The US Medicare prescription drug plan, which covers the over-65s and disabled people, cost about 30% - $6 billion - less than originally anticipated in the financial year ended September 30, and the federal programme’s spending on prescription drugs totalled $44 billion, 12% down on the previous year.

When the programme began in January 2006, the Congressional Budget Office (CBO) forecast that by 2008 its annual costs would reach $74 billion, but the year's actual figure is closer to $50 billion. Moreover, the programme’s monthly basic monthly drug coverage premium for 2008 was $26.70, again about a third less than originally forecast.

A major reason for the savings has been the programme’s use of generic drugs, which account for 64% of all prescriptions written under the benefit compared with 61% in the private health insurance market. In addition, with around 32 million enrollees the programme has about 2 million fewer than originally envisaged, and enrollees have also reduced their costs to avoid the “doughnut hole.” This is the gap which occurs when they reach their annual coverage limit - which is $2,510 this year - and then have to pay $3,216 worth of prescription drug costs entirely out of their own pockets until their bill for the year reaches $5,726, after which Medicare again starts to pick up the tab.

Nevertheless, Medicare can save even more in years to come, if more consumers use cost-saving mail-service pharmacies, physicians utilise e-prescribing technology and Congress passes legislation enabling the Food and Drug Administration (FDA) to approve generic versions of biotechnology drugs, according to the Pharmaceutical Care Management Association (PCMA), which represents pharmacy benefit managers (PBMs). “Congress must also resist new initiatives that would actually increase drug costs, such as the proposal to give white-collar pharmacists the right to collectively bargain for higher prices,” added PCMA chief executive Mark Merritt.

Enrollment for the 2009 Medicare prescription drug benefit commences on November 19. According to a report in USA Today, the programme’s costs are expected to start rising again next year.

Medicaid spending growth set to far outpace that of US economy

Meantime, warnings that spending on Medicaid, the federal health programme that covers people on low incomes, will substantially outpace the US economy’s rate of growth over the next decade have come from the Centres for Medicare & Medicaid Services (CMS), which administers the programmes.

Medicaid benefits spending will grow 7.9% annually over the next 10 years, reaching $674 billion by 2017, compared with a projected annual rate of growth of 4.8% each year for the general economy and 7.4% for Medicare, it says.

Health and Human Services Secretary (HMS) Michael Leavitt described this spending path as “unsustainable for both federal and state governments,” and acting CMS Administrator Kerry Weems added: “as a nation, we must tackle the difficult job of bringing health care costs under control and assuring that our health care dollars are buying the highest quality, most efficient health care services.”

Medicaid represented 14.8% of all US health care spending in 2006.