The Washington Post

Medicare has a drug problem

Perhaps no part of Medicare has done as well in reining in costs as Medicare Part D, the prescription drug benefit, signed into law by President George W. Bush in 2003. Its costs have consistently come in under budget by as much as 44 percent (though some of that is likely due to lower than projected enrollment). Even as premiums for private health insurance skyrocketed, Medicare Part D premiums actually decreased slightly, dropping by 76 cents for 2012.


The Bipartisan Policy Center chart draws on CBO data available here. And it shows the cost growth of Medicare Part D eclipsing the Medicare programs that cover hospital stays and doctor visits by 2014.

What’s going on here? Bipartisan Policy Center policy analyst Loren Adler says, “From my understanding, the main reason for the difference is that the [Affordable Care Act] did a fair amount to curb Part A and Part B costs over the next decade, but very little on Part D.”

Other reports have suggested that the price of drugs is also a big factor here. Many of Medicare’s most commonly prescribed drugs are on the verge of moving off patent, meaning that cheaper, generic versions will be available. In 2011 alone, generic versions for four of Medicare’s most commonly prescribed drugs--Lipitor, Zyprexa, Seroquel and Plavix--will hit the market.

But forecasters don’t expect this to lower costs forever. New drugs will likely come online, which is expected to push up costs higher. With that in mind, the 2011 Medicare Trustees’ Report expects the “the resumption of per capita drug cost growth rates that exceed the rate of increases in other categories of medical spending.”

Another factor here is the demographics of Medicare: as the Baby Boomer population becomes older, the demand for medications is likely to rise, driving up the cost of prescription coverage.

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