Medicare Drug Benefit Costs Are Down

WASHINGTON — The Medicare drug benefit has come in way under budget this year, which supporters boast is a testament to the benefits of competition. Instead of costing about $43 billion this year, it will cost about $30 billion.

"The costs have been driven down not by the government but by the collective voices of millions of consumers," President Bush said during an interview shortly before the November 7 elections.

But figures provided to the Associated Press by the agency that oversees the benefit show two other key factors are at work: lower-than-expected enrollment and drug prices that went up less than expected in the two years before the benefit kicked in.

Democrats say they can cut costs further by having the government directly negotiate drug prices with pharmaceutical companies on behalf of beneficiaries. Currently, the law creating the drug benefit prohibits the government from negotiating drug prices. It leaves that to those companies overseeing private drug plans serving seniors and the disabled.

Why the program has cost less than anticipated will be an important element of the coming debate that Democrats are promising. To date, however, there has been little detailed analysis of how savings are being achieved.

The Centers for Medicare and Medicaid Services, the federal agency that oversees the new drug benefit for the elderly and disabled, provided the AP with its accounting of where the program saved money this year.

• Lower-than-projected enrollment: $7.5 billion.

• Competition: $6.9 billion.

• Drug prices rising less than expected in the two years before the benefit began: $3.7 billion.