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Medicare Part D Costs

Executive Summary

The Congressional Budget Office estimates that net Medicare spending on Part D will total $593 bil. over 2004-2013, compared with its original projection of $552 bil. for the same period; neither figure accounts for expected savings to Medicaid and other federal programs. CBO attributes $17 bil. of the $41 bil. increase to changes related to the low-income subsidy and transitional drug assistance. The agency also says Part D plans will be less effective at controlling drug spending than previously assumed, due to regulatory decisions regarding formulary requirements. CBO's estimate follows controversy set off by HHS' latest cost projections (1"The Pink Sheet" Feb. 14, 2005, p. 25). Sen. Lindsey Graham (R-S.C.) has introduced legislation calling for presidential action if Part D costs exceed the original CBO estimate...

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Part D costs rise...again

Medicare spending estimates for Part D increased by $6.4 bil. to a total of $855.7 bil. over 2006 to 2015 due to a new inflation rate forecast, the Congressional Budget Office says. The 10-year projection period CBO uses to predict spending has changed since the MMA was enacted. It now spans 2006 to 2015 rather than 2004 to 2013 and therefore includes two additional years of prescription drug benefits. CBO had originally predicted spending for Part D from 2004 to 2013 would be $552 bil., then raised the estimate for the same time period to $593 bil. in March (1"The Pink Sheet" March 14, 2005, In Brief). The net cost includes offsetting funds for Part D premiums but does not incorporate expected savings to Medicaid and other federal programs. The most recent estimate is already outdated since CBO completed its summer update before the Centers for Medicare & Medicaid Services announced the lower than expected base premium levels for Part D (2"The Pink Sheet" Aug. 15, 2005, p. 19)...

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