Medicare prescription drug program cost fell by $6 billion in 2008
31 10 08 - 12:05
Medicare drug plan spending drops $6B in 2008
By Dennis Cauchon, USA TODAY
In a rare bit of good news for taxpayers, the cost of the Medicare prescription drug program fell $6 billion this year — savings driven by the widespread use of low-cost generic drugs.
The prescription drug program for seniors has cost about one-third less — about $50 billion — than originally estimated since it started in January 2006.
Medicare prescription drug spending dropped by 12% to $44 billion in the fiscal year ended Sept. 30.
When the program started, the Congressional Budget Office had predicted it would cost $74 billion a year by 2008. Medicare actuaries predicted even higher costs. Seniors have seen savings, too. The monthly premium for basic drug coverage was $26.70 in 2008 — a third less than forecast.
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"The program's been a success," says David Certner, legislative policy director for AARP, a senior advocacy group that offers Medicare drug plans. "After the initial confusion at the launch, it started delivering many benefits people need."
The drug plan was the most expensive new federal program since the 1960s, until the current financial bailout.
About 32 million seniors are now enrolled. Enrollment for 2009 begins Nov. 15.
Big reasons for the savings:
•Generic drugs. The use of generic drugs has grown sharply, especially among seniors. Norvasc, for high blood pressure, and Fosamax, for osteoporosis, are among expensive drugs now available in generic form. Generics account for 64% of Medicare prescriptions compared with 61% in the private sector, Medicare says.
•Fewer enrollees. The program has 2 million fewer participants than originally forecast. Some seniors decided to keep existing drug coverage, Medicare says. Also, fewer poor people enrolled than expected.
•Doughnut hole. Seniors have cut costs to avoid falling into the "doughnut hole" — a coverage gap in which drug expenses between $2,510 and $4,050 a year are not insured.
Medicare drug costs are expected to start rising again next year as early savings fade and the first of 79 million Baby Boomers start entering the program in 2011.