A clearer view of why premiums, benefits, and access have been shifting—and why it’s not just the insurers and drug companies.
A Period of Noticeable Change
Many people on Medicare have seen real changes over the past year or two; higher premiums, scaled‑back benefits, shifting formularies, and changes in which well‑known hospitals participate in Medicare Advantage. It’s led to understandable questions about what’s driving all of this.
For years, the familiar explanation has focused on insurers, drug costs, or “overuse.” But a recent analysis from the Kaiser Family Foundation (KFF) reframed the picture for me.
KFF found that hospital spending alone accounted for 40% of all growth in national health expenditures between 2022 and 2024. That’s a striking share, and it highlights a major cost driver that often receives far less attention.
This doesn’t mean hospitals are “the cause,” or that insurers and drug companies aren’t part of the equation. It simply means the story is broader than most people have been led to believe.
Why Hospital Costs Matter So Much
Hospital care is expensive, and its costs are rising faster than almost every other part of the healthcare system. Even if you haven’t had a hospital stay, these rising costs affect you through:
- Medicare Advantage bids
- Medicare Supplement premiums
- Part B premium calculations
- Network decisions and benefit design
Several forces are pushing hospital costs upward:
- prices rising faster than inflation
- consolidation among large hospital systems
- more services billed in hospital‑owned outpatient settings
- major specialty centers opting out of Medicare Advantage
Hospital care already makes up 31% of all U.S. health spending, yet it accounted for 40% of the growth over the past two years. That imbalance helps explain why so many Medicare enrollees are feeling the effects.
How This Shows Up in Medicare
Medicare Advantage
Rising hospital costs contribute to:
- higher copays
- narrower networks
- more prior authorizations
- changes in hospital participation
When major hospitals leave MA, patients can lose access overnight—sometimes in the middle of complex treatment. Situations like these highlight the need for clearer protections to ensure continuity of care.
Medicare Supplement (Medigap)
As hospital charges rise:
- claim costs rise
- premiums rise
- some carriers close plans or exit states
The era of slow, predictable Medigap increases appears to be over.
Medicare Part B
Part B premiums are tied directly to national health spending. When hospital spending jumps, Part B premiums follow.
Why Hospitals Haven’t Been Part of the Conversation
Hospitals have largely avoided the scrutiny aimed at insurers and drug companies because:
- people see hospitals as community institutions
- criticizing hospitals feels uncomfortable
- hospital lobbying power is formidable
- insurers are easier public targets
- hospitals benefit from public frustration with carriers
This isn’t about blame. It’s about acknowledging that no single part of the system is blameless, and that real progress requires understanding all the forces at play.
A Broader Conversation Is Needed
For years, people on Medicare have been told that rising premiums and shrinking benefits are the fault of insurers, drug companies, or “overuse.” But the latest data tells a more complete story.
Hospitals are a major driver of the Medicare cost equation that affects premiums, benefits, and access for millions of people. Recognizing all the forces behind these changes is essential in moving toward more consistent and stable premiums, benefits, and access to care.
In The Meantime…….
A practical takeaway to consider: Use freestanding, non‑hospital facilities whenever possible; imaging centers, surgery centers, infusion centers, labs, and urgent care. They’re often significantly less expensive for both you and the plan.
Source: Kaiser Family Foundation (KFF), Hospital Spending Accounted for 40% of the Growth in National Health Spending Between 2022 and 2024.
If there are specific topics you’d like us to address in future issues please drop us a line at 65plus@bbginc.net with your suggestions.