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Health Care Cost Estimates Rise Two government agencies recently revised their Health Care spending estimates upwards. These revisions have significant implications for prescription drugs and Medicare reform. In February, the Congressional Budget Office (CBO) sharply increased its estimate of spending on prescription drugs for Medicare recipients - making the estimated cost of current prescription drug proposals from both the President and Congress too low. Last year the CBO predicted that drug spending would rise an average of 11% a year over the next decade. Now it says that growth will average 12% to 13% a year. In addition, the budget office said that spending on prescription drugs averaged $1,525 for each Medicare recipient in 2000. It estimates that spending will triple over the next 10 years reflecting higher prices and greater use. The 2001 Medicare Trustees Report also contains new assumptions about future health care costs that show the long-term condition of Medicare has worsened. The gap between revenues and spending for Medicare grew 63% from last year`s estimate. The Trustees called for changes at `the earliest possible opportunity` to address the long-term problems. Congress is responding with a series of hearings on Medicare reform and prescription drugs. Editor`s note: Our research indicates that prior government estimates of health care costs have been too low. According to private sector surveys, by December 31, 2000, the cost of Medigap health insurance premiums increased an average of 14% per year since 1998, and drug costs increased 17% over the same period. Sources: `Trustees Report Near-Term Gains for Hospital Fund, but Long-Term Peril for Total Medicare Program,` U.S. Dept. of HHS, March 19, 2001. `Budget Office`s Estimates for Drug Spending Grows,` Robert Pear, The New York Times, February 24, 2001. To read a related story on our website, click on one of the headlines below: `Is Your COLA Keeping Up?``Medicare Reform and Prescription Drugs`
This article first appeared in Volume 6, Issue 7 of "The Social Security and Medicare Advisor" newsletter (June/2001). To receive future editions of "The Advisor" in its special, free e-mail version, please click here.
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