Medicare Frauds

What’s $320 billion among friends?

(Editorial from the March issue of my magazine)

Last March and April in this space I wrote about the scandal(s) behind the passage of the Medicare prescription drug bill. At the time, I was irate over the fact that the White House hid $134 billion in costs for the bill, conveniently capping the publicized cost at $400 billion in order to gain votes. It was transparent fraud, and it was compounded by the fact that the chief actuary at Medicare/Medicaid was threatened with firing if he revealed the “true costs” of the prescription drug benefit bill.

The former head of the agency, Thomas Scully, was recently fined $85,000–equal to seven months’ salary–for this action,* Fortunately, he’s now on the speaking/lobbying trail, discussing the intricacies of health care coverage. Why, “[f]rom Medicaid and Medicare to the future of U.S. public health services, Thomas Scully precisely understands the intricacies of health care & public policy,” according to his online biography. This job must’ve taken up a good deal of Mr. Scully’s time. After all, his busy travel schedule prevented him from testifying in front of Congress about Medicare costs last April.

But maybe I shouldn’t be so harsh on Mr. Scully. After all, it appears that his strongarm tactics only cost the American people $134 billion (minus the amount of his fine). As we learned in February 2005, the true extent of budget mendacity was actually a lot worse than we thought.

Revised estimates of the prescription benefit’s cost now range from $720 billion to $1.2 trillion over 10 years. The higher number’s skewed by ignoring cost-savings that the program is likely to generate, but it’s a big number that left-wing partisan hacks like to publicize. The problem is, that leaves the right-wing partisan hacks swallowing a $720 billion program, nearly double what was approved.

How on earth did the numbers jump from $400 billion to $534 billion to $720 billion? Mainly because the initial estimates of the cost included years when the program wouldn’t yet be in effect. That’s right: Congress voted on a bill for a Medicare prescription drug benefit that takes full effect on Jan. 1, 2006, but the initial (fraudulent) costs floated were for the 10-year stretch from 2004 to 2013, since the first phase-ins were to begin last year. But the cost of the program is negligible for 2004 and 2005, making the program look cheaper than it is. This administration has made a practice of that sort of cost-estimate trickery, a hinge of its 2001 and 2002 tax cuts.

So it’s the 2006-2015 costs that are now leaping up to bite us, just around the same time that the administration has a much more valid point to make about the long-term insolvency of Social Security. Virtually no one will treat this matter seriously, since the White House has made a practice of crying wolf, fiscally speaking.

Last June, in a Policy Forum on fiscal policy, Douglas Holtz-Eakin, the director of the Congressional Budget Office (and one of the few people to denounce the initial false numbers of the Medicare bill), remarked, “Two equally plausible scenarios for the future of healthcare costs yield Medicare and Medicaid being either 11% of GDP–half the size of the current federal government–or over 20% of GDP–larger than the current federal government. So there’s an enormous uncertainty out there, but the trends in the long term, I think, are the central issue. There’s no question about that.”

No question at all.

–Gil Roth
Editor

* Actually, the correct amount of the fine is $84,933. We want to be exact about our numbers.

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