A closer look at why benefits are shrinking, premiums are rising, and access is changing for so many people on Medicare.
The Medicare Disruption So Many Are Feeling
The past two years have been unusually disruptive for people on Medicare. Many have seen Medicare Advantage plans reduce benefits, shrink service areas, or disappear entirely. Others have watched Medigap premiums climb faster than they have in a long time. Prescription drug plans have tightened formularies, raised premiums, consolidated in ways that caught people off guard, or completely withdrawn from the market.
And more than a few have been stunned to learn that some high-profile hospitals and specialty centers have stepped away from Medicare Advantage altogether, leaving patients scrambling to understand how to continue receiving needed care.
Against that backdrop, a new analysis from the Kaiser Family Foundation (KFF) made me stop and rethink what’s actually driving all of this. It didn’t just add context, it reframed the entire conversation 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 staggering share of the increase. And it raises a question that rarely gets asked:
If hospital costs are driving so much of the growth, why aren’t they part of the public conversation about Medicare affordability?
What’s Actually Driving Hospital Costs Up
Hospital care is not only expensive, it’s growing faster than almost every other part of the healthcare system. And even if you haven’t needed a hospital stay yourself, rising hospital costs still affect you. They ripple through Medicare Advantage bids, Medigap premiums, and Part B calculations, shaping everything from copays and networks to the extra benefits plans can afford to offer.
Several forces are pushing hospital costs higher:
- Hospital prices continue rising faster than general inflation.
- Large hospital systems have consolidated, both eliminating competition and giving them more leverage to set higher prices.
- More services are being billed in hospital‑owned outpatient settings, which often come with higher facility fees.
- Certain prestigious academic hospitals and major specialty centers are opting out of Medicare Advantage, increasing their negotiating power even further.
Some of this reflects hospital pricing power. Some reflects how Medicare and Medicare Advantage are structured to pay for hospital care. And some reflects the reality that people are living longer with more complex health needs. It’s a mix of incentives, market dynamics, policies and legislation, and demographics — not a single cause.
One detail from the national spending data helps put this in perspective: hospital care already makes up about 31% of all U.S. health spending, yet it accounted for 40% of the growth over the past two years. That disproportion helps explain why so many people on Medicare have felt the impact so directly.
How Rising Hospital Costs Show Up in Medicare
Medicare Advantage
MA plans operate within fixed CMS reimbursement rules. When hospital costs spike, health plans have limited room to absorb it. That’s why people have been seeing:
- higher inpatient and outpatient copays
- reduced supplemental benefits
- narrower networks
- more prior authorizations
- entire plans leaving certain counties or shutting down
And in some cases, hospitals themselves are choosing to leave MA altogether. When certain prestigious academic hospitals or major specialty centers exit, people lose access overnight.
Medicare Supplement (Medigap)
Medigap carriers pay the 20% that Medicare doesn’t. When hospital charges rise:
- claim costs rise
- premiums rise
- carriers close plans or withdraw from counties and states
The long run of modest, predictable Medigap increases is ending.
Medicare Part B
Part B premiums are tied directly to national health spending. When hospital spending jumps, Part B premiums follow. It’s built into the formula.
Why Hospitals Haven’t Been Part of the Conversation
Despite being a major driver of spending growth, hospitals have largely avoided the scrutiny aimed at insurers and drug companies. A few reasons:
- People see hospitals as community institutions, not businesses.
- Criticizing hospitals feels uncomfortable — people associate them with care, not cost.
- Hospital lobbying power is enormous.
- Regulators tend to focus on insurers because their pricing is more visible to consumers, and historically insurers have often made themselves easier targets.
- Hospitals also benefit from the public’s longstanding frustration with insurance companies. When a contract dispute or price increase occurs, it’s easy for hospitals to cast the insurer as the bad actor — leaving patients caught in the middle.
This isn’t about shifting blame from one part of the system to another; no single part of the system is blameless. It’s about recognizing that you can’t meaningfully address Medicare affordability without looking at hospital costs too.
What This Means for You
If You’re on a Medicare Advantage Plan
Rising hospital costs will continue to shape your experience. Expect:
- higher hospital copays
- more prior authorizations
- narrower networks
- potential loss of access if hospitals exit MA
A practical takeaway: use freestanding, non‑hospital facilities whenever possible — imaging centers, surgery centers, infusion centers, labs, and urgent care. They’re often significantly less expensive for the plan and for you.
If You’re on a Medicare Supplement + Part D Drug Plan
The Medigap landscape is shifting:
- premiums are likely to rise more sharply than in past years
- some carriers may close plans or withdraw from certain states
- fewer new entrants may come into the market
The era of slow, steady Medigap increases is behind us.
The Conversation Needs to Broaden
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 different story.
Hospitals are a major, and often under‑discussed, driver of national health spending growth. And until that’s acknowledged and addressed, people will continue to feel the impact on their premiums, their benefits, and their access to care.
Source
Kaiser Family Foundation (KFF), Hospital Spending Accounted for 40% of the Growth in National Health Spending Between 2022 and 2024.
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