Although overall healthcare cost inflation remains relatively small, healthcare spending just passed 18 percent of the nation’s gross domestic product at the end of 2015. Because of the size of healthcare as a component of the nation’s expenditures, this continued increase in spending is unsustainable and threatens our economy.
While hospital spending makes up the largest slice of healthcare spending at 32 percent of all healthcare expenditures, drug costs have risen as a component and now account for 20 percent of that total. In addition, for all categories of healthcare spending tracked by the Alatarum Institute’s Center for Sustainable Health Spending, drug costs increased at the fastest rate, rising 12.1 percent from November 2014 to November 2015.
Interestingly, this increase in medication prescribing coincides with the expansion of the use of e-prescribing applications and EMRs driven by the funding from the HITECH act. Although no evidence exists confirming cause and effect, the ease of writing and filling prescriptions afforded by HIT cannot be dismissed as a contributing factor to the increased prescribing of pharmaceuticals.
In particular, electronic prescribing has risen dramatically in clinical practice. Only 7 percent of physicians prescribed electronically in 2008. Now, it’s reported that 70 percent of physicians were e-prescribing using an EHR in 2014.
Of course, there are many other factors playing into the increase in drug spending. The expansion of Medicare prescription drug coverage in 2004, Medicare Part D, provided subsidies to Medicare beneficiaries to cover both prescription drug costs and prescription drug insurance premiums. The law also included a provision that prevents the Federal government from negotiating prices with pharmaceutical manufacturers. Unlike other countries, the U.S. government is prohibited from obtaining bulk pricing on medications, leaving that responsibility to individual Medicare plans.
More drug use
Many factors lead to this increased spending on pharmaceuticals. One is that the use of prescription drugs has grown dramatically. A recent article by Elizabeth Kantor in the Journal of the American Medical Association documented the increase in medication use from 51 percent of U.S. adults in 1999-2000 to 58 percent in 2011-2012. In addition, Kantor reported that polypharmacy—the use of five or more drugs—rose from 8.2 percent of U.S. adults to 15 percent over that same period.
Interestingly, this increase in medication prescribing coincides with the expansion of the use of e-prescribing applications and EMRs driven by the funding from the HITECH act. Although no evidence exists confirming cause and effect, the ease of writing and filling prescriptions afforded by HIT cannot be dismissed as a contributing factor to the increased prescribing of pharmaceuticals.
In particular, electronic prescribing has risen dramatically in clinical practice. Only 7 percent of physicians prescribed electronically in 2008. Now, it’s reported that 70 percent of physicians were e-prescribing using an EHR in 2014.
Of course, there are many other factors playing into the increase in drug spending. The expansion of Medicare prescription drug coverage in 2004, Medicare Part D, provided subsidies to Medicare beneficiaries to cover both prescription drug costs and prescription drug insurance premiums. The law also included a provision that prevents the Federal government from negotiating prices with pharmaceutical manufacturers. Unlike other countries, the U.S. government is prohibited from obtaining bulk pricing on medications, leaving that responsibility to individual Medicare plans.