Inpatient hospital services account for the greatest amount of Medicare spending, accounting for 27 percent of costs in 2010. This is followed by Medicare Advantage (Part C)) costs (22 percent), physician payments (12 percent), and prescription drugs under the Medicare Prescription Drug Plans (Part D) (12 percent).
Beneficiaries with the greatest costs include those with end-stage renal disease (ESRD) (per capita cost for those with ESRD is more than $50,000 compared to the general per capita cost of close to $10,000). Beneficiaries who live in long-term care facilities also account for a very large share of Medicare spending. These beneficiaries are sicker upon admission, and have comparatively higher inpatient and emergency room hospital visits than average Medicare beneficiaries. Among beneficiaries residing in long-term care facilities in 2006, 31 percent were in the top decile of Medicare spending (according to a Kaiser Family Foundation report). In addition, about 51 percent of these residents in 2006 had at least one emergency room visit during the year, while half (26 percent) had two or more visits (according to the same Kaiser Family Foundation report). Lastly, a number of chronic diseases account for much of Medicare’s spending. In 2005, Medicare spent $91 billion on patients with Alzheimer’s disease. In 2006, Medicare spent $24 billion on heart disease, and in 2008, spent an additional $65.6 billion on stroke care. Currently, direct costs of diabetes care accounts for 10 percent of health care dollars. Most people are usually not sick, which means a small percentage of any pool of insured persons accounts for most spending in any one year.
Medicare FAQs
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