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Medicare Drug Benefit May Cost $1.2 Trillion

Estimate Dwarfs Bush's Original Price Tag

By Ceci Connolly and Mike Allen
Washington Post Staff Writers
Wednesday, February 9, 2005; Page A01

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.

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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.


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