Prescription drugs play an important role in medical care for 59 million seniors and people with disabilities, and account for $1 out of every $6 in Medicare spending. The majority of Medicare prescription drug spending is for drugs covered under the Part D prescription drug benefit, administered by private stand-alone drug plans and Medicare Advantage drug plans. Medicare Part B also covers drugs that are administered to patients in physician offices and other outpatient settings.
After a period of relatively slow growth, total and per capita Part D spending has increased more rapidly in the past few years mainly due to treatments for hepatitis C, and is projected to increase more rapidly in the next decade as more high-priced specialty drugs become available, according to the recently-released annual report of the Medicare Boards of Trustees.
Even with Medicare’s prescription drug coverage, beneficiaries can face substantial out-of-pocket costs, particularly if they use specialty drugs or multiple high-cost brand-name drugs. The following series of graphics examines trends in Medicare spending on prescription drugs, Medicare beneficiary out-of-pocket drug spending, and what the public thinks about different options for keeping drug costs down.
1. Medicare accounts for a growing share of the nation’s prescription drug spending: 29 percent in 2015 compared to 18 percent in 2006, the first year of the Part D benefit.
2. Prescription drugs accounted for $110 billion in Medicare spending in 2015, 17% of all Medicare spending that year.
3. The 10 drugs with the highest total Medicare Part D spending accounted for 21% of all Part D spending in 2015 (including both Medicare spending and beneficiary out-of-pocket costs).
4. Medicare Part D drug plans have negotiated steadily higher manufacturer rebates since 2006, the first year of the Part D benefit.
5. Medicare Part D prescription drug spending per enrollee is projected to grow over the next decade at nearly twice the rate than it did in the early years of the Part D program.
6. As new high-cost specialty drugs have become available, Medicare Part D spending in the catastrophic coverage (“reinsurance”) phase of the benefit has increased as a share of total drug benefit costs, from 14% in 2006 to 38% in 2016.
7. Prescription drugs accounted for nearly $1 in every $5 that Medicare beneficiaries spent out-of-pocket on health care services in 2013, not including premiums.
8. Medicare Part D enrollees who did not receive Low-Income Subsidies spent about $500 out of pocket on their prescriptions in 2015, on average, but some Part D enrollees spent considerably more.
9. Average out-of-pocket spending by Medicare Part D enrollees with high-out-of-pocket costs (above the catastrophic coverage threshold) dropped substantially in 2011, due to the Affordable Care Act provision to phase out the coverage gap by 2020—but costs for this group are on the rise again.
10. High and rising drug costs are a concern for the public, and many leading proposals to reduce costs for all people—including Medicare beneficiaries—enjoy broad support.