Why Did Cost Estimate Rise?
Medicare is set to undergo a major expansion in 2006 when it begins paying part of seniors’ prescription drug costs. The program is expected to pay $70 billion for drugs for 39 million beneficiaries next year and $720 billion by 2014, according to White House budget documents released in early February. But the prescription benefit is expected to have little long-term impact on consumers’ out-of-pocket spending for health care. Out-of-pocket spending for prescriptions is expected to dip in 2006, but will then continue rising at an estimated 6% to 7% per year until 2014, the report estimates. Retail drug prices are expected to drop 15% for Medicare seniors in 2006, though most of the savings for the health system as a whole will be wiped out by higher utilization of prescriptions, Foster says. The estimate was far beyond the $534 billion prediction put forward by administration actuaries last year and nearly double the $400 billion cost pegged for the prescription benefit when Congress
