CBO: Medicare reform plans come up short

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Sunday, July 27, 2003

July 28, 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 last week by the Congressional Budget Office, the Wall Street Journal reported.

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 Congressional Budget Office (CBO).

The CBO estimates the House bill would cost a net of $567 billion over 10 years, including $174 billion in lost revenue because of separate legislation attached to the bill that would create tax-preferred health savings accounts for people under age 65.

The Senate bill would cost a net of $437 billion over 10 years, including $40 billion from a single provision that would require pharmacy benefit managers, which are expected to administer any Medicare drug benefit passed by Congress, to disclose to Medicare officials their discounted arrangements with drug manufacturers, according to the CBO.

The agency estimates the drug benefit in the House bill would cost $408 billion over 10 years, and the Senate plan's drug benefit would cost $422 billion over the same period, reports CongressDaily.

According to the 60-page 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.

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