White House Brushes Aside Criticism Over Medicare Plan

Times Staff Writers

Bush administration officials, facing harsh criticism over a newly disclosed estimate that the Medicare prescription drug law could cost $134 billion more than expected, on Friday defended the law and sought to turn aside accusations that they had misled lawmakers about the potential expense.

“The Medicare reform we did is good reform,” President Bush told reporters. “It fulfills a long-standing promise to our seniors.”

White House spokesman Scott McClellan downplayed the $534-billion administration estimate that became public Thursday, which is about 33% higher than the bill’s original price tag of $400 billion spread over 10 years. McClellan said the higher estimate represented “a difference of about somewhere in the 1% to 2% range” of total Medicare and Medicaid spending.


But with the federal government facing a record budget deficit, analysts and members of Congress said the controversy could prompt conservative Republican lawmakers to reject some of the president’s election-year spending plans.

“They will certainly insist that the president drop any thoughts of new spending initiatives. Mars has probably lost out to Medicare,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group in Virginia.

The higher cost estimate for Medicare “is going to make it far more difficult for [conservatives] to do what they really want to do, which is to cut taxes and make the existing tax cuts permanent,” Bixby said.

Rep. Mac Collins (R-Ga.), who voted for the Medicare bill, said the new cost estimate is “very concerning to those of us who were very reluctant to vote for the bill to begin with.” He called on Bush to help Congress “hold the line” on spending.

A congressional Republican aide who spoke on the condition that he not be named said the higher Medicare estimate would test the loyalty of conservative Republicans to the president’s agenda.

“The right is steadily getting demoralized,” he said.

“This is exactly what conservatives feared,” Rep. Jeff Flake (R-Ariz.), who voted against the Medicare bill, said of the apparently ballooning costs.

The new Medicare estimate also prompted some groups to question whether the White House had worked in good faith with Congress on the legislation, which passed the House last year on a narrow 220-215 vote after extensive lobbying to sway conservatives wary of its cost.

Bush signed the measure into law Dec. 8. It will give Medicare beneficiaries their first-ever subsidies for prescription drugs and take steps to give private insurers a larger role in serving Medicare seniors and the disabled.

Keith Ashdown, a vice president of Taxpayers for Common Sense, a Washington-based budget watchdog group, said that fiscally conservative lawmakers got “suckered by a classic financial bait-and-switch by the administration.”

Fred Smith, president of the Competitive Enterprise Institute, said the new figures hurt the administration’s credibility. “Every pressure tactic known to mankind was used to get it through the House at $400 billion. At another $150 billion, it wouldn’t have gotten through,” Smith said.

Robert D. Reischauer, a former director of the Congressional Budget Office who now is president of the Urban Institute, a Washington think tank, said the discrepancy represented a “sort of a domestic weapons-of-mass-destruction scenario: Was Congress given the best information at the time they were making the decision?”

“How much did they know and when did they know it?” Reischauer asked.

Bush said Friday that he first learned of his administration’s 10-year, $534-billion cost estimate two weeks ago in a briefing on his new budget proposal. The higher estimate came from the actuaries at the Centers for Medicaid and Medicare Services, while the lower and highly publicized estimate of $400 billion had come from the Congressional Budget Office, which works for lawmakers.

“The president is always very clear with the American people in the decisions that we are making and very upfront with them about the information that we have,” McClellan told reporters.

But administration officials, budget analysts, lobbyists, political conservatives and congressional sources said the administration, if not the president, had long known of the discrepancy.

The higher cost estimate was “well known in the fall,” said John Rother, who as director of policy and strategy for the seniors’ group AARP helped draft the Medicare legislation.

“It’s not new, it’s just now [being made] public,” he added.

“This should be no surprise to anyone,” said an administration official who spoke on condition of anonymity. “During the course of negotiations [with lawmakers], we were at the table. We did tell them our thoughts on these things.”

It was widely reported last summer that official cost estimates generated by the nonpartisan Congressional Budget Office were based on different assumptions than the estimates made by the Medicare actuaries.

Specifically, CBO officials believed that fewer of Medicare’s 40 million senior and disabled beneficiaries would elect to receive the voluntary drug benefit or join private Medicare managed-care plans.

Early cost estimates also came in lower than final projections because Democrats largely succeeded in removing from the final Medicare bill a Republican cost-containment proposal that would have required private health plans to compete with one another for Medicare contracts.

And after intense lobbying by private insurance companies, the final bill included substantial increases in Medicare payments to managed-care plans, which added to the bill’s costs.

“These estimates document that if more people go into managed care it will cost more,” said Rother of AARP. “It may save the beneficiaries money, but it will not save the program money.” AARP supported the legislation.

Senate Democratic Leader Tom Daschle of South Dakota said Friday that the higher cost estimate should convince Republicans to support Democratic legislation that would “allow Medicare to negotiate lower drug prices, and to get rid of the billions of dollars in giveaways to HMOs that are in the plan now.”

But with Democrats in the minority in Congress and Republican lawmakers unlikely to try to scale back the Medicare program in an election year, the effect of the new cost estimates on beneficiaries was unclear.

Under the legislation, seniors will be able to buy a card in June entitling them to drug discounts. The full drug benefit does not take effect until 2006.

Long before then, however, seniors and other U.S. voters will go to the polls. Some analysts wondered Friday how the Medicare cost controversy would affect Bush’s reelection campaign.

The significantly higher price tag is “a big red flag,” said former House Republican leader Bob Michel of Illinois. “It’s just that much more of a debt bestowed upon our kids and grandkids.”

Scott Reed, a GOP strategist who managed Bob Dole’s 1996 presidential campaign, said Bush could still use Medicare to his advantage.

“The fact that he got this legislation is still a huge achievement,” he said.

But Harvard University professor Robert Blendon, a specialist in public opinion and healthcare issues, said the controversy over Medicare cost estimates “really makes it much more difficult an issue for Bush.”

The higher cost estimates could also give Democrats ammunition to argue that the bill amounted to a giveaway to the insurance and drug industries, he said.


Times staff writer Edwin Chen contributed to this report.