Medicare Prescription Drug Benefit Cost Almost $13B Less In 2006 Than Expected, According To CMS

December 1, 2006 – 6:44 pm | posted in Medicare

The Medicare prescription drug benefit will cost $30 billion in 2006, a 30% decrease from a previous estimate of $43 billion, according to CMS, the AP/Houston Chronicle reports (Freking, AP/Houston Chronicle, 11/29). CMS said that the decrease resulted from:

• $7.5 billion in savings from lower-than-expected enrollment;
• $6.9 billion in savings from competition; and
• $3.7 billion in savings from lower-than-expected increases in prescription drug prices in the two years prior to the launch of the program.

Higher-than-expected costs in other areas, such as catastrophic coverage, partially offset the decrease in the cost of the benefit, CMS said. CMS also estimated that the Medicare prescription drug benefit will cost $729 billion through 2015, compared with a previous estimate of $926 billion. CMS actuary John Shatto said that lower-than-expected increases in prescription drug prices account for about $141 billion of the estimated decrease in the cost of the Medicare prescription drug benefit through 2015 and that competition accounts for about $55 billion. He also said that lower-than-expected enrollment will have a less significant effect on the cost of the drug benefit over the long term. “Those with very high drug spending are the ones that are going to sign up for Part D,” Shatto said, adding, “Those with little drug spending are the ones who did not sign up for Part D. That’s what’s creating a smaller (effect).”

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