospices (10.3 percent). 

• Hospices that exceeded the cap (Medicare’s aggregate average per beneficiary payment 

limit) had a 2018 margin of about 22 percent before the return of the cap overpayments.
200 Other services

Chart 11-16. Medicare margins were higher among hospices with

more long stays, 2018

Note: Margins exclude overpayments to hospices that exceeded the cap on the average annual Medicare payment per 

beneficiary. Margins are calculated based on Medicare-allowable, reimbursable costs. For hospice providers in the lowest 

(first) quintile, the share of stays greater than 180 days was less than 12.4 percent; it was between 12.4 percent and 20.0

percent in the second quintile; it was between 20.0 percent and 26.7 percent in the third quintile; it was between 26.7 

percent and 34.9 percent in the fourth quintile; and it was greater than 34.9 percent in the highest (fifth) quintile. 

Source: MedPAC analysis of Medicare hospice cost reports and 100 percent hospice claims standard analytic file from CMS.

• Medicare’s per diem payment system for hospice has provided an incentive for longer 

lengths of stay.

• Hospices with more patients who had stays greater than 180 days generally had higher 

margins in 2018. Hospices in the lowest length-of-stay quintile had a margin of –3.0 percent 

compared with a 21.7 percent margin for hospices in the second highest length-of-stay 

quintile. 

• Margins were somewhat lower in the highest length-of-stay quintile (15.5 percent) compared 

with the second highest quintile (21.7 percent) because some hospices in the highest 

quintile exceeded Medicare’s aggregate payment cap and were required to repay the 

overage. Hospices exceeding the cap had a margin of about 22 percent before the return of 

overpayments (see Chart 11-15).

-3.0

7.5

18.4

21.7

15.5

-5

0

5

10

15

20

25

1 2 3 4 5

Margin (in percent)

Share of providers' patients with stays greater than 180 days, by quintiles
A Data Book: Health care spending and the Medicare program, July 2021 201

Chart 11-17. Hospices that exceeded Medicare’s annual

payment cap, 2014–2018

2014 2015 2016 2017 2018

Share of hospices 

 exceeding the cap 12.1% 12.3% 12.7% 14.0% 16.3%

Average payments over

 the cap per hospice

 exceeding the cap

 (in thousands) $370 $316 $295 $273 $334

Payments over the cap

 as a share of overall

 Medicare hospice spending 1.2% 1.0% 1.0% 1.0% 1.3%

 in cap year

Note: The aggregate cap statistics reflect the Commission’s estimates and may differ from the CMS claims processing 

contractors. Spending in cap year 2017 reflects an 11-month period from November 1, 2016, to September 30, 2017. For 

years before 2017, the cap year was defined as the period beginning November 1 and ending October 31 of the following

year. Beginning 2018, the cap year is aligned with the federal fiscal year (October 1 to September 30 of the following 

year).

Source: MedPAC analysis of 100 percent hospice claims standard analytic file data, Medicare hospice cost reports, Provider of 

Services file data from CMS, and CMS Providing Data Quickly system. Data on total spending for each fiscal year are

from the CMS Office of the Actuary or MedPAC estimates.

• The share of hospices exceeding the aggregate cap was 16.3 percent in 2018, up from 14.0

percent in 2017. 

• On average, above-cap hospices exceeded the cap by about $334,000 per provider in 2018, 

up from about $273,000 per provider in 2017.

• Medicare payments over the cap represented 1.3 percent of total Medicare hospice 

spending in 2018.
202 Other services

Chart 11-18. Hospice live-discharge rates, 2017–2019

2017 2018 2019

Live discharge as a share of all discharges,

by reason for live discharge

All live discharges 16.7% 17.0% 17.4%

No longer terminally ill 6.5 6.3 6.5

Beneficiary revocation 6.4 6.6 6.5

Transfer hospice providers 2.1 2.2 2.3

Move out of service area 1.4 1.6 1.7

Discharge for cause 0.3 0.3 0.3

Providers’ overall rate of live discharge as a

share of all discharges, by percentile

(for providers with more than 30 discharges)

10th percentile 8.5 8.5 8.6

25th percentile 12.2 12.0 12.3

50th percentile 18.1 17.9 18.9

75th percentile 27.1 27.8 29.5

90th percentile 41.4 42.5 46.6

Note: Percentages may not sum to totals due to rounding. “All discharges” includes patients discharged alive or deceased.

Source: MedPAC analysis of the 100 percent hospice claims standard analytical file, Medicare hospice cost reports, and Medicare 

Provider of Services file from CMS.

• In 2019, the overall live-discharge rate was 17.4 percent and has been on a slight upward 

trend since 2017.

• The most common reasons for live discharge were the beneficiary no longer being terminally 

ill and the beneficiary revoking the hospice benefit, each accounting for 6.5 percent of all 

discharges in 2019. Less frequent reasons for live discharges included a beneficiary 

transferring hospice providers, a beneficiary moving out of the service area, and a 

beneficiary being discharged for cause. 

• Among providers with more than 30 discharges, 10 percent of providers had live-discharge 

rates in excess of 46 percent in 2019.

• Small hospices as a group have substantially higher live-discharge rates than larger 

hospices. In 2019, the aggregate live-discharge rate was 45 percent for hospices with 30 or 

fewer discharges (data not shown).
A Data Book: Health care spending and the Medicare program, July 2021 203

Chart 11-19. Medicare spending for clinical laboratory services,

2005–2019

 

Note: Spending is for services paid under the clinical laboratory fee schedule. Hospital-based services are furnished in labs 

owned or operated by hospitals. The components of each bar may not sum to the total at the top of each bar due to 

rounding. The spending data include only program payments; there is no beneficiary cost sharing for clinical lab services. 

Source: The annual report of the Boards of Trustees of the Medicare trust funds, 2015 and 2020.

• Medicare spending for clinical laboratory services in all settings grew by an average of 3.6

percent per year between 2005 and 2013. 

• From 2013 to 2014, Medicare spending for lab services declined by about 9 percent because, 

beginning in 2014, many lab tests provided in hospital outpatient departments are no longer paid 

separately under the clinical lab fee schedule. Instead, many of these tests are packaged with 

their associated visits or procedures under the hospital outpatient prospective payment system. 

• Medicare spending for lab services decreased by an average of 0.9 percent per year from 

2014 to 2017.

• Beginning in 2018, clinical laboratory fee schedule payment rates are based on private 

sector rates. From 2017 to 2019, Medicare spending for lab services grew by an average of 

3.8 percent per year.

3.6 3.7 4.0 4.3 4.7 4.9 4.7

5.2 5.3 5.7 5.7

5.2 5.3 5.8 6.1

3.4 3.5

3.6

3.7

3.5 3.6 3.8

4.0 4.0 2.7 2.8

2.9 2.9

2.9 2.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Dollars (in billions)

Calendar year

Independent and physician office Hospital based

8.5

8.1

8.7

8.2

8.9

7.3

7.6

7.0

8.0

8.2

8.6 8.5

9.3 9.3

8.5

•

•

•