Insight, analysis & opinion from Joe Paduda

< Back to Home


Medicare drug costs up…again

The latest projections from the Congressional Budget Office have the Medicare Drug Program’s costs over the next ten years at $849 billion. This is a rather substantial increase over the initial projections of some $400 billion, which were for the ten years ending 2014. Nonetheless, this does represent an increase of over $100 billion from the last CBO estimate, published less than a month ago.
According to California HealthLine,
“CBO’s projection does not include anticipated savings, which could make the actual cost lower than the Bush administration’s cost estimate of $724 billion over 10 years (Fram, AP/Detroit News, 3/5).
Analysts attributed the net spending increase to a higher estimated cost of basic benefits and a change in the cost of low-income subsidies under the original bill. About $36 billion of the $54 billion net spending increase would occur before 2013 — the period covered under the original cost projections (CQ HealthBeat, 3/4).”
There have been some rumors about possibility flexibility on the part of the Administration on the program, but any “flexibility’ in terms of cutting benefits and therefore costs may well be offset by the financial support CMS may have to provide to private insurers willing to participate in the Medicare Drug card program.
These private insurers are justifiably worried about the possibility of adverse selection. The program is voluntary, so logically, only those recipients that would actually gain financially from the program would sign up. This isn’t insurance, it is a guaranteed money loser.
That being the case, one wonders how and why private companies would sign up to lose money. My sense is they are being offered stop-loss assurances from CMS; or if not explicit protection, some other form of risk avoidance.

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



© Joe Paduda 2024. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.