off the charts
POLICY INSIGHT
BEYOND THE NUMBERS
BEYOND THE NUMBERS
House Budget Committee Chairman Paul Ryan claims that his troubling proposal to convert Medicare into a premium support system — where beneficiaries would receive a voucher to buy private coverage or traditional Medicare — would control costs. He notes that the Medicare Part D drug benefit, which private insurers provide, has cost much less than the Congressional Budget Office (CBO) expected. He says that the lower spending reflects efficiencies produced by competition among private insurers.
But, as our analysis from last year (which we issued after Chairman Ryan started making these claims) explained, Part D’s reliance on private plans had little to do with its lower-than-expected costs. The primary factors were:
- Prescription drug spending growth throughout the U.S. health care system slowed sharply just as Part D got up and running. That’s because fewer blockbuster drugs were coming to market, major drugs were going off-patent, and consumers were using more generic drugs. In fact, overall U.S. prescription drug spending was about 35 percent lower in 2010 than CBO had projected back in 2003, when Congress created Part D. Medicare’s trustees have explained that this system-wide slowdown was a key factor in reducing Medicare drug spending below original projections.
- Part D enrollment was lower than expected. In 2010, only about 77 percent of people enrolled in Medicare Part B also enrolled in Part D or received Medicare-subsidized drug coverage through their employer, well below CBO’s original 93 percent estimate. Roughly 6.5 million fewer people were enrolled than CBO had estimated in 2003.
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