White House Says Congress Underestimated New Medicare Costs
By ROBERT PEAR and EDMUND L. ANDREWS
Published: February 2, 2004
WASHINGTON, Feb. 1 — Bush administration officials said Sunday that Congress had grossly underestimated the cost not only for prescription drug benefits, but also for private health insurance plans that would be offered to elderly people under the new Medicare law.
When President Bush signed the legislation on Dec. 8, the Congressional Budget Office said it would cost $395 billion in the decade from 2004 to 2013. On Thursday, the White House put the cost at $534 billion.
Mr. Bush will try to explain the difference when he submits his budget to Congress on Monday.
The budget is expected to show a record deficit of more than a half-trillion dollars in 2004, up from $375 billion last year. But the president says his policies will reduce the deficit to $364 billion in 2005 and to $237 billion by 2009, fulfilling his vow to cut the deficit in half in five years.
Administration officials said that Mr. Bush's budget would not include the costs of the Iraq war. Nor, they said, would it include the costs of restructuring the alternative minimum tax, estimated at more than $162 billion over five years.
The minimum tax is intended to prevent wealthy people from making excessive use of sophisticated tax breaks, but it will snare millions of people with moderate incomes in the next few years.
Budget analysts say the administration's five-year goal glosses over the much bigger fiscal gap that looms over the next 10 years. The huge upward recalculation of costs for the new Medicare law has little effect in the first five years, because the new drug benefits do not become available until 2006.
The same is true of Mr. Bush's proposal to make his tax cuts permanent. The cost would be more than $1.2 trillion over 10 years, but most of that would come at the end of this decade.
Mr. Bush is expected on Monday to outline a list of programs that would be cut back or halted. The administration plans to limit the rise in discretionary spending outside of defense and domestic security to less than 1 percent, which is less than the amount needed to keep pace with inflation.
Administration officials and Congressional budget analysts said that nearly three-fourths of the discrepancy in the Medicare cost estimates — $100 billion of the $139 billion difference — was attributable to the fact that the White House believed the new drug benefit would be more expensive than Congress had assumed.
About a fourth of the discrepancy, or $32 billion, results from the fact that the administration expects Medicare to spend much more on private health plans than Congress assumed.
The new cost estimate has touched off a political furor.
Senator Bob Graham, Democrat of Florida, said he was "shocked and appalled" at the new figure. "We should reopen the bill and examine what is driving this cost estimate," Mr. Graham said.
Democrats said Congress should investigate the discrepancy to find out when the administration first realized that the bill might cost far more than the $400 billion sum proposed by Mr. Bush early last year.
The Senate Democratic leader, Tom Daschle of South Dakota, said it would be inexcusable if the administration had "concealed or withheld" such information from Congress.
The House and the Senate passed separate versions of the Medicare bill in June. Lawmakers haggled with one another and with administration officials last fall. Medicare actuaries continually developed and revised cost estimates.
Tommy G. Thompson, the secretary of health and human services, said Friday: "Congressional staff knew our actuarial numbers. Our actuaries communicated with the Congressional Budget Office throughout the negotiations. There was no attempt to keep our number camouflaged."
Representative Pete Stark of California, the senior Democrat on the Ways and Means Subcommittee on Health, said, "We repeatedly asked the actuaries for cost estimates and other analysis of the Medicare bill, but the administration refused to release the information."
The administration now says the actuaries' cost estimates have been over $500 billion since last summer.
A Medicare official said, "If the administration had owned up to its cost estimates a long time ago, there would be a lot less drama now."
Christin Tinsworth, a spokeswoman for Republicans on the House Ways and Means Committee, said Democrats were hypocritical to complain about the cost of the new law, written mainly by Republicans. Prescription drug bills proposed by House Democrats would have cost $1 trillion over 10 years, she said.
Representative Trent Franks, Republican of Arizona, said: "If we had failed to pass the Republican version of the Medicare legislation, some Democratic alternative would have passed. It would have been an unmitigated disaster, with an even higher cost estimate."
Administration officials and Congressional budget experts gave several reasons for the discrepancy. Republicans in Congress wanted to promote the growth of private health plans, especially preferred provider organizations. The new law authorizes extra payments and subsidies for such plans, which Congress assumed would cost $14 billion over 10 years.
But the Bush administration says the cost will be $46 billion, or more than three times as much — partly because the administration assumes that many more people will enroll.
The administration offers several reasons to explain why the drug benefit will cost $100 billion more than Congress expected. The White House says that per capita costs will be 4 percent higher than Congress assumed, accounting for $16 billion of the discrepancy. Another $16 billion of the difference results from the Bush administration's assumption that more people will sign up for the drug benefit: 94 percent of those eligible, compared with the 88 percent assumed by Congress.
The administration also predicts that Medicare will spend more than Congress assumed on subsidies for low-income people, to help them with drug costs not covered by Medicare.
The Congressional Budget Office said the subsidies would cost $192 billion over 10 years. The administration says the cost will be higher by $47 billion, or 24 percent.
Karen M. Ignagni, president of the American Association of Health Plans, a lobby for insurers, said the new estimates boded well for beneficiaries.
"If it's true that more people take advantage of low-income subsidies and more people enroll in private plans, they'll get more benefits," Ms. Ignagni said. "That's very good for beneficiaries. We can help them stretch the dollars they spend on prescription drugs."
One big uncertainty for White House budget planners is the outlook for tax revenues, which declined in each of the past three years as a result of the economic slowdown and the collapse of the stock market bubble.
As recently as November, administration officials had been counting on a big increase in tax collections as the economy rebounded. But tax receipts have climbed less than expected. The Congressional Budget Office noted last week that corporate tax collections in recent months had been "weaker than analysts had expected, given the strong surge in profits."
Over all, the budget office said, it has reduced its estimate of tax collections by $15 billion a year for 2004 and 2005. |
