Drug costs drive Medicare spending for younger beneficiaries

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Younger Medicare beneficiaries have similar spending patterns as their older counterparts, with the exception of one area: Drug costs.

Although Medicare primarily offers health coverage to Americans 65 and older, the program also provides insurance for 9.1 million people under the age of 65 with permanent disabilities like end-stage renal disease and ALS. According to a report by the Kaiser Family Foundation, per capita Medicare Part A and B spending among younger beneficiaries was just slightly higher than older beneficiaries--$9,281 versus $8,814. Once analysts accounted for Part D drug costs, the gap widened considerably--$13,098 versus $9,972.

In fact, KFF’s analysis shows Medicare spending for those under 65 was generally lower than spending for older beneficiaries until Part D coverage began in 2006. By 2014, Part D spending for younger beneficiaries was more than three times as much as spending for those over 65.

Outpatient and inpatient costs for younger beneficiaries were also slightly higher, although the older population spent significantly more on skilled nursing facilities, home health services and hospice care.

Rapidly escalating drug costs have revived cost control discussions, including a new proposed demonstration project from the Centers for Medicare and Medicaid Services (CMS) that would alter Part B drug payments. Earlier this year a federal advisory panel pushed for new incentives that would allow insurers to curb Part D spending.

- read the KFF report