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New White House Estimate Lifts Drug Benefit Cost to $720 Billion
 

WASHINGTON (By Robert Pear, NYTimes) February 9, 2004 - The Bush administration offered a new estimate of the cost of the Medicare drug benefit on Tuesday, saying it would cost $720 billion in the next 10 years.

That is much more than the $400 billion Congress assumed when it passed legislation creating the benefit in late 2003.

But administration officials said the numbers were not comparable. The original estimate was for the years 2004 to 2013. The new estimate covers the period from 2006, when the drug benefit becomes available, to 2015.

The higher figure, which provides the first glimpse of the true cost of the drug benefit, could touch off a political uproar in Congress, where conservative Republicans were already expressing alarm about the costs of Medicare, including the drug benefit.

In a recent interview, the new chairman of the Senate Budget Committee, Judd Gregg, Republican of New Hampshire, said he wanted to "put the brakes on the growth of entitlements" and take a close look at the new Medicare law.

"Since it was sold as a $400 billion program, that's what we should keep it at," Mr. Gregg said.

Representative Rahm Emanuel, Democrat of Illinois, asked about the issue on Tuesday when Treasury Secretary John W. Snow was testifying before the Ways and Means Committee. Mr. Snow said he did not have detailed figures at hand.

Dr. Mark B. McClellan, administrator of the Centers for Medicare and Medicaid Services, said later that the drug benefit would cost $720 billion from 2006 to 2015.

Passage of the Medicare bill was a major political achievement for President Bush and the Republican leaders of Congress. It squeaked through the House by a vote of 220 to 215, and it would probably not have been approved in its current form if lawmakers had thought the cost would exceed a half-trillion dollars.

Mr. Emanuel said: "The new cost estimate destroys the credibility of the Bush administration. Officials were so far off in estimating the cost of the Medicare law. Why should we believe what they say about the financial problems of Social Security?"

Representative Pete Stark of California, the senior Democrat on the Ways and Means Subcommittee on Health, said: "I told you so. We can't trust numbers provided by administration officials. They'll say anything to get a bill passed. And if the new drug benefit costs more, the extra money goes to their friends in the pharmaceutical industry, not to senior citizens."

Mr. Stark said the higher cost estimate showed that Congress should allow the secretary of health and human services to negotiate with drug manufacturers to secure lower prices for Medicare beneficiaries. The law forbids such negotiations. But Tommy G. Thompson, the former secretary of health and human services, said he wished Congress had given him the power to negotiate.

When the Medicare bill was passed, the Congressional Budget Office said the cost would not exceed $400 billion over 10 years. In a letter to The New York Times published on Nov. 20, 2003, Thomas A. Scully, who was then the Medicare administrator, wrote, "We are spending $400 billion."

Just two months later, in January 2004, the White House said the cost, for the same 10-year period, would be $534 billion.

Dr. McClellan said Tuesday that "there has been no significant change in the cost of the drug benefit" for the years 2006 to 2013. But, he said, the new estimate covers two additional years, 2014 and 2015, when Medicare enrollment will be larger and drug prices will be higher. In 2015 alone, he said, Medicare will spend well over $100 billion on the drug benefit.

Assumptions about the cost of the Medicare drug benefit were included in the budget that Mr. Bush unveiled on Monday. A table in one volume of the budget, titled "Analytical Perspectives," shows the drug benefit as costing $345 billion from 2004 to 2010.

Lawmakers said they were shocked to see that number because it was close to the $400 billion figure they had previously been given as the price tag for a full decade. Estimates prepared by the chief Medicare actuary show that the spending for the prescription drug benefit will total $1.2 trillion from 2006 to 2015, before taking account of income that will offset some of that cost.

Dr. McClellan tried to reconcile the numbers on Tuesday night. He said the $345 billion figure and the $1.2 trillion showed "gross costs" and did not reflect the premiums that would be paid by Medicare beneficiaries, compulsory contributions by states or savings to Medicaid that would result from the new law.

Several members of Congress cited the latest cost estimates as a reason Medicare should not pay for Viagra and other "lifestyle drugs." Medicare officials said last week that the new benefit would pay for Viagra, Levitra and similar drugs when they were needed to treat erectile dysfunction.

 

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