The Congressional Budget Office (CBO) released a preliminary analysis of the proposed changes to Medicare Part D, the prescription drug benefit for seniors, under the Ways and Means version of H.R. 3200, the House Democrats’ health care bill. The bill would make a number of changes to the Medicare program and its drug benefit, including phasing out the infamous doughnut hole or gap in drug coverage that some seniors have run up against. In a recent letter, the CBO estimated:
“That enacting the proposed changes would lead to an average increase in premiums for Part D beneficiaries, above those under current law, of about 5 percent in 2011. That effect would rise over time and reach about 20 percent in 2019. Beyond the 10-year budget window, the premiums would increase slightly more until the doughnut hole was eliminated in 2022; beyond that point, enrollees’ premiums would grow along with the cost for covered drugs.”
CBO director Douglas Elmendorf goes on to write, “the proposed changes would also reduce beneficiaries’ average cost sharing and their average total drug spending.” But while, on average, seniors might save on their total drug costs, Elmodorf explains, “The net effect on drug spending would differ among beneficiaries depending on the amount of their purchases in a year.”
Translation: average premiums for Medicare Part D would increase over time.
But the effect on total spending would vary among beneficiaries. CBO acknowledges this by saying, “Those who ended up purchasing a relatively small amount of drugs in a year would pay more in additional premiums than they would gain from lower cost sharing, while those who purchased a relatively large amount of drugs in a year would gain more from lower cost sharing than they would pay in higher premiums.” Unfortunately, the CBO has not yet “estimated the number of beneficiaries who would fall into each of those groups.”