Cost of Medicare Changes Climbs From $400 Billion to $530 Billion

In November, when the bill was passed, Republican leaders used the CBO estimate that prescription drug benefits and incentives to join private health plans would cost about $400 billion for the ten-year period 2004 to 2013. But the president’s budget, due out on Monday, puts the cost at $530 billion to $540 billion.

Administration officials did not say exactly why the price tag went up. White House spokesman Trent Duffy said cost 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 rise and how many people on Medicare switch to private health plans, as the law encourages.

“I, two weeks ago, received an estimate about Medicare,” the president said at a photo opportunity Friday. “I asked two questions to the estimators: One, does the Medicare reform do what we want it to do still, which is to provide modern medicine for our seniors and introduce competition, which will eventually hold down costs of Medicare. And, secondly, did the new estimate of Medicare cost fulfill my promise to reduce the deficit in half over a five-year period of time?

“And the budget we’ll submit on Monday,” Bush added, “does fulfill that promise that we’ll reduce the deficit in half. Now, it’s going to require Congress to be wise with the taxpayers’ money.”

Fiscally conservative Republicans were dismayed by the news.

Rep. Patrick Toomey, R-Pa., who voted against the bill, called the cost revision “very disturbing, and I am concerned that the bill will end up costing even more than $540 billion. What could have changed so much in just a few months?”

“All of us were afraid it was going to be greater than the estimate,” said Rep. Mac Collins, R-Ga., who said that he and other conservatives had felt pressured to support the bill, knowing that the president supported 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.”

Democrats said the news confirmed what they had said during the debate: That the bill spends too much on incentives for pharmaceutical manufacturers and insurance companies.

“The news on the Republican Medicare bill gets better and better for drug company profits and HMOs, and worse and worse for seniors and the Medicare program,” said Sen. Edward Kennedy, D-Mass.

“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,” he said.

The transition costs in 2004 and 2005 are predicted to be relatively small, but the price tag is expected to surge when the drug benefit begins in 2006 and baby boomers begin to turn 65 and enter the Medicare system.

Created in the 1960s, Medicare currently provides health coverage to about 41 million elderly and disabled Americans.