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KFF’s Top Ten Facts About Medicare Drug Spending

By February 11, 2019Commentary

As with the general population, drugs have become a much more common treatment for diseases among the senior population.  A brief missive from the Kaiser Family Foundation gives “ten essential facts” about drug spending in Medicare.   (KFF Brief)   The first fact is that Medicare’s share of all retail medication spending rose from 18% in 2006, when Part D began, to 30% in 2017 and is projected to rise to 33% in 2026.  The share paid for by private insurance has slightly declined to around 41% and out-of-pocket spending gone down more sharply.   In 2016, at about $130 billion, drug spending was 19% of all Medicare costs.  Ten drugs accounted for 17% of all Part D spending, with Harvoni for hepatitis C at the top of list with $4.4 billion in cost.  Cancer, diabetes, blood thinners and asthma drugs accounted for most of the other top ten.

From 2006 to 2010 per beneficiary Part D expense rose 5.5% annually, declining to 2.2% from 2010 to 2017 and projected to begin growing at 4.6% going forward for the next ten years.  Reinsurance for unexpectedly high costs for the Part D plans is taking up a rapidly growing share of CMS’ Part D expense and was 40% in 2017. Part D non-premium out-of-pocket expenses were 21% of all out-of-pocket spending, but I suspect there is some significant additional Part B drug out-of-pocket expense.  For beneficiaries not eligible for the low-income subsidy, average out-of-pocket annual amounts were $500, but about 1 million were above the catastrophic level and spent an average of $3200 annually.  But for some beneficiaries, expensive specialty drugs can push out-of-pocket expenses above $10,000 a year.  When you see these statistics you can understand why CMS is looking for new ways to limit drug spending.

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