Last week, the Congressional Budget Office (CBO) released its annual updated projections for the entire federal budget, including health programs. And, in those projections, CBO dropped the projected ten-year cost for Medicare quite substantially—by $137 billion. The reason? Buried deep in the CBO report there’s this explanation: “the largest downward revision in the current baseline is for spending for Medicare’s Part D (prescription drugs).”
That’s an understatement. Of the $137 billion drop in the Medicare baseline, $104 billion—or 75 percent—was due to the drop in expected Medicare drug benefit spending. This is truly remarkable because CBO had already lowered the drug benefit baseline several times in the preceding years. With this latest revision, CBO’s part D projections bear almost no resemblance to what was expected to occur when the law was enacted in 2003….
And this is occurring in a program run entirely through private insurance plans competing with each other for enrollment among Medicare beneficiaries…. Those plans are offering seniors low-premium products with strong incentives for generic substitution, and—surprise, surprise—seniors are readily taking them up on the offer. It turns out that Medicare beneficiaries are just as eager to save on their monthly insurance premiums as everyone else in America. It’s just that this is the first time in the history of Medicare that they have been given the opportunity to cut their expenses by signing up with lower-cost options.