Medicare covers prescription drugs provided during inpatient hospital and skilled nursing facility stays through Part A, retail prescription drugs through Part D, and drugs provided in physicians’ offices and hospital outpatient departments through Part B. Over the 2006-17 period, Medicare FFS Part B drugs spending per enrollee grew at 8.1 percent annually. This spending growth is more than twice as high as Part D (per enrollee annual spending growth of 3.4 percent) and nearly three times as high as the nation overall (per capita annual spending growth of 2.9 percent for the National Health Expenditures (NHE) retail drug spending). The paper presents data on Part B drug spending and utilization; describes the current pricing system and discusses the system’s financial incentives that could help explain the underlying rising trends in spending. It also describes new policy initiatives that have been proposed or implemented since March of 2016.
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