Where Your Medicare Dollar Goes

Published February 2026 · 16 min read

Where does your Medicare dollar actually go? It's a question that 67.0M Medicare beneficiaries and every taxpayer should be asking. The answer, drawn from a decade of billing data across 1.2M providers and hundreds of procedure codes, reveals a system dominated by routine office visits, expensive drugs, and high-volume surgical procedures.

This analysis categorizes every major procedure code by clinical function to build a comprehensive picture of where the money flows — from the first blood draw to the last radiation session.

The Medicare Dollar: A Visual Breakdown

If you could hold a single Medicare dollar in your hand, here's how it would be divided:

Office vs. Facility: Where Care Happens

The Office Visit Foundation

Nearly 18 cents of every Medicare dollar goes to office and outpatient visits — the bread and butter of ambulatory care. The 99214 code alone ($73.3B) accounts for 8.6% of all Medicare spending. Combined with 99213 ($44.4B), these two codes represent the single largest pair of spending items in the system.

This spending funds the basic infrastructure of healthcare delivery: the 15-to-25-minute encounters where doctors manage chronic diseases, adjust medications, order tests, and refer to specialists. Without it, the rest of the system doesn't function.

The Drug Question: 11 Cents on the Dollar

Drugs and biologics account for $94.2B — 11% of total spending. This covers only Part B drugs (those administered in physician offices and outpatient settings), not Part D pharmacy drugs. The concentration is extreme: just one drug (aflibercept) accounts for 20.9% of all Part B drug spending.

By 2023, drugs represented 14.8% of total spending — up from about 9% at the start of the analysis period. This reflects both the approval of new expensive biologics and the shift of cancer treatment to outpatient settings.

The Markup Tax: Charges vs. Payments

Across the entire system, providers submitted charges totaling roughly$3385.2B — about 4 times what Medicare actually paid. This "markup tax" doesn't directly cost Medicare beneficiaries, but it inflates the sticker prices that affect uninsured patients and distort private insurance negotiations.

What's Not in These Numbers

This analysis covers Medicare Part B (physician services and outpatient care). It does not include:

• Part A — Hospital inpatient stays (paid under DRGs), skilled nursing facilities, hospice, and home health
• Part D — Prescription drugs filled at pharmacies
• Medicare Advantage — Payments to MA plans (which then pay providers)
• Administrative costs — CMS operations, fraud detection, enrollment

Total Medicare spending (all parts) exceeds $900 billion annually. The $93.7B in Part B payments in 2023 represents roughly 10% of the total — but it's the most transparent portion, with detailed procedure-level data available for public analysis.

Why This Matters

Understanding where Medicare dollars go is the first step toward ensuring they're well spent. When 18% goes to office visits, we should ask: are those visits producing good outcomes? When 11% goes to drugs, we should ask: are we using the most cost-effective options? When $19.7B goes to a single drug, we should ask: is there a cheaper alternative that works just as well?

Medicare's financial sustainability depends on making every dollar count. With an aging population pushing enrollment higher and per-beneficiary costs climbing, the $854.8 billion question isn't just academic — it's the defining fiscal challenge of the next generation.

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