CBO: Medicare reform plans come up short

Sunday, August 31, 2003

WASHINGTON - The House and Senate Medicare reform bills (HR 1 and S 1) both would surpass the $400 billion limit over 10 years set by President Bush and approved by Congress in the fiscal year 2004 budget, according to estimates released by the Congressional Budget Office (CBO) in July.

Additionally, the proportion of Medicare beneficiaries expected to enroll in private health plans will be lower in 10 years than it is today, despite efforts in both the House and Senate Medicare reform bills to encourage beneficiaries to enroll in private plans, according to the CBO.

The CBO estimates the drug benefit in the House bill would cost $415 billion over 10 years, and that the Senate plan’s drug benefit would cost $432 billion over the same period. With everything else figured in - lost revenue due to tax-preferred health savings accounts, for example - the House bill could cost as much as $567 billion by some estimates.

The overruns will make it that much tougher for House and Senate leaders to agree on a compromise reform bill, say industry sources.

According to the 67-page CBO analysis, an estimated 11% of Medicare beneficiaries would be enrolled in private health plans in 10 years if the House reform bill becomes law. The report estimated that 9% of beneficiaries would be enrolled in private plans in 10 years if the Senate plan is enacted.

Currently, 12% of Medicare beneficiaries are enrolled in HMOs, and 1% are enrolled in other private health plans, according to CMS statistics. In a June 26 memo, Richard Foster, the CMS chief actuary, estimated that “roughly 43%” of Medicare beneficiaries would enroll in a private health plan by 2010 under the House bill.

CMS Administrator Tom Scully said, “I’ve never seen such a big difference in judgment.”

Scully added that the disparity stems from a disagreement over whether private plans would be less expensive than traditional Medicare, which would allow private plans to offer lower premiums to entice beneficiaries to enroll. HME