How Medicare Provides More and Spends Less


The Congressional Budget Office, the non-partisan agency that provides Congress with economic information, recently issued new data on Medicare budget estimates. The report shows Medicare spending projections have plummeted, which has been the trend. This an important development because health care makes up a large portion of the annual federal budget.

What's even more promising is that this trend may be here to stay: Forecasts for federal spending as far out as 2050 are much lower than initially expected. In fact, the CBO's projection of the total cost of Medicare through the next 35 years is $13.3 trillion less than previously thought.


(Source: The Center for American Progress)

There are many contributing factors to this eye-popping drop in price, including the cost saving provisions featured in Part D. Many Americans rely on medications to stay healthy and active, particularly as they grow older. Part D, also known as the Medicare prescription drug benefit, includes several measures that guarantee seniors access to quality medication, while keeping out-of-pocket expenses to a minimum.

Medicare plan sponsors - the groups that provide insurance - categorize medications into separate groups, or tiers, depending on price. Nonpreferred tiers include medicines with higher copayments, while the preferred tiers feature less expensive but equally effective medicines. This way, people get access to quality treatment without a high price tag--and can work with their physicians to build a treatment plan that fits their budget and their medical needs.

Plan sponsors work with pharmaceutical companies to determine the medicines in each tier, which drives down overall costs because sponsors compete with each other to provide the most affordable plans. This makes medicines less expensive, and dramatically reduces copayments for the beneficiary and the government. Sponsors have also cut spending by encouraging the use of low-cost generic medicines when appropriate. It's simple: Part D gives patients more options at lower costs, a simple formula that has produced groundbreaking results for public health and fiscal discipline.

Millions of Americans need quality medicines at reasonable prices. The prescription drug benefit featured in Medicare Part D improves and saves lives, while reducing government spending by trillions. A true win-win.