Bush says Medicare is next

WASHINGTON – Stung by criticism of skyrocketing cost estimates for the Medicare prescription drug benefit, President Bush vowed Wednesday to focus more attention on shoring up the new program’s finances.

Although it won’t pay out its first dollar until next year, the drug benefit that Bush sold to Congress as costing less than $400 billion for its first 10 years comes in at $724 billion in the 2006 budget released Monday.

While Medicare officials contend that the new figures are in line with earlier projections, lawmakers from both parties are fuming over what seems to be its exploding price. To make matters worse, the libertarian Cato Institute released a study Wednesday claiming the drug benefit’s costs for 41 million Medicare beneficiaries are likely to double again.

Sen. Judd Gregg, R-N.H., chairman of the Senate Budget Committee, said Wednesday that he wants White House Budget Director Joshua Bolten to tell Congress “what the real numbers are,” and pronounced himself “very suspect of this program as to its cost.” Buttonholed later in a Senate hallway, Gregg said that while he’d like to hold hearings on the drug benefit, “I’m a lone voice on that issue.”

House Minority Leader Nancy Pelosi of California also called for new hearings on the drug benefit. She said she’s especially interested in lifting a provision that bars the Department of Health and Human Services from negotiating prices with the drug industry. The drug industry had insisted on that measure.

“We should move immediately to lower the costs of this bill by requiring the government to use the purchasing power of millions of seniors to negotiate lower drug costs,” Pelosi said.

The drug benefit narrowly passed the House of Representatives in November 2003, and only after Republican leaders kept the floor vote open through the night as they lobbied for the final votes. Accusations of unethical arm-twisting followed but eventually were withdrawn or settled.

Knight Ridder later reported that former Medicare administrator Thomas Scully had threatened to fire his top actuary, Richard Foster, if Foster disclosed to Congress estimates that indicated the benefit could cost more than $500 billion. Administration officials knew of the figure, but withheld the information in an effort to ensure the votes of 13 House fiscal conservatives who pledged to vote against the bill if it cost more than $400 billion.

The ultimate House-Senate drug benefit compromise bill passed the House by five votes.

“An ethical cloud has hung over the Republican Medicare law since it was passed in the dark of night more than a year ago,” Pelosi scolded.

The seeds of the seeming price hike arise largely from an accounting tactic that helped pass the bill.

When Medicare’s actuaries arrived at their cost estimates, they used a 10-year period that ran from 2004 to 2013. But the drug benefit doesn’t kick in until 2006, so there were almost no costs for the first two years. The 2006 budget, however, has to take in the 2006-2015 period, which includes 2014 and 2015, when the drug benefit’s costs will be taking off.

President Bush, at a White House press briefing on Wednesday, said he’d take up Medicare once Social Security changes are in place.

“Once we modernize and save Social Security for a young generation of Americans, then it will be time to deal with the unfunded liabilities in Medicare,” Bush said. “We look forward to working with Congress to make sure that the Medicare reforms that are in place are fully enacted and the people can realize the benefits of them.”