Lower-Than-Expected Medicare Drug Costs Reflect Decline in Overall Drug Spending and Lower Enrollment, Not Private Plans
Evidence Shows Reliance on Private Insurers Actually Raised Medicare Costs
End Notes
[1] For example, Gail Wilensky, former administrator of the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services) has repeatedly made this claim. See http://www.pbs.org/newshour/bb/politics/jan-june11/medicare_04-21.html and http://thedianerehmshow.org/shows/2011-04-05/slashing-federal-budget/transcript .
[2] In 2003, the Congressional Budget Office estimated that in 2010, Medicare Part D costs (benefits including Medicare subsidies for employer-sponsored retiree coverage, net of premiums and so-called “clawback” payments from states), would cost about $73 billion; CBO recently estimated that net Part D costs were about $52 billion in 2010. See Congressional Budget Office, “Letter to the Honorable Don Nickles,” November 20, 2003 and Congressional Budget Office, “March 2011 Medicare Baseline,” March 18, 2011.
[3] See Mark Merlis, “Explaining the Growth in Prescription Drug Spending: A Review of Recent Studies,” U.S. Department of Health and Human Services, August 2000.
[4] See, for example, Aaron Catlin et al., “National Health Spending in 2006: A Year of Change in Prescription Drugs,” Health Affairs, January/February 2008; Micah Hartman et al., “National Health Spending in 2007: Slower Drug Spending Contributes to Lower Rate of Overall Growth Since 1998,” Health Affairs, January/February 2009; Micah Hartman et al., “Health Spending Growth at a Historical Low,” Health Affairs, January 2010; Anne Martin et al., “Recession Contributes to Slowest Annual Rate of Increase in Health Care Spending in Five Decade,” Health Affairs, January 2011; and IMS Institute for Healthcare Informatics, “The Use of Medicines in the United States: Review of 2010,” April 2011.
[5] CBPP analysis of National Health Expenditure data available at http://www.cms.gov/NationalHealthExpendData/downloads/nheprojections2003-2013.pdf and http://www.cms.gov/NationalHealthExpendData/downloads/proj2009.pdf .
[6] See the 2007- 2010 Annual Reports of the Boards of Trustees of the Federal Hospital and Federal Supplementary Medical Insurance Trust Funds.
[7] See Congressional Budget Office, “Letter to the Honorable Don Nickles,” op cit.
[8] CBPP analysis of CBO’s Medicare March 2011 baseline. Relying on CMS enrollment data, the Kaiser Family Foundation has produced similar enrollment figures. See Kaiser Family Foundation, “The Medicare Prescription Drug Benefit,” October 2010.
[9] See Richard Frank and Joseph Newhouse, “Mending the Medicare Prescription Drug Benefit: Improving Consumer Choices and Restructuring Purchasing,” The Hamilton Project at the Brookings Institution, April 2007; Stephen Schondelmeyer, Statement before the Minority Office of the House Committee on Government Reform, January 2006; and House Committee on Oversight and Government Reform, “Medicare Part D: Drug Pricing and Manufacturer Windfalls,” July 2008, http://oversight.house.gov/documents/20080724101850.pdf.
[10] Schondelmeyer, op cit.
[11] Congressional Budget Office, “Reducing the Deficit: Spending and Revenue Options,” March 10, 2011. State Medicaid programs receive rebates from pharmaceutical companies for drugs dispensed to Medicaid beneficiaries. The proposal that CBO estimated would save $112 billion over ten years would require pharmaceutical manufacturers to pay the same level rebates for drugs dispensed to Medicare beneficiaries who receive the “low-income subsidy” as the manufacturers pay for drugs dispensed through Medicaid.
[12] See, for example, January Angeles, “Ending Medicare Advantage Overpayments Would Strengthen Medicare,” Center on Budget and Policy Priorities, September 14, 2009 and Edwin Park, “Informing the Debate About Curbing Medicare Advantage Overpayments,” Center on Budget and Policy Priorities, May 13, 2008.
[13] Medicare Payment Advisory Commission, “Report to the Congress: Medicare Payment Policy,” March 2011.
[14] January Angeles, “Health Reform Changes to Medicare Advantage Strengthen Medicare and Protect Beneficiaries,” Center on Budget and Policy Priorities, July 27, 2010.
[15] Congressional Budget Office, “Long-Term Analysis of a Budget Proposal by Chairman Ryan,” April 5, 2011.