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February 3, 2003 To: Interested Parties From: Tom Bradley Subject: Projected spending for prescription drugs by and on behalf of Medicare enrollees. The Congressional Budget Office (CBO) has recently updated its projection of aggregate spending for outpatient prescription drugs by and on behalf of Medicare beneficiaries. As shown in the attached table, CBO estimates that spending for outpatient prescription drugs for Medicare beneficiaries will total $1.84 trillion over the 2004-2013 period. That estimate, which takes into account recent information and reflects other steps we have taken to improve our projection, represents an increase of about 4 percent over our projection last year that spending on prescription drugs for Medicare beneficiaries would total $1.77 trillion over the 2003-2012 period. Starting the 10-year projection period one-year later is the main reason for that increase, since it adds a relatively expensive year (2013) to the projections while dropping a relatively inexpensive year (2003). Indeed, that shift in the projection period would by itself increase our projection by about 11 percent. That increase was reduced, however, for two reasons, both of which take into account new information we have received about drug spending:
The combination of a lower starting point and slower growth results in projected spending on prescription drugs for Medicare beneficiaries that is lower in each year than we projected a year ago. That reduction, which averages 7 percent over the 2003-2012 period, grows from 5 percent in 2003 to 8 percent in 2012. (The 4 percent increase in CBO's projection of spending during the 2004-2013 period, compared to last year's projection for the 2003-2012 period, is the result of combining the average reduction of 7 percent in projected spending for each year with the 11 percent increase from starting the projection period one year later.) It is important to note the estimated cost of a specific Medicare drug benefit proposal from last year (but with effective dates delayed by one year) could change by more or less than the change in the baseline, depending on the details of the proposal. |
Projected Spending on Prescription Drugs By or On Behalf of Medicare Enrollees |
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By Fiscal Year |
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2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2003- 2012 |
2004- 2013 |
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CURRENT PROJECTION | |||||||||||||
Total Spending on Outpatient Prescription Drugs for Medicare Beneficiaries (billions of dollars) | 95 | 107 | 120 | 134 | 150 | 167 | 186 | 206 | 229 | 255 | 284 | 1,649 | 1,839 |
Rate of Increase (in percent) | 13 | 12 | 12 | 12 | 12 | 11 | 11 | 11 | 11 | 12 | |||
PREVIOUS PROJECTION (2002) | |||||||||||||
Total Spending on Outpatient Prescription Drugs for Medicare Beneficiaries (billions of dollars) | 100 | 113 | 128 | 143 | 160 | 179 | 200 | 222 | 248 | 278 | n/a | 1,773 | n/a |
Rate of Increase (in percent) | 14 | 13 | 12 | 12 | 12 | 12 | 11 | 12 | 12 | n/a | |||
Change in Projected Spending from Previous Projection (in percent) | -5 | -6 | -6 | -6 | -6 | -7 | -7 | -7 | -8 | -8 | n/a | -7 | n/a |
Memorandum: | |||||||||||||
The current estimate of spending over the 2004-2013 projection period ($1,839 billion) is about 4 percent larger than last year's estimate of $1,773 billion in spending over the 2003-2012 projection period. | |||||||||||||
SOURCE: Congressional Budget Office. | |||||||||||||
NOTE: n/a = not available. | |||||||||||||