Medicaid Costs Down, Medicare Costs Up


For the first time since the program began in 1965, costs associated with Medicaid, a partnership between federal and state governments to provide health care to the impoverished, decreased by 1.4% according to the Bureau of Economic Analysis. This decrease is even more impressive – 5.4% – when the health care inflation rate is factored in.

Although some Medicaid cost savings can be attributed to reducing rates to health care professionals and hospitals; providing less costly in-home care rather than more expensive nursing home care; improving fraud detection methods; and better managing the care of "high-cost patients," the single most important factor contributing to the decrease may be the shifting of drug costs to Medicare, a completely separate, federal program whose costs actually increased by 15.6%.

The complex relationship between the two entities and the shifting of expenses between them make an accurate analysis of true cost increases and decreases virtually impossible.

Source:, 11-26-06

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