Medicare drug-cost estimates skyrocket; record deficit also forecast

By Amy Goldstein and Juliet Eilperin
The Washington Post

	STEPHEN J. BOITANO / AP An employee with the Government Printing Office stacks copies of President Bush's fiscal 2005 budget proposal yesterday.
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The revised cost — $534 billion — will add to a federal deficit that is drawing increasing anger from conservatives in Bush's Republican Party. This year's deficit actually could set a record at $520 billion, under a higher estimate to be released Monday when Bush proposes his budget for 2005, according to a knowledgeable source. That easily would exceed the $375 billion total for 2003, a record in dollar terms.

Word of the escalation in the Medicare forecast immediately enraged lawmakers and policy analysts at both ends of the ideological spectrum. Congressional Democrats and conservative Republicans alike vowed that they would intensify efforts to alter major aspects of the Medicare law this year.

"This is a work in progress," said Rep. Jack Kingston, R-Ga., a conservative who voted for the law.

Administration officials would not explain the reason for the discrepancy.

White House spokesman Trent Duffy said putting a price tag on Medicare "is a terrifically difficult area to try to predict" that hinges on "any number of unknowns," including how many older Americans buy the drug coverage, how much pharmaceutical prices increase and how many people on Medicare switch to private health plans, as the law encourages.

"The bottom line is, President Bush made a commitment to give seniors a prescription-drug benefit and modernize Medicare, and he's delivered," Duffy said.

Joe Antos, health-policy expert for the conservative think tank American Enterprise Institute, said the White House had no incentive to announce the true cost of the Medicare proposal while it was trying to draw votes. The plan passed by two votes after an all-night House session that involved arm-twisting some conservatives to vote for the bill.

"You think they were going to ruin their chances to get what they wanted?" he said. "It's political."

Bush aides and outside health-policy specialists, however, said it's common for congressional and White House budget advisers to come up with conflicting cost forecasts on a range of major government expenditures.

Outside analysts said yesterday that one possible reason for this difference involves long-standing disagreements over how rapidly Medicare's overall costs will increase.

For decades, cost predictions for major changes to Medicare and other government health programs often have proved inaccurate — and usually underestimated. Even so, lawmakers and health-policy analysts said the size and swiftness of the increase in the White House forecast was striking.

"I'm not sure I've ever heard of such a big discrepancy ... weeks after legislation is passed," said Gail Wilensky, a Republican health economist who ran the Medicare program under the first Bush administration. "If people thought they were voting for a $400 billion budget, it's distressing."

News of the White House's conclusion came three days after the Congressional Budget Office (CBO), which supplies the official spending estimates on which lawmakers rely, reaffirmed its forecast that the Medicare law will cost $395 billion over 10 years.

During the many months that the Medicare bill was pending in Congress, the Bush administration never provided an overall spending estimate, preferring to rely on CBO figures. Now, it will take years to establish which prediction is more accurate, particularly because the drug benefit is not scheduled to start until 2006.

After years of debate, Congress late last year adopted fundamental revisions to Medicare, the 1960s-era program that provides health coverage to 40 million elderly and disabled Americans. In addition to creating federal subsidies for prescription drugs, the law is designed to tilt the program heavily toward the private sector.

Most Democrats argued that the law would provide skimpy drug assistance, make too little effort to constrain drug prices and provide a financial boon to pharmaceutical manufacturers and private health plans.

A significant faction of House conservatives complained about the large expansion of one of the country's main entitlement programs, particularly at a time of record budget deficits.

Both sides were furious yesterday.

"It's almost like shooting fish in a barrel to say, 'We told you so,' " said Robert Moffitt, director of health-policy studies at the Heritage Foundation, a conservative think tank that opposed the legislation on the grounds that it was unaffordable.

"All of us were afraid it was going to be greater than the ($395 billion) estimate," said Rep. Mac Collins, R-Ga., who said he and other conservatives had felt pressured to support the bill, knowing that Bush was eager to sign it.

"It's unfortunate that Congress was put in the position of dealing with a bill that was going to be very expensive, going to be an entitlement, and was going to make it into law."

Collins said the White House figures could stiffen conservatives' resolve to impose unprecedented spending limits on the program. In a compromise, the law does not impose a hard limit on Medicare spending but would require the White House to alert Congress if expenditures exceeded specified levels. "I hope Congress has enough backbone" to impose such a cap, Collins said.

Democrats were critical for different reasons.

"Not any senior has seen any assistance, yet we've just slugged the taxpayers for another $140 billion," said Rep. Rahm Emanuel, D-Ill., who fought unsuccessfully for provisions designed to reduce drug prices.

Sen. Edward Kennedy, D-Mass., said, "The ballooning cost of the program underlines the need to end the sweetheart deals (for drug companies) and to provide the government the authority to negotiate reasonable prescription-drug prices for senior citizens under Medicare."

Details on the federal deficit were provided by The Orlando Sentinel.

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