Thank you, Medicare. Prescription drug spending surged in 2006 as the government's benefits for the elderly kicked in, according to a federal study. Some $216 billion was spent on prescriptions in 2006, up 8.5 percent from 2005. And the government footed the bill for more than a third of that, through Medicare, Medicaid, the Departments of Defense and Veterans Affairs, and local and state hospital subsidies. In 2005, before the Medicare drug benefit took effect, government spending only covered 24 percent of prescription purchases.
Incidentally, the report quashed suspicions that rising drug prices are fueling the steady increase in healthcare costs. It's increased use of expensive drugs that's causing it. Increased drug consumption caused the spending hike, not rising prices, the researchers found. A slight but important difference.