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November 25, 2003

Why the Drug Bill Really Sucks

This Congressional Budget Office analysis of the Medicare drug bill could be the political killer for the GOP.

All the numbers about the drug benefit being thrown around are only for the first year. Costs to beneficiaries, however, are slated to increase with inflation in drug costs.

What does that mean, according to CBO?

  • The $250 annual deductible at the start of the program in 2006 is projected to rise to $445 by 2013.
  • Monthly premiums will rise from $35 per month in 2006 to $58 per month in 2013.
  • For catastrophic drug costs, seniors will be responsible for $2,850 in 2006, which will rise to more than $5000 out-of-pocket by 2013.

    Here is the key-- these numbers are based on the fact that there are no price controls on drugs in the legislation. This will create a political dynamic where seniors will mobilize to impose those price controls, since they will directly save out-of-pocket if the government brings the hammer down on big Pharma.

    Well, the GOP wanted to create incentives for cost controls-- they just may not recognize where that political dynamic will inevitably go.

    Posted by Nathan at November 25, 2003 11:32 PM