2024 Report

Medicare and Medicaid Expenditures: Medical Equipment

An aging US population is managing more chronic conditions that require home-based medical aids, driving up demand for medical equipment as Medicare has expanded coverage. This deep dive explores how health care providers, payers, and equipment manufacturers can adjust to market changes to continue expanding options for managing health at home.

Medical Equipment

Durable medical equipment (DME) goes well beyond wheelchairs and walkers. Medicare defines DME as equipment used in the beneficiary’s home used to treat a medical illness or condition.¹ As medical technology has improved, devices that were only available in hospitals have become more and more common at home: intravenous medications can be delivered in the comfort of a patient’s own bed and respiratory aids can be conveniently carried around by the patient as they go about their day, granting additional flexibility and freedom.

During the COVID-19 pandemic, many Medicare beneficiaries were prescribed ventilators to help them recover from the long-term respiratory issues associated with COVID-19. This resulted in a supply shortage that was covered by the news cycle throughout 2020.² Confronted with the reality of social distancing to prevent the spread of COVID-19, companies explored ways to help providers manage their patients’ COPD symptoms while in isolation.³ This remote pulse-oximetry monitoring equipment yielded promising results, pushing innovation in the industry to offer a broader range of convenient, wearable, and remotely monitorable devices in the coming years that report health data built for a digital age.⁴

By the Numbers

Medicare DME spending grew at five times the rate of overall Medicare spending.

Medicare spending growth in medical equipment far outpaced Medicaid. From 2019 to 2023, Medicare spending on DME grew at five times the rate of Medicare overall spending. Spending on non-durable medical products, such as syringes, needles, wound dressings, and infusion/transfusion sets, grew even faster at nine times the overall Medicare rate. Medicaid, on the other hand, saw growth rates in DME spending at one-third the rate of overall Medicaid growth.

This is not surprising—Medicare beneficiaries are age 65 and over, a demographic associated with chronic health conditions and mobility problems that require daily management. A report published by the CDC found that, in 2023, 93% of adults age 65 and over had at least one chronic condition and 78.8% had multiple chronic conditions, compared to 59.5% and 27.1% of adults age 18 to 34, respectively.⁵ Muscle strength declines with age, which affects the performance of every day activities in older adults.⁶ The intersection of decreased mobility and increased chronic conditions (some of which affects mobility) create an increased need for durable medical equipment to aid in daily living.

While Medicare normally doesn’t cover common medical supplies like wound dressings, over-the-counter medical products for use at home while receiving home services, such as IV infusion, are covered.⁷ This means non-durable medical products growth in Medicare points to a growing at-home health care market.

In-home services are broad in scope: the North American Industry Classification System (NAICS) code for Home Health Care Services (6216) includes medications and medical equipment/supplies in addition to the therapy, counseling, and nursing care associated with health professionals visiting patients at their homes to deliver care.⁸ Why, then, did Medicare Home Health Care expenditures only grow by 0.2% from 2019 to 2023? The answer lies in the way NHE defines its categories. NHE Home Health Care data excludes all services and medical equipment purchases not billed through freestanding home health agencies, which means it misses all billing from hospitals and clinics for care delivered at patients’ homes.⁹ Since Medicare DME and non-durable medical product spending is directly tied to home health care, these categories tell a more representative story about home health care trends than the Home Health Care category itself.

*Figure 1. Changes in Medicare Medical Product Expenditures Since 2019*

Table 2. 2023 Durable and Non-Durable Medical Equipment Changes by Source¹⁰ ¹¹

Spending Source¹²	Medicare	Medicaid
2023 Overall	$1.03 trillion	$871.7 billion
Change since 2022	4.6%	4.5%
Change since 2019	7.2%	18.7%
2023 Durable Medical Equipment¹³	$15.9 billion	$51 billion
Change since 2022	*14%*	1.6%
Change since 2019	*38.8%*	5%
2023 Other Non-Durable Medical Products¹⁴	$4.7 billion	–
Change since 2022	*26.3%*	–
Change since 2019	*64.1%*	–
2023 Home Health Care¹⁵	$51.8 billion	$51.2 billion
Change since 2022	4%	4.3%
Change since 2019	*0.2%*	15.6%

The Growing Market for In-Home Medical Equipment

American are growing older and receiving more health services at their homes.

The durable medical equipment (DME) market is expected to expand, with 5-year compound annual growth rates estimated at over 5%.¹⁶ This market growth is predicated on the rising geriatric population in the US, which has grown by 53.6% from 2010 (38.6 million) to 2023 (59.3 million).¹⁷ Although the prevalence of chronic conditions in older Americans hasn’t changed in the last decade, as the proportion of older Americans in the population increases, the need for DME will grow. For example, two of the chronic conditions Americans age 65 and over manage that require DME are arthritis (51.3% of population) and diabetes (23.5% of the population).¹⁸ For arthritis, the kind of DME needed depends on the type and severity of the condition. Examples of DME for arthritis that are covered by Medicare include canes and walkers, braces and splints, and orthopedic supports, all of which aim to increase mobility and reduce strain on joints. In the case of diabetes, continuous glucose monitors (CGMs) provide live readings to inform users of their blood sugar to effectively deliver insulin and manage their symptoms.

Advancements in Durable Medical Equipment Technology

Not only are there more Americans who need DME solutions for daily living, there are new kinds of at-home medical devices created every year. While fitness tracking devices like the seminal Fitbit weren’t designed primarily for the health system, they spurred innovations in wearable technology. Emergency response devices like the telephone-connected Life Alert button are now wristwatch-like devices like the Silvertree Reach, which connects wearers to family members and care providers via an app while tracking the wearer’s location and detects their falls. These devices can be tailored to enable remote monitoring of specific conditions. Biotech companies like Medtronic and Boston Scientific have created platforms that share patient health data with providers and send alerts when connected devices like glucose monitors and pacemakers detect signs of impending health events.¹⁹

The connected healthcare devices market is experiencing incredible growth right now, with an estimate 17.5% compound annual growth rate through 2032.²⁰ The figure below displays just a fraction of the innovators in the DME market.

Figure 2. Top 50 DME Companies in the US Market by Primary Equipment Type²¹ ²²

Remote patient monitoring (RPM) offers Medicare a huge opportunity to extend preventative care and chronic condition management beyond the walls of healthcare centers and help beneficiaries stay healthier for longer. A literature review of wearable devices’ role in patient monitoring found them effective at cardiac and neurological rehabilitation outcomes and improved self-management of respiratory conditions like asthma and chronic obstructive pulmonary disease, among others.²³ Improved rehabilitation and self-management means fewer in-patient stays and emergency room visits, which hold large potential savings for Medicare, which covers 100% of in-patient costs for 60 days after the plan’s deductible is met.²⁴

While Medicare coverage of these new digital DME hasn’t caught up to the innovation in the field, it has begun to expand. A CMS final rule in 2021 expanded the DME covered by Medicare to include CGMs, providing beneficiaries with diabetes more responsive options for managing their condition.²⁵ Expanding coverage to additional RPM devices will help support beneficiaries with other chronic conditions while helping Medicare realize acute care and inpatient hospital care savings.

Growing Home Health Care Solutions

Recent cultural and policy changes responding to COVID-19 have expanded the home health care services market.

Regular monitoring and therapy is necessary to help patients recover in post-acute care and manage chronic conditions. Patients are increasingly preferring to receive this care in their home, with a majority (56%) of Americans believing they would recover faster at home than in the hospital.²⁶ The desire for home healthcare is worth paying for according to Americans, who are willing to pay over 58 additional dollars per day to receive rehabilitative care at home instead of at nursing facilities.²⁷

The market is responding to these changing preferences. From 2019 to 2024, home health care services employment grew by 14.5%.²⁸ In the same period, nursing and residential care facilities employment shrunk (-5.9%), demonstrating a shift in where Americans are receiving health care. COVID-19 influenced the trend toward at-home care options, with many providers expanding their telehealth and home health services infrastructure to interact with patients outside of hospital settings during lockdown. The pandemic also triggered a shift in Medicare-covered at-home treatment when they launched the Acute Hospital Care at Home (AHCAH) initiative. The AHCAH allowed some hospitals to safely deliver in-patient services at home through the end of 2024.

A CMS study of the AHCAH found that in-home acute care could be delivered at the same level of quality as in hospitals and at a lower cost, all while creating a more positive patient experience.²⁹ This study suggests brick-and-mortar acute care centers do not have to be the default for delivering in-patient services.

Home Health Care as a Solution for Older Rural Americans

Rural counties are aging faster and home health care services are responding to increased needs.

Geriatric population growth isn’t distributed equally throughout the US. The number of nonmetro counties considered “older age” (at least 20% of the population age 65 and over) grew by a whopping 194% from 2010 to 2023, with the working age (15- to 64-year-old) population in nonmetro counties decreased by about 2 million in the same period.³⁰ This means older Americans are living farther and farther away from hospitals and clinics, but still need access to equipment to help them manage their conditions.

For many people, the solution is home health care. Almost all rural eldercare growth since 2010 has been in home health care, which increased by 36% from 2010 to 2023.³¹ This makes sense from a logistical standpoint—without the population density to run independent continuing care or retirement facilities in the patient’s local community, rural health care organizations can instead connect with patients where they live to deliver services without the required health infrastructure of a skilled nursing facility. The advancements in remote patient monitoring and telehealth technology give health care providers more options to improve patient outcomes in healthcare deserts. Without high-mileage visits to remote locations or the operational upkeep of hospital or nursing facilities, providers can still check in on patients to help them manage their conditions and stay healthier for longer.

Medical Equipment in Health of Health Pillars

Changes in the medical equipment market include all Health of Health pillars. Patients are dealing with more chronic conditions to prevent unnecessary hospitalizations. Providers are hiring registered nurses to provide home health care services as the number of hospital beds around the US declines. Payers are spending more on medical equipment, some of which isn’t covered by insurance plans. R&D is investing in new digital innovations and integrations that enable providers to remotely monitor patients to keep them healthy outside a clinical setting. The full cross-cutting pillar metric table is below.

Table 3. Medical Equipment Cross-Cutting Pillar Metrics

The Path Forward

The rise in Medicare medical equipment purchases outside clinical settings shows that the health care system is increasingly setting up older Americans to manage their health at home. Embracing DME as tools that, paired with home health care services and/or RPM, provide alternatives to skill nursing facility care that both saves Medicare money with shorter in-patient stays and mirrors patient preferences for health care delivery.³² We list several priority recommendations in the current policy environment:

For Congress:

Write AHCAH services into Medicare hospital funding: The AHCAH initiative expiring in December 2024 despite yielding promising results in reducing costs and improving patient experience.³³ Congress should modify Medicare hospital funding to include AHCAH services to incentivize innovation in health care delivery and drive down per patient acute care costs.

For CMS:

Reexamine cost-saving programs for Medicare DME: The last competitive bidding program for DME was issued in 2021 and has been on a gap period since the start of 2024.³⁴ With a rapidly changing and growing DME market, CMS should restructure its competitive bidding to more regularly receive contract proposals for new types of DME that enable remote patient monitoring and improve home health care. Proactive action will ensure that equipment remains at the lowest possible cost to both Medicare and its beneficiaries while responding to changing patient needs and preferences.

For hospitals and clinics:

Integrate home health services into health care delivery systems where possible: Hospitals and clinics should incentivize professional development in home health and telehealth delivery and expand their teams to dedicate hours to those venues to meet patient needs. This will help more traditional care centers reach additional patients, generating more billable hours for health care centers while improving patient quality of care.

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Trending	Pillar	Metric	Deep Dive Connection
	Patient	Chronic disease prevalence	Durable medical equipment is often prescribed to help patients manage chronic conditions
	Patient	Preventable hospitalizations	Proper access and use of medical equipment outside of clinical settings helps manage conditions and prevent readmissions
	Provider	Number of hospital beds	Durable medical equipment is for use in the home
	Provider	Home health care utilization	Durable medical equipment is for use in the home
	Payer	Medicare expenditures	Age 65 and over patients manage chronic conditions that sometimes require medical equipment
	Payer	Claim coverage	Coverage of medical equipment plays a role in cost and use
	R&D	NIH spending by topic	Digital innovation is growing the medical equipment industry