Medicare drug plan may cost even more

By Ceci Connolly
The Washington Post

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WASHINGTON — President Bush promised Congress that his Medicare prescription-drug benefit would cost no more than $400 billion over 10 years, but once the legislation was enacted, federal actuaries boosted the estimate to $534 billion.

Now, administration projections indicate that the cost could be considerably higher.

According to internal White House budget-office estimates of the long-term cost of Medicare, spending related to the new drug benefit could increase by $42 billion over the coming decade.

But administration officials over the weekend strongly disputed that the figures indicate the drug program's projected cost has been increased by that much.

The revised figure appears in a chart prepared during this summer's "midsession review" by the Office of Management and Budget (OMB) and Medicare actuaries.

The document provides a detailed breakdown of an extra $176 billion in Medicare spending projected for the next 10 years. The chart, provided to The Washington Post late last week, identifies $42 billion of that increase "as related to MMA," the initials of the Medicare Modernization Act, the new prescription-drug law.

Several budget analysts said the chart indicates that the price tag of the president's new drug program could total as much as $576 billion over 10 years.

"Using their own numbers, it costs over 10 years $42 billion more, and so, therefore, it's $576 billion," said Richard Kogan, senior fellow at the Center on Budget and Policy Priorities.

But Mark McClellan, administrator of the Centers for Medicare and Medicaid Services, said Medicare's actuaries have not re-estimated the cost of the drug law and that the new figures are primarily adjustments to the "baseline" or projected spending levels for a Medicare program likely to cost more than $4 trillion over the next decade.

He said there is no way to anticipate how the new prescription-drug benefit will interact with other Medicare programs.
 
He said it would be a mistake to simply add the $42 billion to $534 billion to come up with a new projected cost, noting that "related to" is not the same as "attributable."

Asset to controversy

Although once considered a political asset for Bush, the Medicare drug package has become a source of controversy, with a growing number of senior citizens telling pollsters that they are disappointed in the outcome.

The latest survey by the nonpartisan Kaiser Family Foundation found that fewer than half of all Medicare beneficiaries have a favorable impression of the law.

Over the past two weeks, Bush has been buffeted by unfavorable developments in the Medicare program, including the disclosure of a record premium increase next year and revelations that the government concealed other cost projections.

Joel Kaplan, deputy OMB director, said the agency publishes five-year projections only because it does "not believe anything beyond five years is a reliable or certain estimate." The 10-year projections were given privately to some members of Congress. Neither Kaplan nor McClellan challenged the actual figures.

Early last week, Democrats excoriated the administration for not revealing the massive increase in Medicare costs projected for 2006. Government actuaries estimate that the typical 65-year-old would see Medicare costs jump from 20 percent of the average Social Security benefit in 2005 to 37 percent in 2006.

The administration responded by noting that, beginning in 2006, seniors will receive a valuable prescription-drug benefit.

Some experts say a big question is what happens after 2006, when seniors — and taxpayers in general — face Medicare increases that threaten to consume more than half of the average Social Security check and would necessitate tax increases on younger workers.

"We're in deep trouble," said Robert Hayes, president of the Medicare Rights Center, as he examined a Medicare chart belatedly released by the administration.

Projected estimates

In 2015, for example, 44 percent of the typical 65-year-old's benefit check would be devoted to Medicare premiums, deductibles and co-payments, according to the actuaries' projections. By 2020, it would be half. The typical 85-year-old would lose 50 percent of his or her Social Security check to Medicare in 2015 and 58 percent in 2020.

"That does not count some of the most substantial expenses people have for health care, such as long-term care, vision, dental and preventive services not covered by Medicare," Hayes added. "The debacle facing consumers is even greater than this chart would suggest."