Medicare Spending Increases Due To Prescription Drugs

Medicare spending grew 18.7% to $401.3 billion in 2006, as prescription drug spending shifted to Medicare from Medicaid and private coverage, the Centers for Medicare & Medicaid Services reported today. That’s the largest annual increase in Medicare spending since 1981 and twice the growth seen in 2005. Total U.S. spending for hospital care grew 7.0% in 2006 to $648.2 billion, down from a 7.3% increase in 2005, as growth in the underlying cost of hospital services slowed to 4.1% from 4.3%, CMS said. Spending for physician and clinical services grew 5.9% in 2006 to $447.6 billion. That’s down from 7.4% in 2005, due in part to a freeze in Medicare payments. The report appears in the January/February issue of Health Affairs.