The State Spending Divide

Published February 2026 · 13 min read

Medicare is a federal program, but it doesn't spend evenly. The geography of Medicare spending reflects population, provider density, practice patterns, and pricing — creating massive disparities between states that receive tens of billions and those that get barely a billion.

Our analysis of $854.8B in Medicare payments across 10 years reveals a system where a handful of large states dominate spending, while markup practices vary wildly by region.

The Top 10: Where the Money Goes

The ten largest states by Medicare payments account for 55.9% of all spending. California alone captures nearly 11 cents of every Medicare dollar, driven by its massive population and 838.7K billing providers — the most of any state.

The Bottom 5: Small States, Small Budgets

At the other end of the spectrum, Wyoming received just $1.1B over the same 10-year period — enough to fund about 12 days of California's Medicare spending. Vermont ($1.2B), Alaska ($1.4B), North Dakota ($1.7B), and Hawaii ($2.0B) round out the bottom five.

These states have smaller elderly populations, fewer providers, and lower overall healthcare utilization — but they also illustrate how Medicare's fixed fee schedule interacts with local market conditions to produce very different per-provider averages.

Per-Provider Spending: Florida Leads

When we normalize by the number of billing providers, a different picture emerges. Florida leads among large states at $120.6K per provider — reflecting its dense elderly population and high-volume practices. New Jersey ($111.5K) and California ($111.1K) follow closely.

In contrast, Ohio providers average just $57.6K each, and Pennsylvania comes in at $64.4K — suggesting either lower utilization, more providers splitting the pie, or different specialty mixes.

The Markup Map: Which States Overcharge the Most?

Markup ratios — the gap between what providers charge and what Medicare pays — vary dramatically by state. Wisconsin leads the nation at 9.47x, meaning providers there submit charges nearly 10 times what Medicare actually reimburses.

At the other extreme, Puerto Rico has a markup of just 2.11x, reflecting both lower charge levels and the territory's unique healthcare market dynamics.

Regional Patterns

Clear regional patterns emerge in both spending and markups:

• Sun Belt dominance: Florida, Texas, Arizona, and Georgia all rank in the top 10 for total spending and tend to have above-average markups. Large retiree populations drive volume.
• Midwest markup mystery: Wisconsin's 9.47x markup is an extreme outlier — nearly double neighboring Minnesota (4.07x) and Iowa (3.57x). This may reflect specific provider billing practices or specialty mix.
• Northeast moderation: Pennsylvania (3.48x) and Maryland (3.32x) have relatively modest markups, possibly reflecting more regulated markets and academic medical center influence.
• Territory gap: Puerto Rico (2.11x) and Guam (2.74x) have the lowest markups, consistent with lower charge-setting in territories.

The Urban-Rural Dimension

State-level data also reflects the urban-rural divide. Urban providers account for 90.9% of all Medicare payments ($776.9B), while rural providers receive just 8.9% ($76.5B). Within states, this concentration is even more extreme — a state's total may be driven primarily by one or two major metro areas.

Why This Matters

The state spending divide has direct policy implications. Medicare's Geographic Practice Cost Indices (GPCIs) are supposed to adjust payments for local cost differences, but the 82x gap between California and Wyoming spending suggests that geographic adjustment alone doesn't explain the disparities.

For beneficiaries, where you live increasingly determines the quality and availability of Medicare-funded care. States with more providers and higher spending may offer more choices, while smaller states face provider shortages and access challenges. Understanding these disparities is the first step toward addressing them.

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