Bush Threatens to Veto Controls on Medicare Drug Spending

Published April 1, 2005

Two days after Bush administration officials released new cost estimates for the Medicare prescription drug program, President George W. Bush threatened to make the first veto of his presidency against efforts to control the program’s costs.

“Any attempt to limit the choices of our seniors and to take away their prescription drug coverage under Medicare will meet my veto,” Bush said during a February 11 swearing-in ceremony for Mike O. Leavitt as the new secretary of the U.S. Department of Health and Human Services (HHS).

The remark clearly was aimed at federal lawmakers who have said something needs to be done to control Medicare drug costs.

Estimated Costs Soar

Bush championed the prescription drug benefit–originally estimated to cost $395 billion over 10 years–and signed it into law in December 2003. The proposal squeaked to victory after the vote was delayed several hours while White House officials twisted lawmakers’ arms and promised reluctant Republicans the $395 billion estimate was solid.

Seven weeks later, HHS announced a new estimate, $534 billion. Then on February 9 of this year, the White House announced the expected cost would be $724 billion.

Administration officials explained that earlier estimates included 2004 and 2005, before the prescription drug program fully took effect. The new estimate projects 10 years from 2006, when the full prescription drug benefit goes into effect.

“When it’s fully phased in, of course it’s going to cost more,” White House spokesman Scott McClellan told reporters.

Lawmakers Challenge Explanation

Some Republican lawmakers do not accept that answer. Democrats are calling for an investigation.

“We did not think we were creating an open-ended program that would grow completely out of control,” Sen. Jeff Sessions (R-AL) told White House Budget Director Joshua Bolten during a February 9 Senate Budget Committee hearing.

Sessions told Bolten he felt misled, saying he may draft legislation that would hold the drug benefit’s cost to $400 billion over a decade, close to the amount the Bush administration promised hold-out members of Congress to win their support.

Democrats also jumped on the higher estimates. Sen. Dianne Feinstein (D-CA) told reporters, “I believe the Senate Finance Committee should investigate the process used to estimate the cost of this bill.”

Sen. John F. Kerry (D-MA) said, “If the numbers don’t add up for Medicare, how can we be sure they will add up for Social Security?” Kerry’s comment came in reference to Bush’s proposal to allow younger workers to put some of their Social Security payroll taxes into private accounts.

Unfunded Liability Evident

Some of the problem apparently stems from the sources of the estimates. The original $395 million estimate came from the Congressional Budget Office (CBO). The later estimates have come from HHS. The two agencies used different scoring methods to arrive at their estimates.

The Medicare law requires those who sign up for drug coverage to pay a premium now estimated at about $35 a month, an annual deductible of $250, and other fees. Benefits are available to all Medicare recipients, regardless of their income or assets. Different assumptions about utilization of the new benefit have produced significantly varying cost estimates.

Agreement is widespread, however, that the program will be expensive in a period when Medicare costs are scheduled to rise anyway. On February 9, Bush told White House reporters America’s aging population will strain Medicare as well as Social Security. “There’s no question that there’s an unfunded liability inherent in Medicare that Congress and the administration are going to have to deal with over time,” Bush said.

“Growth Is Unsustainable”

Recent comments by CBO Director Douglas Holtz-Eakin painted an even bleaker picture.

He estimated 20 percent of Medicare spending 10 years from now will go toward new prescription drug payments. Entitlement spending cannot continue to grow at such a pace, he said.

“The growth of these programs is simply unsustainable. Big changes are coming regardless of what you might think at the moment,” Holtz-Eakin said February 1 to the 1,500 health industry executives who attended the 2nd Annual World Health Care Congress in Washington, DC.

Holtz-Eakin forecast that Medicare and Medicaid will cost taxpayers more than Social Security within 10 years. Together, those three programs will consume more than half of all federal spending, he told World Health Care Congress attendees.

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.