Ohio Department of Aging
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February 2008
Medicare Spending Rate Increase Doubled in 2006
The new Medicare prescription drug plan was largely responsible for an 18.7 percent increase in Medicare spending in 2006, which was more than double the increase in spending from the year before, U.S. health officials report. The rate of increase was up from the 6.5 percent rate in 2005. The 2005 rate was the slowest growth since 1999.
In 2006, Medicare spending reached $401.3 billion, an increase from $338 billion in 2005, according to officials from the National Health Statistics Group at the U.S. Centers for Medicare and Medicaid Services (CMS), Office of the Actuary. Expenditures reached $2.1 trillion, or $7,000 a person.
At the same time that the Medicare drug plan increased spending, spending by Medicaid dropped for the first time since 1965, to $310.6 billion in 2006 from $313.5 billion in 2005. This drop was mostly due to drug coverage for people who were eligible both for Medicare and Medicaid being transferred to Medicare.
The cost to the federal government of the Medicare drug program, which took effect in 2006, was less than originally projected, according to officials. The actual cost of Part D in 2006 was significantly below the cost estimated before the program was implemented. After slowing for six years, prescription drug spending increased to 8.5 percent in 2006, compared with 5.8 percent in 2005.
According to CMS, the increase is due to increased use, lower rebates, new indications for existing drugs, growth in several therapeutic classes and increased use of specialty drugs. However, more use of generic drugs helped keep the growth in drug cost low. The 2006 growth rate was less than the average annual rate of 13.4 percent per year from 1995 to 2004.
Other than Medicare and prescription drugs, there was a general slowdown in spending by hospitals, physicians and clinics. In addition, home health care, nursing home care and dental care all grew at slower rates in 2006 than in 2005. The Medicare drug plan was also responsible for a decrease in the rate of out-of-pocket spending for health care.
Ohio Department of Aging