Medicare Monitor

Medicare Monitor

The Palm Beach Post's veteran Washington correspondent, Larry Lipman, tracks policy makers and interest groups who are shaping the future of the federal health insurance program for the elderly.

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Medicare is the federal health care system that covers about 36 million people age 65 and older, plus 7 million disabled. It has four parts:

Part A Covers inpatient hospital care as well as nursing home, home health and hospice care. Nearly all elderly and disabled Americans qualify for Part A coverage.
Financed by a 2.9 percent payroll tax divided equally between employees and employers.

Part B Covers outpatient care, doctor’s services, durable medical equipment, home health visits and preventive care. Part B coverage is voluntary, but roughly 40 million are enrolled.
Financed by beneficiary premiums and federal general revenue. Current monthly premiums are $93.50. Starting this year, individuals whose taxable income is more than $80,000 will pay a higher premium.

Part C Medicare Advantage managed care plans provide health care normally covered by Medicare Parts A and B. They may also provide some other benefits, including prescription drugs, not covered by traditional Medicare. Oart C is voluntary; about 7 million beneficiaries are enrolled.
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Part D Medicare prescription drug plans come in two types, those that just cover prescription drugs and those that cover drugs as part of a broader managed care benefit. Part D is voluntary. About 9.2 million beneficiaries are in stand-alone drug plans and about 5.1 million are in managed care drug plans.
The plans are private and financed by Medicare and beneficiary premiums, which vary among plans.
-- Larry Lipman

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Home > Medicare Monitor > Archives > 2008 > January > 08 > Entry

Report: Medicare prescription plan’s effect widespread

By Larry Lipman | Tuesday, January 8, 2008, 02:29 PM

The full implementation of the Medicare Part D prescription drug plan in 2006 has dramatically reshaped the landscape of who pays what for health care, according to a report released by the federal government Monday.

As a result of Medicare Part D, the number of prescriptions filled, the amount of retail drug spending and the public share of spending for drugs increased from 2005 to 2006, according to the annual report on national health spending prepared by analysts in the Centers for Medicare and Medicaid Services.

Meanwhile, the rate of growth in the amount that consumers spent on health care goods and services not covered by insurance slowed, primarily because of Medicare Part D. The growth of so-called “out-of-pocket” health care spending increased 3.8 percent in 2006. If the amount spent on prescriptions was not included in the calculation, out-of-pocket spending would have grown 5.3 percent. That means consumers spent significantly more out of their own pockets for other health services than for prescription drugs.

Overall, Americans spent 12 percent out-of-pocket for their health care in 2006. That percentage has steadily decreased since 1998, when it was 15 percent. In 1960, before the creation of Medicare, Medicaid and widespread employer health insurance, 47 percent of all health care spending was out-of-pocket.

Partially as a result of Medicare Part D, the growth in spending for prescription drugs increased in 2006 for the first time in six years, the report said. The growth in retail drug spending was 8.5 percent in 2006 compared to 5.8 percent in 2005.

In 2006, Medicare suddenly accounted for a much greater portion of prescription drug spending. Medicare covered only 2 percent of retail drug spending in 2005; in 2006 it covered 18 percent.

The advent of the Medicare Part D program shifted some prescription drug coverage for elderly and disabled Americans from employers to the federal government.

“The public share of drug spending increased from 28 percent in 2005 to 34 percent in 2006,” the report said.

Overall, the United States spent roughly $21 trillion - $7,026 per person - on health care in 2006. That was 6.7 percent more than was spent in 2005.

Despite the increase in the rate of spending for prescription drugs, the rate of growth for other health care services generally decreased:

• Hospital spending grew by 7 percent to $648.2 billion, a 0.3 percentage point slowdown from 2005.
• Physician and clinical services grew 5.9 percent to $447.6 billion, the slowest rate of increase since 1999 and 1.5 percentage points slower than in 2005.
• Nursing home and home health care services spending grew 3.5 percent to $124.9 billion, again the slowest rate of increase since 1999, and a 1.4 percentage point drop from 2005.

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