LA Times, WSJ reported revised estimated cost of drug plan without noting earlier, lower projections


The Los Angeles Times and The Wall Street Journal reported on February 3 that the revised 10-year cost estimates of President Bush's Medicare prescription drug plan were less than earlier projected -- $678 billion, as opposed to $737 billion estimated in August 2005. In fact, while they were less than August 2005 projections, they were far more than the $400 billion estimate the administration provided Congress when trying to get the votes to approve the plan.

News articles in the February 3 editions of the Los Angeles Times and The Wall Street Journal reported that revised 10-year cost estimates of President Bush's Medicare prescription drug plan were less than earlier projected -- $678 billion, as opposed to $737 billion estimated in August 2005. The new estimates were announced by Medicare administrator Mark McClellan during his February 2 testimony before the Senate Committee on Aging. In fact, while the new cost estimates were less than the August 2005 projections, they were far greater than the figures the administration put forward when it was trying to persuade Congress and the public to approve the bill: In advance of the November 2003 vote to approve the plan, Medicare provided Congress with an estimate of $400 billion; subsequently, the agency's chief actuary disclosed in March 2004 that the Medicare administrator ordered him to withhold his actual budget projections of between $500 and $600 billion from Congress.

As staff writer Robert Pear of The New York Times reported on March 25, 2004, Medicare actuary Richard S. Foster testified before Congress that the agency's then-administrator, Thomas A. Scully, threatened to fire him if he divulged Medicare's own estimate of the program's cost to Congress.

On June 6, 2003, Scully had testified before the Senate Finance Committee about the proposed drug plan using the $400 billion estimate. In addition, Tommy Thompson, secretary of the Department of Health and Human Services (HHS), provided the same estimate to the House Committee on Energy and Commerce on February 12, 2003.

Moreover, while the estimates represent a drop from the administration's most recent cost estimates -- which HHS credited to competition among the plan's providers, as Washington Monthly's Kevin Drum, author of the Political Animal weblog, observed -- the revised HHS estimate McClellan released on February 2 in a report entitled "The Secretary's One Month Progress Report on the Medicare Prescription Drug Benefit" was issued just one month after the prescription drug plan went into effect. Drum also noted that the revised estimate reflecting the 10-percent "savings" is still significantly higher than both the estimate initially provided to Congress and the actual projections Foster developed before the plan's approval. He continued: "So take this news with a great big shaker of salt."

From the February 3 edition of the Los Angeles Times:

The White House has promoted the drug benefit as a historic accomplishment and the most significant improvement to Medicare since its establishment in 1965. Spokesman Trent Duffy said Thursday that President Bush remained committed to the program, even though Bush didn't mention it in his State of the Union message this week.

Separately, the Medicare agency released estimates indicating that the drug benefit would cost less than expected: $678 billion over the next 10 years instead of the $737 billion projected last year. The average monthly premium for seniors this year is expected to be about $25, or 22% less than the $32 estimated in August.

McClellan said the main reason for the lower estimates was "robust competition" among the private insurers offering coverage. Other data released by the government suggested another factor might be at work: The previously rapid rate of increase in drug costs has slowed dramatically in the last two years because of a shift to generic medicines and other reasons.

From the February 3 edition of The Wall Street Journal:

Medicare officials say the program's new drug benefit will cost less than expected this year, as beneficiaries gravitate to plans with lower premiums.

The average premium for beneficiaries this year is about $25 a month, down from about $32 as estimated in August. The government also will see savings, said Mark McClellan, administrator of the Centers for Medicare and Medicaid Services.

The reason for the reduction: Health insurers are offering lower premiums than expected, and beneficiaries, Dr. McClellan said, "are choosing the plans that offer them the best deal."

Last year, Medicare actuaries projected that the drug benefit would cost taxpayers $737 billion over 10 years. That figure, updated after beneficiaries began enrolling in drug plans, now is $678 billion. Under the new estimates, the 2006 cost of the benefit dropped to $30.5 billion from $38.1 billion.

From the March 25, 2004, edition of The New York Times:

The chief Medicare actuary, Richard S. Foster, told Congress on Wednesday that last June he provided the White House with data indicating that prescription drug legislation would cost 25 percent to 50 percent more than the Bush administration's public estimates. That information did not make its way to Congress for six more months.

Mr. Foster said he had shared his cost estimates with Doug Badger, the president's special assistant for health policy, and with James C. Capretta, associate director of the White House Office of Management and Budget. But he said that Thomas A. Scully, who was then administrator of the Medicare program, directed him to withhold the information from Congress, citing orders from the White House in one instance.

In testimony before the House Ways and Means Committee, Mr. Foster said he had struggled to preserve the independence and integrity of his office. It was his first public appearance since a furor erupted over his assertions that Mr. Scully threatened to fire him if he disclosed his cost estimates to Congress during debate on the Medicare bill. The law, signed by President Bush in December, adds drug benefits to Medicare and significantly increases federal payments to private health insurers.

Mr. Foster said he had been told to withhold information from lawmakers of both parties. Moreover, he said, Mr. Scully stated that he was "acting under direct White House orders" in telling the actuary not to respond to a request from the chairman of the Ways and Means Committee, Representative Bill Thomas, Republican of California. Mr. Thomas was a principal architect of the Medicare bill.


Federal law says the chief actuary shall follow "professional standards of actuarial independence" and can be removed from his job "only for cause." But Mr. Foster testified that a lawyer at the department had told him that Mr. Scully had the legal right to prohibit the actuary from sharing information with Congress.


President Bush was urging Congress to create a drug benefit under Medicare, but said the legislation could not cost more than $400 billion over 10 years, and Congress accepted that ceiling.

The shape of the legislation was continually changing, but Mr. Foster said, "The range of our estimates was $500 billion to $600 billion all the way through the process," from June to November.

In their public statements, administration officials cited lower figures. "We are spending $400 billion," Mr. Scully said in a letter to The New York Times published on Nov. 20.

Posted In
Health Care, Medicare
Wall Street Journal, Los Angeles Times
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