Medicare drug plan balloons

President Bush’s budget next week will show the new prescription drug program costs $540 billion over 10 years, more than one-third higher than the $400 billion estimate Congress used in passing the bill in November.

“That really is a shocker,” said Robert L. Bixby, executive director of the budget watchdog Concord Coalition. “It’s a huge change. If a number like this had been floating around the Capitol last fall, it never would have passed.”

Congressional Republicans, meeting for a legislative retreat in Philadelphia yesterday, were briefed on budget numbers by administration officials. On Monday, Mr. Bush will send his fiscal 2005 budget to Congress, having pledged to limit nondefense discretionary spending increases to 1 percent.

Part of that increase will be in the National Endowment for the Arts (NEA), which first lady Laura Bush announced yesterday will get an $18 million boost, a 15 percent increase over the $122.5 million approved for fiscal year 2004.

But the Medicare number promises to be a bigger problem as the budget debate unfolds. Some Republicans in the House only voted for the bill after being promised the costs wouldn’t exceed $400 billion — something dozens of taxpayer-advocacy and policy-analysis groups said was inevitable.

“We told you so,” said Robert E. Moffit of the Heritage Foundation, who said he expects the estimate to go higher with every new projection. “None of this bad news goes away. It gets worse.”

The administration’s higher estimate of costs comes from its Office of Management and Budget (OMB) from Medicare’s actuaries. The lower estimate used by Congress last year came from the Congressional Budget Office (CBO).

Trent Duffy, a spokesman for the White House, said it is “the norm, not the exception” to have differences between OMB figures and CBO figures.

“This is ground-breaking legislation in a very unpredictable field, which is health care,” Mr. Duffy said. “There are a lot of moving parts and variables, and the experts do their best, but the one thing we know about projections is they are typically wrong.”

He said costs don’t always exceed projections. He said the changes to Medicare as part of the 1997 Balanced Budget Act actually produced more savings than projected.

But other times, Medicare cost projections have been wildly low. When the initial program, hospital insurance, was instituted in 1965, the projected cost in 1990 was $9 billion. The actual cost in 1990 was $67 billion — more than seven times the estimate.

Then, in 1987, Medicaid’s special hospitals subsidy was projected to cost $100 million per year by 1992, but the actual cost by then was $11 billion.

And when the 1988 Medicare Catastrophic Coverage Act was passed, the CBO put the five-year cost at $5.7 billion. Less than 12 months later, CBO estimated the price at $11.8 billion. Angry seniors protested the new law’s provisions and it was repealed in 1989.

Democrats had fought last year for a broader and more-expensive Medicare bill. But yesterday, they said the new cost estimates don’t mean the bill is better than expected.

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