In 2008, Medicare spent $68.3 billion dollars on drugs purchased through Part D plans.  This is too much money! Seventy-five percent of the $68.3 billion was spent on brand name drugs like Lipitor, Plavix, and Nexium.

Generics used to treat high cholesterol cost less than $10, while brand drugs cost $100 or more. Although most people on Medicare use generics, the chart below shows how the higher cost of brand drugs overwhelms the Part D budget.  If everyone used generics, the Medicare Part D budget could be cut by billions of dollars.

In 2008 Medicare spent $68.3 billion
on drugs purchased  through Part D.

Lipitor is going generic soon. Fosamax now has a generic replacement, so Part D plans are not covering this drug for treating osteoporosis. I learned this when I was searching for a Part D drug plan for a client and discovered that Fosamax was not on any plans’ formularies (list of drugs covered).

See my recent post on the top ten drugs purchased through Part D.

FOR MORE INFORMATION ON YOUR MEDICARE CHOICES SEE ARIZONAMEDICARENEWS.COM

Here is a chart from kff.org that shows a breakdown of government spending.  Understanding the federal budget is important when we hear about where spending cuts will be targeted.   The only area being targeted so far is “Discretionary non-defense” spending, which represents just 19% of the total budget.

Looking at the chart below, you can see why Social Security, Medicare, and Medicaid are blamed for budget deficits, as they total 43% of the federal budget. Medicaid pays 75% of states’ Medicaid costs.

Medicare and Social Security are seen as contracts between the government and seniors, so cutting these programs is a political hot potato.  Defenders of Social Security say money that is paid out is covered by Social Security taxes that are paid into the system each year, so this does not add to the deficit.  In 2010, for the first time, Social Security payouts totaled more than Social Security taxes collected. This was because of high unemployment and more people choosing to start collecting their Social Security at age 62.

Social Security defenders also point out that Social Security has a about 2.5 trillion dollars in IOUs because the government has used surplus Social Security revenue for other programs over the years.  Now the government must make up the difference between payouts and tax receipts by paying off some of their Social Security bonds.

In 2008, Medicare spent $9,100, on average, for each Medicare beneficiary. Multiply that times the 46 million people enrolled in Medicare in 2008 for a total expenditure of $418 billion.   Kaiser Health News reported on a study of how much Medicare spends in locations around the country and efforts to determine how much waste there is in the health care program for seniors and disabled individuals.

Medicare spending in Arizona is below the national average, though it depends on how you look at it.  The Kaiser Health News article reports that in Mesa, Arizona, Medicare spending was 5 percent below the national average in 2008. But the average Mesa Medicare patient was slightly younger than the national average, and fewer patients had diagnoses that were expensive to treat such as heart failure and diabetes. So, when looked at this way, average Medicare spending in Mesa became $8,370, which put it 12% above the national average ($7,500).

Miami, Florida is the most expensive city for Medicare, with an average cost per Medicare beneficiary of $18,199 in 2008.  That was twice the national average cost! Medicare studied patients in Miami to see if doctors there were milking the system by ordering more tests and performing unnecessary operations and procedures.  It turns out that patients in Miami are very sick and require more care. When this is taken into account, the adjusted cost per Medicare beneficiary in Miami was $10,145 in 2008, which was 35% above the national average.  Miami is the epicenter for Medicare fraud and it looks like there is plenty of waste and/or fraud even when you consider the very bad health of patients there.

Sun City, Arizona came in 4% below the national average in 2008, at $8,764 per Medicare beneficiary. But when Medicare looked at the details of patients in Sun City, it turned out they were not that sickly and their care was a bit out of line for their health conditions.   Using a complicated formula, Medicare adjusted the average cost for Sun City to $7,999 per person, and this was 7% above the adjusted national average.

In Tucson, Medicare spent $7,747 on average for each person enrolled in Medicare in 2008. That was 15% below the national average, which is a good thing.  But it turns out that, like Sun City and Mesa, our seniors are healthier than those in other parts of the country.  So when Medicare adjusted for Tucson’s younger, healthier Medicare beneficiaries, we came in 1% over the national average.

Honolulu is one of the least expensive cities for Medicare as the average cost per beneficiary was just $6,732 in 2008.  This was 32% below the national average.

Albuquerque, New Mexico is another low cost city for Medicare, coming in at 26% below the national average.

The key for Medicare is to determine if these lower cost locations simply have healthier seniors, or if hospitals and doctors are operating in more efficient ways, resulting in lower costs to the Medicare program.  This is very important because of growing Medicare enrollment (2.8 million baby boomers turning 65 in 2011) and political pressure to cut Medicare benefits.