Estimates on Medicare hit $2 trillion

The new Medicare prescription-drug benefit could cost as much as $2 trillion in its second decade, the Congressional Budget Office (CBO) said yesterday, especially if Congress fills in the coverage gaps in the current benefit.

And some Democrats already are proposing to do just that in a new bill they are set to introduce today.

“We’re talking about huge costs,” said Robert Moffit, director of the Center for Health Policy Studies at the Heritage Foundation, which opposes the new Medicare drug law and consistently has told Republican leaders that the benefits will be too costly in the long run. “What can I say? We warned them.”

President Bush signed the Medicare prescription-drug bill into law yesterday. The new law — estimated by CBO to cost $395 billion in the next decade — would update Medicare, create a new prescription-drug benefit for all seniors and give private health plans an expanded role in health care delivery.

Democrats say it provides skimpy drug coverage and undermines traditional Medicare by tilting the field toward private health plans.

“We’ve only just begun to fight,” Sen. Edward M. Kennedy, Massachusetts Democrat, told seniors at a rally against the new law yesterday. Mr. Kennedy and Rep. John D. Dingell, Michigan Democrat, are set to introduce a bill today that would make several major changes to the new Medicare law, including beefing up the new drug benefit by filling in the measure’s coverage gap.

CBO Director Douglas Holtz-Eakin yesterday estimated that the new Medicare prescription-drug law will cost more than $1 trillion in its second decade, from 2014 to 2023, and could soar to $2 trillion during that period if Congress revisits the new law and fills in the coverage gaps — an idea he said has been “widely discussed as a possible future for the bill.”

The CBO director said it is very difficult to estimate future costs because it is impossible to know exactly what will happen but said it is “highly unlikely that we’ll end up on the course we’ve set.”

If Congress makes no policy changes to the new law, the one-year cost of the prescription-drug benefit in 2023 will be $190 billion, Mr. Holtz-Eakin said.

If Congress passes new legislation to fill the drug benefit’s coverage gap, he said, the one-year cost of the program will be $360 billion in 2023.

Under the newly signed Medicare law, a senior who enrolls in the new benefit would pay $250 annual deductible and about $35 monthly in return for the government paying three-quarters of annual drug costs up to $2,250. If the senior’s annual drug costs go beyond that, however, he falls into a coverage gap, during which there is no additional help from the government until drug expenses reach $5,100. Then catastrophic coverage kicks in, and the government picks up 95 percent of additional drug costs.

The bill that Mr. Kennedy and other Democrats are set to introduce today would close that drug-coverage gap, ensuring that a senior would have continuous coverage from the government.

A Kennedy spokesman said the CBO has not yet estimated the cost of Mr. Kennedy’s bill, but if costs exceed the $400 billion during 10 years set out in the budget for the Medicare prescription-drug benefit, the difference “would be paid for by rolling back tax cuts for the wealthy.”

Democratic aides also pointed out that some changes Democrats are proposing to the new law would save money, thereby holding down costs.

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