The Tar Pit

Wednesday, February 09, 2005

Bush Prescription Drug entitlement
becomes a budgetary abyss

From today's Washington Post:

The White House released budget figures yesterday indicating that the new Medicare prescription drug benefit will cost more than $1.2 trillion in the coming decade, a much higher price tag than President Bush suggested when he narrowly won passage of the law in late 2003.

The projections represent the most complete picture to date of how much the program will cost after it begins next year. The expense of the new drug benefit has been a source of much controversy since the day Congress approved it, with Democrats and some Republicans complaining that the White House has consistently low-balled the expected cost to the government.

As recently as September, Medicare chief Mark B. McClellan said the new drug package would cost $534 billion over 10 years. Last night, he acknowledged that the cumulative cost of the program between 2006 and 2015 will reach $1.2 trillion, but he cited several major savings and offsets that he said will reduce the federal government's bottom-line cost to $720 billion.

Wait a minute... "reduce the federal government's bottom-line cost to $720 billion?"

Who does McClellan think he's kidding? If there is any certainty to Bush Budget numbers, it's that the Bush Administration will always wildly underestimate the bottom line expense of the President's ill-advised prescription drug expansion of the welfare state.

$1.2 trillion is $670 billion over Bush's promised $530 billion expense when the prescription drug program was passed. McClellan's $720 billion wishful thinking is "only" $190 billion over budget.

Is that fiscal responsibility?

Before you answer, let's tip-tope back through the inconvenient record:

Bush's budget will show a $530 billion cost over 10 years for the addition of a prescription drug benefit for the Medicare health program for senior citizens. That is 33 percent more than was anticipated when the Medicare overhaul was approved less than two months ago.
Bush Seeks to Soothe Republican Worries on Budget
Reuters - Sat January 31st, 2004 - Caren Bohan

Calculating back, $530 billion ÷ 1.33 = $400 billion (in round numbers).

But that $400 billion Prescription Drug price tag is up from the $300 billion estimate from 2002:

WASHINGTON (Reuters Health) - Congress will seek to set aside approximately $300 billion over the next 10 years to fund a Medicare prescription drug benefit, congressional aides said Friday.

Aides to House Speaker Dennis J. Hastert (R-IL) said that he would seek to attain the $300 billion figure, an amount roughly equal to the money approved for the benefit as part of last year's budget resolution. Early negotiations last year failed to produce an agreement on prescription drugs or on overall Medicare reform.

The $300 billion is likely to exceed President Bush's budget request for prescription drugs by approximately $100 billion, said Hastert spokesman John Feehery.
Congress to Seek $300 Billion for Medicare Benefit
Reuters - January 28th, 2002 - Todd Zwillich

$1.2 trillion is almost a 300% increase over $300 billion, and we're just getting started. That $300 billion exceeded "President Bush's budget request for prescription drugs by approximately $100 billion," so we're looking at an initial projection of $200 billion.

So the new figure of $1.2 trillion represents a 500% increase over the $200 billion projection. Or to use McClellan's guess, $720 billion is only 360% over budget.


Numbers -- The budget includes only $153 billion for both an unspecified drug plan and undefined Medicare reform. Last year's House Republican plan was solely for prescription drugs. It carried a ten-year price tag of $159 billion, and the price of prescription drugs has only increased. Last year's plan, which relied on an unstable and unreliable Medigap market to provide drug coverage to seniors, was deemed unworkable by the insurance industry itself.

House -- This year, when asked about the President's Medicare numbers, a top House Republican, Rep. Billy Tauzin, Chairman of the House Energy and Commerce Committee said, "Everybody knows that figure is gone. It was set before CBO re-estimated last year's House bill," which he said is "already over $200 billion and climbing." (Congress Daily, page 3, 3/22/01)
Congressional Republicans Reject Budget's Medicare Prescription Drug and Reform
(Google HTML cache)

So, since early 2001, President Bush's Prescription Drug entitlement has gone from a projected $153 billion to $1.2 trillion (or $720 billion, if you still trust Bush numbers) in the first ten years. That's an increase of between 350% and 700% over the Bush Administration's initial estimates.

Of course, all of those numbers are projections for the time period prior to the retirement of most of the Baby Boomers.

Then it gets worse.