Recent studies estimate that as of 2015, every male turning 65 is expected to take prescription medicines worth $195,000 in lifetime Medicare benefits. It is predicted that by 2035, the figure will pass $300,000 mark; at this rate, it will surpass the Medicare benefits available for 65 year-old in their lifetime from Social Security and will cross $500,000 by 2055. The main reason for these high rates is due to the hike in treatment and surgical costs, as well as prescription drug costs.
In a 2016 report by Medicare Board of trustees, it is forecasted that hospital insurance trust would exhaust their spare cash by 2028, which is too early compared to older forecasts. If this happens, benefits offered to physicians and hospitals will fall by 13%, and may even cause healthcare providers to refuse Medicare.
Spending on Medicare’s catastrophic drug has increased exponentially within in the last 3 years (by around 85%) and has reached $51.3 billion now. When out of pocket spending on prescription drug for a beneficiary reaches $4580, he will be granted a catastrophic coverage. Beneficiaries reaching these spending have to pay 5% of their prescription drug spending, and the rest will be paid by Medicare, taxpayers, and insurance providers.
In 2015, only 9% of the people crossed the mark, yet the catastrophic coverage was accounted for spending 37% of the total 137 billion dollars spent on Medicare costs for prescription drugs. Besides that, the average spending for these 9% of people escalated from $9,666 to $14,100 in the last 3 years.
According to The New York Times, insurers and Medicare cover 80% of the catastrophic costs, and taxpayers cover the remaining amount. But as the price of prescriptions drugs are climbing on a day-to-day basis, it will result in further strain for taxpayers and Medicare programs. If this trend continues, Medicare will be forced to shut down its catastrophic benefit coverage, resulting in an increased expense being passed on to the retired personals.
The Congress is currently left with the choice to negotiate with drug prices in lieu of Medicare. If the Federal government were allowed to bat for Medicare, which represents around 56 million enrollees, it would be enough to tackle the current scenario largely with a few exceptions in the case where alternate medications do not exist. This way, the Federal government would be able to reduce spending on catastrophic drug under Medicare Part D, along with overall spending on prescription drugs.
The major issue with the Federal government intervening in the Medicare, however, is that it could result in ways to force pharmaceuticals, drug makers, and biotech companies to reduce the price. Yet in doing so, there is a high chance for these companies to cut their research and development expenses, which would then cause a decline in identifying possible new rare diseases and its cures.