Medicaid Drug Spending Driven Primarily by Volume, Report Finds

A Kaiser Family Foundation report has identified the 50 most costly drugs (before rebates)—reflecting both frequency of prescribing and per prescription cost—for Medicaid between January 2014 and June 2015, and found that 45 of the 50 are categorized as such at least in part because of the frequency with which they are prescribed and not because of higher per prescription costs. Over half (28) of Medicaid’s 50 most costly drugs are frequently prescribed but not expensive at the “per prescription level,” including ADHD drugs and hydrocodone-acetaminophen, a pain relief drug that was the most frequently prescribed drug in Medicaid over the study period. Seventeen of the 50 most costly drugs are both frequently prescribed and expensive prescriptions. These include antiviral medicines, which accounted for 20% of the 50 most costly drugs due to their high rate of prescription and their high cost per prescription. The report’s authors cite patents and other forms of “regulatory exclusivity” as drivers of high costs but suggest that states can help control drug costs by monitoring utilization and mitigating excessive prescribing.

National Health Spending Projected to Grow 6% Annually, Faster Than GDP

CMS is projecting a 5.8% average annual increase in health spending between 2015 and 2025—1.3 percentage points faster than GDP—driven by improved economic conditions, increasing healthcare prices, and an aging population. The report estimates that health spending will account for one-fifth of the total economy by 2025, up from 17.5% in 2014, and that federal, state, and local government spending will account for 47% of all health spending, up from 45% in 2014. The report attributes an increase in health spending growth between 2013 and 2014 (2.9% to 5.3%) to the ACA’s coverage provisions, though the impact of those provisions on spending growth is not expected to be significant past 2016. The percentage of the U.S. population that is uninsured is expected to be 8% by 2025, down from 11% in 2014. The authors further note that the growth of actual and projected health spending has slowed considerably since the early 1990s and that the Congressional Budget Office had previously predicted health spending would account for 20% of the economy by 2003.

Medicaid Spending per Newly Eligible Reflects State Adjustments to Managed Care Rates in 2015

Spending per Medicaid enrollee increased 4.3% to $7,639 in 2015 while spending for newly eligible adults rose 16% to $6,366, according to estimates from CMS’ Office of the Actuary. The authors note that the increase was greater than expected based on prior reports and that the increase was primarily driven by greater-than-anticipated increases in Medicaid managed care capitation rates. Many states included adjustments in 2015 to reflect a higher level of acuity, morbidity or pent-up demand among newly eligible adults. Total Medicaid expenditures increased an estimated 12.1% between 2014 and 2015, though much of that increase was borne by the federal government’s enhanced funding of newly eligible adults. Federal Medicaid expenditures increased an estimated 16.2% while state expenditures increased an estimated 5.9%. Newly eligible adults accounted for 4.8 million of the 4.9 million new Medicaid enrollees in 2015.