FIGURE B-4 Federal spending for Medicare. Note that overall spending includes benefit dollars, administrative costs, and program integrity costs (federal spending only).

SOURCE: Medicare Program Spending. Centers for Medicare and Medicaid Services, Office of the Actuary, June 2002 (

By combining Medicare expenditure figures with results from the National Adult Literacy Survey (NALS), which indicate that 80 percent of persons over 65 have limited literacy skills, one can estimate that about 80 percent of Medicare beneficiaries—32 million individuals—have limited literacy skills. Thus, most of the $240 billion annual Medicare expenditures are related to providing benefits for persons with limited literacy. Addressing the health literacy of Medicaid enrollees (Table B-5) can potentially result in substantial cost savings for the Medicare program.


The Medicaid program, funded by state and federal tax dollars, provides medical insurance benefits for about 45 million persons, most of whom are poor (CMS, 2000). Total expenditures by the Medicaid system were $175 billion per year in 1998, accounting for about 15 percent of all health-care spending in the United States (Health Care Financing Administration, 2000). The cost of the Medicaid program is expected to grow to $444 billion by 2010 (Figure B-5).

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