When a 9% Increase in Healthcare Spending Is Good News

It’s hard to find some good news in the recent national health expenditure data released by the Centers for Medicare & Medicaid Services (CMS). As you’re well aware by now, national health expenditures rose 7.2% in 2024 to nearly $5.3 trillion, according to CMS. That follows a 7.4% jump in 2023.

But, as hard as it was, I did find some with tongue firmly in cheek.

National health spending on Medicare privatization, also known as Medicare Advantage (MA), rose only 9% in 2024 to about $596.3 billion. It’s a record dollar spending figure, but the single digit increase of 9% is the smallest annual increase in MA spending since 2016 when it rose a meager 8.1%.

Between then and now, annual increases in MA spending consistently have been in double digits with the highest being 16.1% in 2023 over that period.

Want more good news? I found more!

Enrollment was the primary driver of the 9% increase in Medicare privatization spending in 2024. Total MA enrollment rose 6.1% to about 33.4 million Medicare beneficiaries. Converted into spending per MA enrollee, that was about $17,847.80. That’s only a 2.7% increase in MA spending per enrollee compared with 2023, when it was about $17,373.33.

Meanwhile, national health spending on traditional Medicare rose only 6.4% in 2024 to about $521.7 billion. Again, the primary driver was enrollment but in a different direction. The number of beneficiaries with traditional, fee-for-service Medicare coverage actually dropped 1.4% to about 33.2 million in 2024. Lower enrollment coupled with higher spending translated into $15,705 in spending per beneficiary with traditional Medicare, or 7.9% more than in 2023, when it was $14,550.

Here’s the actual bad news in the numbers. We spend more per beneficiary with MA coverage than we do per beneficiary with traditional Medicare. As MA enrollment grows, the privatization of the Medicare program will continue to raid the bank as commercial health insurers that run MA plans manipulate the payment system. To wit, overall Medicare spending rose 7.8% in 2024 versus the 7.2% increase in overall national health expenditures.

If we want to build a better healthcare system, let’s stop pretending that Medicare privatization and its perverse economic incentives are one of the solutions.

Thanks for reading.