Medicare drug benefit nearing $1 trillion price tag over next decade

The prescription drug benefit that Congress adopted as part of a Medicare overhaul law enacted in 2003 will cost the federal government nearly $1 trillion over the next 10 years, about $600 billion more than the administration first said the program would cost, according to projections developed by Medicare actuaries.

The projections, the first to cover a 10-year period in which Medicare will provide full drug benefits, show that the drug benefit for eligible senior citizens will cost $1.19 trillion from fiscal 2006 to fiscal 2015. That amount will be offset slightly by features of the law that will bring in money, putting the final estimated price tag at $913 billion.

Medicare's last estimate of $517 billion over a decade included years in which the benefit was being phased in. The new numbers likely will add fuel to debates on Capitol Hill over the cost of the drug benefit and attempts to trim the federal deficit.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said the higher estimates are understandable, since they cover 10 years of the full benefit. But, he said, "I'd like to see an apples-to-apples comparison."

Attempts to hold down the deficit might bring added pressure to trim entitlement programs such as Medicare and Medicaid. "It is these entitlement programs that we as a Congress have an obligation to try to fix today so they don't end up bankrupting our children and grandchildren," Senate Budget Committee Chairman Judd Gregg, R-N.H., said in a speech on the Senate floor.

Mark McClellan, Centers for Medicare and Medicaid administrator, told reporters Tuesday night that the actual cost to the government would be about $720 billion over 10 years, a price tag that reflects savings to the Medicaid program triggered by the new Medicare drug law.

Under the drug program, Medicare will pick up the drug costs of beneficiaries who previously got their medications through the Medicaid program. That tracks with previous estimates, he said. "There is no significant change in the scoring of the drug benefit," McClellan said.

Still, Democrats are expected to use the new Medicare numbers to argue for additional cost controls, particularly for soaring prescription-drug prices. Republican leaders have resisted cost-saving measures sought by Democrats, such as allowing the HHS secretary to negotiate with drug companies for lower prescription drug prices for Medicare enrollees. The new numbers "will certainly bring attention to those issues," Grassley said.

Medicare cost estimates have proven controversial in the past. While Congress debated the Medicare drug bill, the administration told lawmakers that it would cost less than $400 billion. But after the law was enacted, the administration revealed that its own number crunchers believed the bill would cost $534 billion over 10 years, beginning with 2004. That revelation caused an uproar on Capitol Hill, where Democrats and some Republicans said the bill would not have passed if lawmakers had known about the higher cost estimate.

Democrats also are trying to muster opposition to Bush's budget proposal to cut $45 billion from Medicaid.

Meanwhile, Sens. Gordon Smith, R-Ore., and Jeff Bingaman, D-N.M., Wednesday will propose legislation to create a commission to study Medicaid, which will be charged with reviewing and recommending long-term goals for the programs, the population it serves, federal and state fiscal responsibilities for Medicaid and the quality of health care provided.