Although drug prices have increased little overall in recent years, the rapid growth in availability and utilization of specialty drugs means that out-of-pocket drug costs represent a growing burden. Much of this problem is due to gaps in insurance coverage. While insurance or entitlements pay for all but 3% of hospital spending, Americans bear 18% of drug costs out of pocket.
These costs are particularly burdensome on senior citizens, who suffer from more chronic conditions than the population as a whole. While only a sixth of Medicare beneficiaries are hospitalized in a year, nine out of 10 use prescription drugs.
For its first 40 years, Medicare did not cover prescription drugs at all, and Medicare’s Part D prescription drug benefit still lacks a cap on out-of-pocket costs. Furthermore, Medicare Part D’s payment structure encourages drug manufacturers to inflate list prices and rebates to the program’s private drug plans, which serves to increase patients’ out-of-pocket costs, which are linked to gross drug expenditures.
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