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 Home > News & Policies > February 2005

For Immediate Release
Office of the Press Secretary
February 9, 2005

Fact Sheet: Setting the Record Straight--Medicare Drug Benefit Estimates Unchanged

Myth: Today's Washington Post story (p A1), headlined "Medicare Drug Benefit May Cost $1.2 Trillion," is simply wrong. The article says "the White House released budget figures yesterday indicating that the new Medicare prescription drug benefit will cost more than $1.2 trillion in the coming decade, a much higher price tag than President Bush suggested when he narrowly won passage of the law in late 2003." This statement in the first paragraph of the story is flat wrong. The White House is seeking a correction from The Washington Post.

Here are the Facts:

  • In 2003, President Bush committed to spending $400 billion over the next 10 years (2004 to 2013) to modernize Medicare and add an Rx benefit to the program.
  • In December 2003, President Bush signed into law the Medicare Modernization Act, which the Congressional Budget Office scored as costing $395 billion over the 10 year period the President discussed (2004 to 2013).
  • The Medicare Actuaries later estimated that the Act's 10 year cost for the period 2004-2013 would be $534 billion. The Congressional Budget Office continued to estimate $395 billion for the same time frame.
  • The 2004-2013 CMS net estimate of Federal spending on the Medicare prescription drug benefit is virtually unchanged from previous estimates.
    • Last year, CMS estimated the cost of the first 10 years of the program (2004-2013) at $511 billion, and this year, they believe that cost to be $518 billion. This cost estimate includes two years (2004 and 2005) before the Medicare drug benefit is scheduled to begin.
  • The FY 2006 budget includes a cost estimate for the Rx drug benefit for a different 10-year time frame, 2006-2015, when the drug benefit is fully phased in. The 2006-2015 CMS net estimate of Federal spending on the Medicare prescription drug benefit is $723 billion.
  • The $1.2 trillion figure from today's Washington Post is flat wrong, because it does not take into account savings to the government from premium payments, state payments, and savings from the Medicaid system.

Remember:

  • Beginning next January, all Medicare beneficiaries will be eligible for prescription drug coverage, regardless of their income, or whether they're enrolled in traditional fee-for-service or a Medicare Advantage plan.
  • Seniors already are benefiting from better preventive coverage under Medicare that took effect last month. These new benefits include screenings for diabetes, heart disease and breast cancer. In addition, beneficiaries entering the Medicare program are eligible for a "Welcome to Medicare" physical.
  • Through the Medicare-approved drug discount program, the purchasing power of seniors is finally being pooled to provide real savings on prescription medicines. Prior to the discount program, seniors often have had to pay full price for drugs. And the drug card program also gives seniors unprecedented information on drug prices to comparison shop. More than 6.2 million of these seniors are now saving on their prescriptions through Medicare drug discount cards.
  • Seniors can use the card to save 15 to 30 percent off the usual retail price of most brand name drugs and more on generics at neighborhood pharmacies.
  • Savings from the cards are even greater when seniors choose generics. A new CMS study shows that savings on generic drugs range from 28 to 75 percent below the average generic prices paid by all Americans. Generic drugs are just as safe and effective as brand-name drugs in the United States, saving consumers billions of dollars annually.
  • Low-income seniors can get these savings and an additional $600 a year - a total of $1,200 for 2004 and 2005. An estimated 1.7 million seniors are receiving this credit through cards with the Medicare-approved seal. There is no enrollment fee on any card for people who qualify for the $600 low-income credit.
  • Beneficiaries who exhaust the $600 subsidy may get additional savings. A growing list of drug manufacturers has agreed to make many of their products available at a nominal price to beneficiaries who have used up their $600 subsidy on prescription medicines. These seniors are benefiting in three important ways from the cards: 1) lower prices on their medicines; 2) a $600 subsidy to help them buy these medicines at the discounted prices; and 3) availability of drugs at a nominal price through manufacturers once they've spent the subsidy.

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