When last we glanced at this ring of the clown show, George W. Bush was saying that HHS Secretary "Tommy" Thompson and Treasury Secretary John Snow had kept the administration 's internal cost estimates of the Medicare Reform bill from him. George W. Bush was lying: if he had been telling the truth, then there was no way that Snow and Thompson would still have their jobs.
Now the Congressional Budget Office writes a letter to Representative Nussle explaining why the administration's estimates are higher than CBO's. There are a lot of differences, and I'm not qualified to have an opinion on any of them:
Posted by DeLong at February 4, 2004 10:39 AM | TrackBack | | Other weblogs commenting on this postLetter to the Honorable Jim Nussle regarding a comparison of CBO and Administration estimates of the effect of H.R. 1 on direct spending: The Administration's estimate of $534 billion in outlays through 2013 is $139 billion higher than CBO's $395 billion estimate.Almost all of that difference is attributable to our estimates of the Part D drug benefit and the Medicare Advantage program.
PART D drug benefit: The Administration's estimate is about $100 billion higher (2004-2013)
- Basic benefits account for about $32 billion (about 7 percent higher than CBO estimates).
The Administration assumes a higher participation rate (94 percent of all Medicare enrollees, compared to CBO's assumption of 87 percent participation).Both agencies exclude about 5 percent who would be subject to secondary-payer rules. The Administration assumes that 94 percentage points out of the remaining 95 percent will participate.The Administration estimates per capita costs that are about 4 percent higher throughout the 2006-2013 period than CBO estimates.
CBO excludes Medicare enrollees who decline Part B--we assume those beneficiaries generally will not participate because they have already showed that they will turn down a benefit with a 75 percent subsidy. CBO also excludes some beneficiaries who have generous prescription drug coverage through the Federal Employees Health Benefits program and other federal programs.
The differences in the number of participants and the per capita costs each account for about half of the $32 billion difference in the cost of the basic benefit.
- The Administration's low-income subsidy is about $47 billion higher (a 24 percent difference).
The Administration assumes higher participation (13 to 15 percent higher than CBO after the third year of the program). CBO estimated participation in the low-income subsidy based on experience with participation of Medicare beneficiaries in the Medicaid, QMB, and SLMB programs.
The Administration assumes full participation immediately; CBO ramps up over three years.
The Administration's per capita cost is higher than CBO's--initially 7 percent to 10 percent higher, with the difference shrinking to 4 percent by 2013.
- Savings in the Medicaid program account for about $18 billion of the difference. Medicaid savings will occur because creation of the Medicare drug benefit will end Medicaid's responsibility for providing prescription drugs to individuals who are eligible for both programs. However, those savings will be offset in part by additional Medicaid costs for newly enrolled people. CBO estimates that H.R. 1 will reduce federal Medicaid spending by $141 billion over the 2004-2013 period, compared to the Administration's estimate of $123 billion.
CBO's estimate of net savings is higher largely because of differences in baseline projections for Medicaid spending on waiver programs to provide limited drug coverage to low-income Medicare beneficiaries who do not otherwise qualify for Medicaid. CBO's baseline projection of federal Medicaid spending for those waiver programs was $18 billion higher than the Administration's baseline projection.Medicare Advantage: The Administration's estimate is $32 billion higher ($46 billion vs. $14 billion)
- The Administration assumes much higher participation (32 percent of Medicare beneficiaries enrolled in Medicare Advantage (MA) plans vs. CBO's estimate of 9 percent).(1)
Both estimates assume that many of the participants in MA plans are in areas where the payments to MA plans and beneficiaries (through premium rebates) would exceed what it would cost if those beneficiaries were in the fee-for-service (FFS) sector. Most of the additional participants in the Administration's estimate are in relatively low-cost, low-density areas where the payments to MA plans and beneficiaries would be substantially higher than the cost of those beneficiaries in the FFS sector.
http://www.nytimes.com/2004/02/03/business/03CARE.html?hp
Companies Limit Health Coverage of Many Retirees
By MILT FREUDENHEIM
Employers have unleashed a new wave of cutbacks in company-paid health benefits for retirees, with a growing number of companies saying that retirees can retain coverage only if they are willing to bear the full cost themselves.
Scores of companies in the last two years, including the telecommunications equipment giants Lucent Technologies and Alcatel and a big electric utility, TXU, have ended medical benefits for some or all of their retirees and instead offered to let them buy coverage through a group plan. This coverage is often more expensive than many retirees can afford.
Posted by: anne on February 4, 2004 10:51 AMExperts expect that the trend, driven by the fast-rising cost of health care, will continue, despite the billions of dollars that the government will distribute to companies that maintain retiree health coverage when the new Medicare drug benefit begins in two years. In contrast to pension financing, companies are not obligated to set aside funds to pay for retirees' health benefits, and the health plans can usually be changed or terminated at the company's choosing, with no appeal available to the retirees.
The costs can be a shock. According to surveys by benefits consultants, companies that offer health benefits to retirees typically have subsidized about 60 percent of the premium. Losing that support all at once can mean hundreds of dollars a month in unexpected costs.
Moreover, in dropping their subsidies, many companies push retirees into insurance pools that are separate from those of younger, healthier workers, executives said. That lowers the company's costs for insuring its current workers, while raising the premiums charged to retirees even further.
please don't come to canada, we have too few medics as it is.
Posted by: big al on February 4, 2004 10:57 AMI'm confused. Does this mean central planning does or does not work?
Posted by: Howard Cohen on February 4, 2004 11:01 AMThis will quell some of the anger from Congress. They can write off the WH as a bunch of incompetents that don't know much about cost accounting rather than con men pulling a bait and switch. Congress can call the WH estimates off base and go back to their CBO (All the more reason to keep CBO). This is good news because it whacks about $139 billion of debt due to "technical factors".
OTOH, it gives Congress all the more reason to question the WH numbers. If one item throws the budget estimate off by 5% what else is wrong?
Toss out the 5% figure. It is 5% of the 05 budget but less than 0.2% of the 10 year budget (still not insignificant).
Posted by: bakho on February 4, 2004 11:32 AMDon't worry about the long-term estimates. The actuals will probably be far above the highest government estimate. As usual.
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