The renewed Democratic push to expand Medicare, lower the eligibility age and move toward Medicare for All is likely to become one of the defining health care debates of the next election cycle.
There is no doubt that Americans are struggling with premiums, deductibles and the cost of accessing medical care. But there is a fundamental problem with much of this discussion: We continue to debate health care financing without adequately understanding health care itself, and we continue to debate health care without understanding the economics of financing it. While I have argued this point for over decades it never ceases to surprise me how decisions about healthcare financing are made by people who have little knowledge about healthcare, financing and technology in their totality not individually.
I was born in 1965, the same year Medicare was created. That coincidence provides a useful perspective on just how much the underlying economics of American medicine have changed. Medicare was designed for a very different America. In 1965, life expectancy at birth was about 70 years. Today it is about 78 years, and someone who reaches 65 can expect to live another 19.5 years on average. Millions of Americans now live into their 80s, 90s and beyond.
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Medicare has grown from roughly 19 million beneficiaries in 1966 to more than 69 million today, with annual spending now exceeding $1.2 trillion. And the cost rises as beneficiaries age: Medicare spending on an 85 year old is roughly 2.5 times that of a 66 year old, while spending on beneficiaries in their 90s can be roughly three times as high. We are therefore not simply covering more people; we are financing more years of increasingly complex medical care for a rapidly growing population.
The disease burden has changed just as dramatically.
Today, 40.3 percent of American adults are obese, more than 40.1 million Americans have diabetes, and another 115.2 million adults have prediabetes. The financial consequences are enormous. The CDC estimates that diabetes alone costs the United States approximately $640 billion a year in medical costs and lost productivity, with 61 percent of those costs attributable to adults age 65 and older, the population largely covered by Medicare.
Obesity adds nearly $173 billion a year in medical expenditures, while cardiovascular disease and stroke impose more than $400 billion annually in direct and indirect costs. More importantly, these conditions increasingly occur together. Three quarters of American adults have at least one chronic condition and more than half have two or more, creating a population that requires years of medications, monitoring, specialist care, procedures and hospitalization.
That matters enormously to the economics of health care.
The most expensive patient is often not the patient with one disease. It is the patient with several interacting diseases requiring medications, specialists, laboratory testing, imaging, procedures, hospitalizations and long-term management. Simply giving that patient an insurance card does not make the underlying care less expensive.
Consider diabetes alone. Sixty years ago, the pharmacological tools available to treat type 2 diabetes were primitive compared with what we have today. Metformin did not even receive FDA approval in the United States until 1995. Today physicians can choose from multiple classes of medications, including SGLT2 inhibitors and GLP-1 drugs that can influence glucose control, weight and cardiovascular risk.
The financial challenge becomes clearer when we put Medicare’s original promise beside the program we are financing today. When Medicare began in 1966, its first year of benefit payments were about $3 billion, covering roughly 19 million Americans. Today, Medicare covers 69.3 million beneficiaries and spent $1.21 trillion in 2025, more than 400 times the original dollar amount, while life expectancy and years of medical care after age 65 have increased substantially.
At the same time, the cost of treating chronic disease and the arrival of increasingly expensive therapies are creating new spending that did not exist when Medicare was designed. U.S. prescription drug spending alone reached $467 billion in 2024, and Medicare Part D spending on GLP 1 drugs rose fivefold between 2019 and 2024 to $27.5 billion in gross spending.
How much more taxpayers would actually have to finance? The Congressional Budget Office estimated that illustrative Medicare based single payer systems would require an additional $1.5 trillion to $3 trillion in federal health subsidies in 2030 alone compared with current law. That money would not disappear simply because the government becomes the payer.
It would shift costs now borne by employers, individuals and states onto the federal balance sheet, requiring some combination of higher taxes, increased borrowing or reductions in other government spending.
New imaging technologies, robotic surgery, biologic therapies, gene therapies, artificial intelligence, implantable devices and increasingly sophisticated interventions can improve outcomes while simultaneously also increasing the cost of providing care.
Then there is the issue of what happens outside traditional Medicare.
Many Americans assume that Medicare means health care is essentially free once someone reaches 65. It does not. Traditional Medicare has premiums, deductibles and coinsurance, and it does not have the same annual out-of-pocket maximum found in many private insurance plans.
That is why millions of Medicare beneficiaries purchase Medigap policies, enroll in Medicare Advantage or obtain other forms of supplemental coverage.
Those costs matter too. The average Medigap policy now costs thousands of dollars a year, while Medicare Part B alone has a standard monthly premium of more than $200 in 2026. For older Americans living on fixed incomes, the cost of obtaining adequate coverage can itself become a significant financial burden.
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In 2026, a Medicare beneficiary pays a standard Part B premium of $202.90 a month, or $2,435 a year, before paying the $283 deductible and any coinsurance. For the roughly 43 percent of people in traditional Medicare who purchase Medigap, the average supplemental premium was another $2,604 a year in 2023.
That means a typical beneficiary with traditional Medicare and Medigap was already paying more than $5,000 a year in premiums before prescription drug coverage and other out of pocket expenses. For older Americans living primarily on Social Security or other fixed incomes, the cost of obtaining comprehensive coverage is therefore not trivial. In fact, KFF estimates that Medicare Part B and Part D premiums and cost sharing alone consume nearly one quarter of the average monthly Social Security benefit
If we lower the Medicare eligibility age, as some propose > or create universal Medicare coverage, we will have expanded the population covered by the program. We will not necessarily have reduced the cost of treating the population.
It also requires recognizing that the economics of medicine are often counterintuitive. A $1,000 drug may look expensive until it prevents a $50,000 hospitalization. A $10,000 procedure may be expensive until it prevents years of disability. Conversely, a treatment that produces little measurable benefit may be extraordinarily expensive regardless of who pays for it.
This is where our political debate often falls short. Republicans tend to emphasize markets and Democrats tend to emphasize access, but neither principle by itself solves the fundamental problem. Health care is simultaneously a clinical, technological, behavioral and financial system.
There is no free health care. There is only health care paid for by someone else.
Invest in healthcare infrastructure
- Build the bridges. A patient’s clinical, diagnostic, pharmaceutical and financial information should move securely and seamlessly across the system. We have accomplished this in banking and commerce. There is no technical reason health care should remain fragmented.
- Use AI to expose variation and waste. AI can analyze millions of transactions and clinical decisions to identify unnecessary care, duplication, fraud, pricing anomalies and differences in outcomes.
- Create a health Passport for every single American. Information should follow the patient, not the institution. A fragmented record produces fragmented care and makes accountability nearly impossible.
- Secure the transactions . Blockchain and distributed ledger technology could provide a common mechanism for verifying who entered data, when it was entered, who changed it and whether a transaction actually occurred, particularly across organizations that do not inherently trust one another.
- Tear down the wall. Every stakeholder from employers, insurers, hospitals to pharma needs to be on a common platform for free flow of data