Bush’s plans for Medicare drug benefit pegged at $1.2
Trillion…Dwarfs previous estimate, creates
doubts about Social Security projections…The White House released
budget figures yesterday indicating that the new Medicare
prescription drug benefit will cost more than $1.2 trillion in the
coming decade, a much higher price tag than President Bush suggested
when he narrowly won passage of the law in late 2003.
The projections represent the most complete picture to date of how
much the program will cost after it begins next year. The expense of
the new drug benefit has been a source of much controversy since the
day Congress approved it, with Democrats and some Republicans
complaining that the White House has consistently low-balled the
expected cost to the government.
As recently as September, Medicare chief Mark B. McClellan said the new drug
package would cost $534 billion over 10 years. Last night, he
acknowledged that the cumulative cost of the program between 2006
and 2015 will reach $1.2 trillion, but he cited several major
savings and offsets that he said will reduce the federal
government's bottom-line cost to $720 billion.
The disclosure prompted new criticism by Democrats about the
administration's long-term budget estimates. It also showed that
Medicare, the national medical insurance program for seniors, may
pose a far more serious budgetary problem in the com- ing decade
than concerns about the solvency of Social Security.
At a House Ways and Means Committee hearing, Rep. Rahm Emanuel
(D-Ill.) taunted Treasury Secretary John W. Snow about the
rhetorical discrepancies.
"If you're looking for a crisis, I would suggest you look at a
crisis that was self-made in just last year, because the crisis
exists in what's happened to Medicare by weighing it down," Emanuel
said. "Those of us who told you it was going to cost twice as much
were right."
At the recent confirmation hearing of Health and Human Services
Secretary Mike Leavitt, Senate Budget Committee Chairman Judd Gregg
(R-N.H.) pressed the administration to hold down the cost of the
prescription drug program to the $400 billion that Bush had
originally promised.
In a telephone briefing last night, McClellan said that the annual
cost of the program will remain relatively the same but that for the
first time the benefit will be fully operational for an entire
10-year budget time frame. "Our cost estimates for the drug benefit
are the same as they've been in the past," he said.
From the outset, the cost of the Medicare drug benefit has sparked
nearly as much controversy as the details of the program itself.
Liberals have said that Bush devised a "stingy" benefit in which
many seniors would be faced with thousands of dollars' worth of drug
bills. Conservatives have argued that an open-ended entitlement to
prescription drug coverage would cost far more than the Treasury
could afford.
Beginning with his January 2003 State of the Union address, Bush
pledged to keep the total cost of the drug benefit to $400 billion
over 10 years. An estimate by the Congressional Budget Office was
close to Bush's figure.
But shortly after Bush signed the program into law in December 2003,
the White House revised its projection to $534 billion, but it never
offered a detailed breakdown of that estimate.
Last March, Richard S. Foster, Medicare's chief actuary for nearly a
decade, said administration officials threatened to fire him if he
disclosed his belief in 2003 that the drug package would cost $500
billion to $600 billion. Lawmakers in both parties accused the
administration of concealing important information that could have
derailed passage of the bill.
Last night, in response to media inquiries, McClellan revised the
numbers once more. The most significant change, he said, is that the
new budget projections tally the cost of drug benefits for 10 years.
Projections made in 2003 included the two transition years before
the drug coverage is fully implemented in 2006.
Providing
prescription coverage for more than 41 million seniors in 2014 and
2015 will cost more than $107 billion annually, he noted.
Administration accountants have factored in new premium payments by
beneficiaries, which will lower the program's overall cost.
Moreover, McClellan said, some seniors will be shifted from Medicaid
to Medicare, resulting in about $190 billion in savings over the
next decade. That is because states will be required to reimburse
the federal government for some of those services, and the federal
government will not be required to pay out as much in matching funds
to states.
The new budget projections also show that seniors will face higher
bills each year. A 10-year chart prepared by the Medicare actuaries
estimates the drug premium will rise from $35 a month next year to
$68 in 2015. Annual deductibles will start at $250 in 2006 and rise
to about $472 in 2015, and the maximum annual out-of-pocket expense
would be $6,800 that year.
Meanwhile, administration officials struggled to defend Bush's Social
Security and budget plans, which Democrats attacked as fiscally
deceptive in day-long hearings on Capitol Hill.
During his testimony, Snow was asked by Rep. Lloyd Doggett (D-Tex.)
how the administration could describe Social Security as headed for
bankruptcy when many private companies have pension plans for which
they cannot currently meet all their obligations.
Bush said in his State of the Union address last week that unless
Congress acts now to restructure Social Security and create
individual investment accounts for younger workers, the system will
"be exhausted and bankrupt" by 2042.
Snow acknowledged that "there is a major difference between not
being fully funded and being bankrupt." But he said Social Security
is "doomed by our country's demographics" and "is offering empty
promises to future generations."
Democrats pointed to the discrepancy in Medicare cost projections as
further reason to distrust Bush's 2006 budget, which they said uses
tricks and omissions to paint a rosier fiscal picture than the facts
justify.
Republicans had expected their opponents to focus on the 150 major
cuts to programs in the president's budget, although the White House
has so far declined to release a complete list. Instead, Democrats
used their time to build a case that Bush is portraying Social
Security as worse off than it really is, as a way to build support
for personal accounts, and at the same time is trying to make the
trend in deficits look better than it is.
Testifying at the same time as Snow, White House budget director
Joshua B. Bolten acknowledged that "the private accounts, the
personal accounts, do not, in themselves, solve the full Social
Security problem."
"Other
reforms will need to be made," he said. |