Range of Factors Drives Medicare Drug Spending Below Estimates

Medicare prescription drug benefit spending in fiscal year 2008 totaled $44 billion -- $6 billion lower than estimated -- as the program experienced lower-than-expected enrollment, more use of low-cost generic drugs and beneficiaries reducing drug spending to avoid the program's "doughnut hole," USA Today reports.

According to USA Today, the drug benefit program in the last fiscal year had two million fewer participants than originally predicted because fewer low-income people enrolled than expected and some Medicare beneficiaries have elected to keep their existing drug coverage.

About 32 million beneficiaries have enrolled in the drug benefit.

Meanwhile, generic prescription drugs accounted for 64% of all Medicare prescriptions in FY 2008, compared with 61% in the private sector.

In addition, beneficiaries have reduced their prescription drug spending to avoid a gap in drug benefit coverage between $2,510 and $4,050 in annual out-of-pocket expenses.

The drug benefit has cost about one-third less than expected since it launched in January 2006.

When the drug benefit began, the Congressional Budget Office predicted it would cost $74 billion annually by 2008.

Medicare actuaries predicted even higher costs.

The drug benefit was the most expensive new federal program since the 1960s, until the recent financial bailout.

According to USA Today, Medicare drug costs are expected to rise by 2011 "as early savings fade" and the first of 79 million baby boomers start the program (Cauchon, USA Today, 10/31).