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Medicare Compliance & Reimbursement

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Bush Budget Mum On Medicare Cuts

Published on Fri Jan 21, 2005

But new figures from White House may fan the flames of ongoing struggle

With Congress in search of budget savings this year, it's unclear whether trimming Medicare is part of the plan.

Observers note that, since the administration has committed itself to cutting guaranteed Social Security benefits in 2005, it likely viewed it as too politically risky to tinker with another major program for seniors.

In addition, if Medicare were on the table for cuts, Democratic lawmakers would go after two provisions that Republicans see as key to making the program more market-based. Democrats want to allow the Secretary of Health and Human Services to bargain directly with pharmaceutical manufacturers on drug prices, rather than leaving negotiations to a number of private companies. Democrats also would cut payments to Medicare Advantage private health plans, because the payments currently run higher than what Medicare pays for fee-for-service beneficiaries.

To avoid complicating CMS' already Herculean task in launching the drug benefit next January, as well as to avoid Democratic attempts to trim back health plan pay and replace private-sector with public-sector bargaining, the Bush administration and congressional Republican leaders who developed 2003's Medicare Modernization Act are pushing hard to keep Medicare out of budget discussions.

However, one Republican senator who will figure heavily in this year's fiscal debates, new Budget Committee Chair Judd Gregg (R-NH), has been suggesting that he hopes to include Medicare in budget trimming activities this year.

And when the administration released new figures Feb. 8 estimating that ten-year Part D spending will total $720 billion from 2006 through 2015 - up from the $534 billion CMS actuaries predicted for 2004 through 2013 - more conservative lawmakers began saying that they, too, hope to trim Medicare spending.

Some Republicans called last week for capping the benefit's 10-year cost at the initial Congressional Budget Office estimate of $400 billion for 2004 through 2013, on the argument that this estimate was the basis on which they voted for the benefit in 2003. Others are suggesting that the drug benefit be limited to the lowest-income beneficiaries. Meanwhile, Democrats and some Republicans are calling anew for repealing the ban on the HHS Secretary negotiating for drug prices.

For its part, CBO released its own figures for 2006-2015 Part D costs Feb. 9. While an apples-to-apples comparison is difficult, CBO continues to predict a slightly lower cost than CMS - likely somewhere between $650 and $700 billion - based partly on CBO's prediction that fewer people will enroll in Part D.

Despite the hoo-ha, however, it's hard to believe that the drug benefit's rising price really surprises lawmakers, at least any who have paid attention to health care debates over the past several years.

The $720 billion estimate represents the first Part D cost projection to include an entire ten-year period during which the benefit will be in operation. This fact alone inevitably swells the cost beyond estimates produced when the law was first passed, which included two full years for which Part D would not even exist.

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