Health Spending Trends Among Seniors

Health spending in the U.S. rose at about 6.9 percent in 2005, nearly toppling the $2 trillion mark.  While this number is staggering and twice that spent by other industrialized countries, the 6.9 percent increase seen in 2005 actually indicates a small increase when compared to the percentages seen in the years from 1999 through 2004.  

Factors attributed to this lowered increase include changes in therapy regimens, tiered copayment benefit plans, a sharp deceleration in Medicaid drug spending, and an increased use of generic drugs. Of similar interest and perhaps concern is that at the same time health care spending has seen a slowing of spending growth, the amount of personal income being attributed to health care is rising due to the growing expenses of hospital, physician, and clinical services.  Similarly, in 2005, the Gross Domestic Product (GDP) for health care spending was 16.0 percent, or $6,697 per person, which was a slight increase from 15.9 percent in 2004. Regarding how senior citizens are spending their medication dollars, it is reported that there are five classes of drugs which can account for two-thirds of all of the outpatient prescription drugs combined.  According to the Agency for Healthcare Research and Quality (AHRQ), the list of five most widely used drugs differs somewhat for the senior population compared to the population in general.  Cardiovascular drugs retained the number one spot regardless of age.  For seniors, cholesterol-lowering drugs, with a cost of about $10 billion, came in second; followed closely with a cost of $8 billion for hormone medications.  Central nervous systems drugs came in fourth and accounted for another $7 billion, and finally, the gastrointestinal class of drugs came in fifth, with $6 billion being spent.  These five drug classes total about $48 billion, or about two-thirds of the entire $65 billion spent on all Medicare prescription drugs for those 65 and older in 2004. Medicare spending rose 9.3 percent to $342 billion in 2005, according to data from a Medical Expenditure Panel Survey.  Though a slight decrease from the 10.3 percent increase seen in 2004, both years are significantly higher than the average annual growth rate of 6.4 percent seen during 1994-2004.  Medicaid similarly experienced a slowed growth to 7.2 percent in 2005, a fourth consecutive year to experience slowed growth.  It should be noted that the slowed growth numbers aren’t exactly cause for celebration, as about one-third of all states had Medicaid budget shortfalls in the fiscal 2005 year, even with the slower growth rate.