Estimates regarding medicare

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In the year 2000, the Congressional Budget Office offered the following estimates regarding Medicare (the U.S. government program that pays for part of the health costs of individuals who are permanently disabled or over 65 years old):
• Medicare would begin partial coverage for prescription drugs in 2003 
• In 2003, the total cost of prescription drugs for those on Medicare would be $48 billion
• The cost of prescription drugs was projected to rise at 12% a year
• Medicare would pay $400 billion over the 10-year period from 2003-2012 for the prescription drug benefit
b. What fraction of the total prescription drug cost over the 10 years would be covered by the new $400 billion prescription drug benefit?
c. Assuming the fraction of the total, found it part (b), would be constant over each of the10 years, how much would have been paid by Medicare on drugs in 2003? 
d. Is your answer to part (c) a lot of money? Provide a brief explanation as to why it may be considered a lot of money, and a brief explanation as to why it may NOT be viewed as a lot of money. 

Reference no: EM13239198

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