WASHINGTON — The nation spent $2 trillion, or $7,000 per person, on health care in 2006. While that was only a small hike from 2005, America's prescription drug tab grew by 8.5%.
Health spending as a share of the nation's gross domestic product hit 16% in 2006.
Total spending on physician and clinical services grew 6% to $448 billion, the slowest growth since 1999. Physician pay crawled almost to a halt, largely because of the freeze in Medicare's reimbursement rates in 2006. Private insurers seemed to have followed suit, said Cathy Cowan, an economist at the Centers for Medicare and Medicaid Services. Ms. Cowan, a coauthor of an annual analysis of the nation's health spending, spoke at a briefing on the report.
Nursing home prices dropped; spending still grew 3.5% in 2006, less than the almost 5% increase in 2005. Home health services grew almost 10% in 2006, down from a 12% increase in 2005.
Medicare spending increased 19% to $401 billion, driven largely by the prescription drug benefit, the administration cost for that benefit, and Medicare Advantage.
Overall drug spending grew 8.5% in 2006—an increase from the 5.8% rise in spending in 2005. Half of the 2006 increase was due to greater utilization, not surprising since about 23 million Medicare beneficiaries took advantage of the new benefit. Prescription prices increased by only a little over 3%, according to an annual analysis by actuaries at the Centers for Medicare and Medicaid Services.
The change in the drug rebate picture also contributed to rising costs. Under Medicaid, states received an average 30% rebate from drugmakers. Medicare, however, got only about 5% from manufacturers for the beneficiaries who shifted out of Medicaid.
Medicare spent $41 billion on Part D in 2006, with $35 billion for drug purchases and $6 billion for administration and “net cost of insurance”—the cost of subsidizing premiums for low-income beneficiaries and costs for transferring beneficiaries into private plans. Medicare paid for 18% of all retail drugs, versus only 2% in 2005. Medicare took on costs previously covered by private insurers, Medicaid, and the uninsured.
On average, each Part D enrollee received $1,700 in benefits, according to CMS.
Generics accounted for 63% of drugs dispensed in the U.S. in 2006, according to the report.
The largest category of spending is hospital care, which eats up 31% of U.S. health dollars.
Consumers Union: Private Insurers Are Gouging
Government economists have concluded that the Medicare Part D prescription drug benefit did not affect the price of pharmaceuticals in 2006, the program's first full year, but Consumers Union has issued another in a series of studies, this one making charges that drug prices are indeed rising under the program.
Each month since December 2005, the consumer advocacy group has tracked the prices of five drugs commonly used by Medicare beneficiaries in a single ZIP code in each of five states—California, New York, Illinois, Florida, and Texas.
The data are taken directly from
Consumers Union Senior Policy Analyst Bill Vaughan said in an interview the group found that prices generally rise the most from December to January—after a beneficiary has locked into a plan for the upcoming year. The average increase for the five drugs as a package (Lipitor, Celebrex, Zoloft, nifedipine ER, and Altace) was $369 from December 2007 to January 2008, according to Consumers Union.
Mr. Vaughan also noted: “These continual price hikes are Exhibit A for Congress to give renewed attention to negotiating drug prices on behalf of America's taxpayers and seniors, and offering the option of a Medicare-run drug benefit.”