Cost Estimates of Medicare Legislation Rise From $400B to $534B Over 10 Years

The new Medicare law (HR 1) will cost $534 billion over the next 10 years, $134 billion more than previously estimated, Bush administration officials have concluded, the Washington Post reports. Administration officials did not explain the reason for the higher estimate from the Office of Management and Budget, which contrasts with a Congressional Budget Office estimate released earlier this week of $395 billion over 10 years. White House spokesperson Trent Duffy said that estimating the cost of the Medicare expansion "is a terrifically difficult area to try to predict" because it depends on "any number of unknowns," including how many people will participate in the prescription drug benefit, how much drug prices could increase and how many beneficiaries enroll in private health plans. "The bottom line is, President Bush made a commitment to give seniors a prescription drug benefit and modernize Medicare, and he's delivered," Duffy said (Goldstein/Eilperin, Washington Post, 1/30). Duffy added that Bush will push for additional "cost-containments" not included in the legislation, according to the Washington Times (Dinan, Washington Times, 1/30). Some analysts said that the discrepancy is attributable to "long-standing disagreements over how rapidly Medicare's overall costs will rise," the Post reports (Washington Post, 1/30). An unnamed Bush administration official said that OMB officials often differ with congressional budget experts, adding, "It's difficult to predict the behavior of 40 million people in a market that does not now exist." Former CMS Administrator Tom Scully said, "The estimate may be surprising to some people, but it's not shocking to me. It just reflects a difference of opinion among actuaries who make different assumptions about the growth of drug spending and enrollment in private plans." William Pierce, a spokesperson for HHS, said, "The Medicare bill had lots of moving parts. We could not make a final analysis of the cost until it became law" (Pear, New York Times, 1/30).

Reaction
The new estimate "immediately enraged lawmakers and policy analysts at both ends of the ideological spectrum," with both Republicans and Democrats in Congress promising to push for changes to the new law, the Post reports (Washington Post, 1/30). The New York Times reports that the news could "strengthen the hand of Republicans who oppose" some Democrats working to expand the drug benefit. According to the Times, the new estimate also could help Democrats who hope to "save money by controlling drug prices and reducing Medicare payments to private insurers" (New York Times, 1/30). CongressDaily reports that the estimate is "sure to anger House conservatives who said the $400 billion figure was unrealistically low" (Rovner, CongressDaily, 1/29). Rep. Patrick Toomey (R-Pa.), who voted against the legislation, said, "The new cost estimate is very disturbing, and I am concerned that the bill will end up costing even more than $540 billion" (New York Times, 1/30). Rep. Jeb Hensarling (R-Texas) said he hopes the new estimate will encourage conservatives and other lawmakers to work on efforts to control Medicare spending. Hensarling was one of a number of conservative Republicans who voted for the bill after Bush and House Speaker Dennis Hastert (R-Ill.) assured them that costs would fall within the CBO estimate, the AP/Long Island Newsday reports (AP/Long Island Newsday, 1/30). Sen. Edward Kennedy (D-Mass.) said, "The news on the Republican Medicare bill gets better and better for drug company profits and HMOs and worse and worse for seniors and the Medicare program" (New York Times, 1/30). Rep. Rahm Emanuel (D-Ill.) said, "The ink isn't even dry (on the new law). There's not a single discount card issued yet, and the price went up over 30%." Rep. Richard Neal (D-Mass.) said, "I think there was an effort made to camouflage the true costs because the Republican conservatives, who already were in protest, would have been in revolt" (Milligan, Boston Globe, 1/30). Robert Moffitt, director of health policy studies at the Heritage Foundation, said, "It's almost like shooting fish in a barrel to say 'We told you so.'" Gail Wilensky, a senior fellow at Project HOPE and a former CMS administrator, said, "I'm not sure I've ever heard of such a big discrepancy ... weeks after legislation is passed" (Washington Post, 1/30). Steve Hahn, a spokesperson for AARP, said the higher estimate is "proof the law needs to be modified," according to the Fort Lauderdale Sun-Sentinel (Lytle, Fort Lauderdale Sun-Sentinel, 1/30).

NBC's "Nightly News" Thursday reported on the rise in cost estimates for the Medicare legislation. The segment includes comments from Bush, former President Bill Clinton and Rep. Mike Pence (R-Ind.) (Gregory, "Nightly News," NBC, 1/29). A video excerpt of the segment is available online in RealPlayer.

New York Times Examines Cancer, Wheelchair Reimbursements
The New York Times in two articles on Friday examined a possible ban on Medicare payments for off-label uses of cancer drugs, as well as efforts to track fraud in charges for power wheelchairs. Summaries of the articles appear below.

• CMS officials are "close" to determining whether the agency will begin denying Medicare reimbursements for off-label use of cancer drugs, a decision that could "represent the first step in a broad overhaul of the program's drug reimbursement policies," the Times reports. The agency is reviewing four drugs -- GlaxoSmithKline's Bexxar, Biogen Idec's Zevalin, Pfizer's Camptosar and Sanofi-Synthelabo's Eloxatin -- that are often prescribed for unapproved uses. Dr. Sean Tunis, chief medical officer for CMS, said that cost is the main concern with Bexxar and Zevalin, which are approved as a third-line treatment for non-Hodgkin's lymphoma. Tunis said that severe side effects prompted the review of Camptosar and Eloxatin, which are approved as presurgical treatments for colon cancer. Eliminating reimbursements for off-label uses of cancer drugs could result in "billions" of dollars in savings for Medicare, but the move would push patients to pay more out-of-pocket or require physicians to alter treatment courses, according to the Times. In addition, such a ban would likely reduce sales revenue from cancer drugs and "pressure" drug makers to lower their prices, the Times reports. CMS, which had scheduled a decision on the drugs for Friday, has delayed the announcement. Tunis said the decision "could potentially be a seismic shift," adding that "it would be a significant departure from how we've approached this in the past" (Harris, New York Times, 1/30).
  
  
• The Times also examined the "controversy" surrounding efforts by Medicare officials to "crack down" on fraudulent billing for power wheelchairs. Demand for the wheelchairs in recent years has "soar[ed]," and Medicare reimbursements for the chairs increased to more than $845 million in 2002, from about $289 million in 1999, as the number of claims "nearly tripled" to 159,000 in 2002 from 55,000 in 1999, according to the Times. In response, CMS initiated a 10-point program to monitor claims for the wheelchairs more thoroughly. The HHS Office of the Inspector General also has won fraud convictions in more than 12 cases and is prosecuting more than 50 additional cases. However, companies that market the wheelchairs say the agency efforts have "tightened the eligibility requirements, which they say is hurting both them and their customers," the Times reports (Janofsky, New York Times, 1/30).