We’ve talked before about how prescription medicines comprise a small share of Medicaid spending. In recent years new life-changing, innovative medicines have come to market to help patients live longer, healthier lives. But even with spending on these new medicines, Medicaid spending on prescription medicines is low. In fact, Medicaid programs spent on average just 4.5 percent on prescriptions drugs in 2015. Looking at fee-for-service, states spent less than 2 percent of their budgets on fee-for-service prescription drugs in 2014.
What does this spending look like in different states? An analysis of FFY2014 CMS data evaluated state-by-state Medicaid prescription drug spending as a percentage of total Medicaid spending showed while there is variation across the country, in all states prescription drug spending as a percentage of total Medicaid expenditures continues to represent only a small share.
To put state Medicaid prescription drug spending in context, according to the National Health Expenditure account data for 2014, the total share of Medicaid spending across the country on prescription drugs is 1/7th the cost of hospital care and less than half of physician spending in Medicaid.
Moreover, with average annual growth rates for Medicaid and Medicaid prescription drugs at about 6 percent, Medicaid spending on prescription medicines is expected to remain a relatively small share over the next decade.
Learn more about how Medicaid works in our chart pack.