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Tilting at Windmills

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February 3, 2006
By: Kevin Drum

SMOKE AND MIRRORS AT HHS....Good news, campers! The Department of Health and Human Services says the Medicare prescription plan is coming in under budget!

When the program was being developed, before we had any actual experience with the cost of drug coverage, it was estimated that the Part D benefit would cost about $700 billion in its first ten years. But as plans compete for seniors business, they are driving the costs of prescriptions down. According to our latest estimates, the costs of the Medicare prescription drug benefit are significantly less than expected.

The federal government now projects the cost to be about 20 percent less per person in 2006. Over the next five years, payments are now projected to be more than 10 percent lower than first estimated. That is a significant savings for taxpayers.

Well. That is good news, isn't it? Competition is certainly a wonderful thing.

And yet....something is niggling at me. You see, back when the program was being developed, HHS actually estimated it would cost $400 billion, not $700 billion. As we later learned, this was just a flat out lie, designed to fool Congress into voting for it. Shortly after the bill passed, HHS admitted that its chief actuary had actually estimated a cost of $500-600 billion but had been forbidden from revealing this to anyone. Then, last year, they upped the estimate again to $720 billion. So assuming that the 10% "savings" applies to the entire 10-year budgeting period, it means HHS is now estimating a cost of $650 billion, which is actually far higher than either of the estimates from two years ago.

It's also worth noting that HHS has come up with this alleged 10% savings after a grand total of one month of experience with the program. In fact, it comes from a document called "The Secretary's One Month Progress Report on the Medicare Prescription Drug Benefit." So take this news with a great big shaker of salt.

Kevin Drum 12:03 AM Permalink | Trackbacks | Comments (42)

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Comments

Why would anyone believe anything these people say anymore?

Really. Just assume they are lying, and go from there.

Posted by: craigie on February 3, 2006 at 12:09 AM | PERMALINK

These guys are prceless...they'll sieze on anything and try and turn it into a positive spin.

First as noted, we are already just a month into this debacle and there is one very plain and simple reason why they are "under budget".....a lot fewer people than expected have signed up.

Stories have already circulated that a lot of seniors are waiting until later in the year before making a decision on whether or not to join.

Equally interesting, a significant number of seniors have run the n umbers and discovered that they are better off without the drug bill and instead pursuing the medications they need from foreign sources because they are so much cheaper it still is a better bargain there than through the plan.

Remember too that this Administration had a wonderful way of making it look like the costs of the plan were lower than they would really be.......they simply started computing the ten-year projection of costs a full YEAR before it actually got up to speed...so right there you cut out a full 10% of the decade long projections.

NEVER believe ANYTHING these people tell you.....EVER

Posted by: dweb on February 3, 2006 at 12:11 AM | PERMALINK

In other news, George W Bush joins Mensa.

Posted by: craigie on February 3, 2006 at 12:11 AM | PERMALINK

Meh. It's Mike Leavitt.

Posted by: mattH on February 3, 2006 at 12:20 AM | PERMALINK

It's another example of Bush Inc.'s modus operandi. Overestimate costs in order to decrease expectations, and then come in with numbers that are still awful, but that appear less so by contrast.

Posted by: Rich on February 3, 2006 at 12:26 AM | PERMALINK

Can anyone with a law degree explain why noone went to jail for that?

Posted by: Boronx on February 3, 2006 at 12:41 AM | PERMALINK

The program is based upon an annual system deductible, doughnut hole, catastrophic coverage, No? We don't even know how many people will sign up by May. Catastrophic drug coverage is where a lot of the federal funding will go and almost no one has reached that point for the year. At this point extrapolating costs over 10 years probably has a 50% error. Reminds me of 10 year deficit projections and EIA long term petroleum cost projections.

Posted by: B on February 3, 2006 at 12:49 AM | PERMALINK

The News Hour discussed this tonight, and this lady ("Mary Grealy is president of the Healthcare Leadership Council, which is made up of executives from the healthcare industry and lobbies on their behalf") was having a ball explaining that millions of people had signed up and prices were falling and everything was moving along as planned.

Her opposite number was a guy from Families USA who pointed out there had been two years to plan for this, so why was it so poorly done? And the numbers are far below expections, and so on.

As usual, the viewers got two sides and weren't educated very much. I'm tired of this format.

Posted by: Linkmeister on February 3, 2006 at 12:55 AM | PERMALINK

I'm tired of this format.

Pistols at dawn would have been much more enlightening.

Posted by: craigie on February 3, 2006 at 1:10 AM | PERMALINK

Is that including the hundreds of millions spent by states to cover those elderly whose enrollment had been FUBARed?

Posted by: Keith G on February 3, 2006 at 1:48 AM | PERMALINK

For Boronx(although I don't have a law degree). In a word--Bill Thomas(R-Bakersfield)chairman of the House Ways and Means Committee. It was on C-span. He didn't want to use the Committee's subpoena power to force the official who had ordered the lying to testify(this was after that official had declined an invitation to testify) just to "satisfy the curiosity"(his words) of some committee members. And as a Chairman can always do, he shut the process down. It was one of the most disgusting displays of arrogance I have ever seen.

Posted by: lee on February 3, 2006 at 2:23 AM | PERMALINK

craigie, maybe not enlightening, but surely equally useful.

Posted by: Linkmeister on February 3, 2006 at 2:49 AM | PERMALINK

Cost estimates got lowered when they realized few seniors were signing up. Fewer customers means less drugs to pay for. Why do I feel that no such savings will come back to taxpayers?

Posted by: Hedley Lamarr on February 3, 2006 at 8:06 AM | PERMALINK

When I read that news report, being a seasoned Bush hater, I assumed the numbers had been fixed somehow. But I didn't have time to check. Thanks for doing the fact-checking!

btw, have you had a thread on the Jan 31 Gallup poll that found that 52% of Americans rate Bush's presidency as a failure? Unfortunately, it is under subscription access, sigh:

"A majority of Americans say that George W. Bush's presidency has been a failure, rather than a success, so far. Americans are somewhat more positive when asked to evaluate the entire Bush presidency rather than the first year of his second term, but more than half say "failure" regardless of the time frame involved. The president's relative strengths are on terrorism, honesty, and "caring about the needs of people like you," while he is less likely to be regarded as having a clear plan for solving problems."

The president's relative strengths are on terrorism, honesty and "caring about the needs of people like you"...!!!! Another piece of evidence that you can fool some of the people all of the time: Medicare is coming in under budget. The economy is growing! We're winning in Iraq!

Posted by: PTate in MN on February 3, 2006 at 8:57 AM | PERMALINK

I think we need to know a lot more about the numbers they're reporting. Weren't there hundreds of thousands of seniors who didn't get their drugs during January? Have they included or excluded the cost of those drugs?

But we do know one thing for certain - this administration's departmental spokepeople are pretty much bald-faced liars.

Posted by: Matt Lantz on February 3, 2006 at 8:59 AM | PERMALINK

As a Muslim, all of this talk of prescription drugs offends me because if you reorder many of the letters of these posts, it spells, "Mohammad." It is blasphemy to render the prophet. This is just another insult to Islam and the Muslim world. Like the many mean things said after 9/11. I declare a jihad on you and will be outside burning the flag of California. But first, I must explain to my children how glorious is the road of martyrdom ...

Posted by: Mo on February 3, 2006 at 9:18 AM | PERMALINK

I believe the estimate went up to $720 billion in large part because, as it was made a year later than the previous estimate, it included a year more of the program actually being in place and a year less of the gearing up period.

So perhaps, when he says '$700 billion in its first ten years', he means '10 years of operation' as opposed to '10 years, beginning with the enacting of the bill'.

Posted by: Aron on February 3, 2006 at 9:22 AM | PERMALINK

Crooks

and

liars.

Posted by: Mitch on February 3, 2006 at 9:25 AM | PERMALINK

I also think that the type size and font you are using is Un-Islamic. Crusader infidels!

Posted by: Mo on February 3, 2006 at 9:26 AM | PERMALINK

Let's not forget that we've been here before, back with Medicare+Choice. Early on, lots of managed care plans offered coverage at low prices, in the hope of capturing market share. But those initial rates weren't sustainable (nor were they meant to be), and costs quickly increased over time (among many problems). So to crow about "savings" at this early stage of the game is simply stupid. And cynical. And, well, business as usual for the crowd running things...

Posted by: Gary on February 3, 2006 at 9:32 AM | PERMALINK

In addition, today's comic strip "Blondie" in which Blondie works outside the home is un-Islamic. She is not wearing a headscarf. I have not been as offended at a blasphemy against the prophet since the strip in which Dagwood makes an enormous sandwich that has unclean pork in it. Why are we Moslems the brunt of your abuse?

Posted by: Mo on February 3, 2006 at 9:40 AM | PERMALINK

Well, Kevin, the Bush administration never lies about anything.

Didn't you hear? They found massive amounts of WMDs in Iraq, but the media just won't report it!

And now they've found massive savings in the prescription drug program!

Faith will help you find anything you want!

Really.

Clap really, really hard and ask Tinkerbell Bush!

Posted by: Advocate for God on February 3, 2006 at 9:40 AM | PERMALINK

Isn't it also this "cheap" because nobody's using it?

Posted by: dj moonbat on February 3, 2006 at 9:42 AM | PERMALINK

"The president's relative strengths are on terrorism, honesty, and "caring about the needs of people like you," "

HONESTY?! Wow, I just about fell off my chair on that one.

Must be the same people that think Hussein planned 9/11 that gave Bush points for honesty.

Not that the other two aren't pretty hilarious as well.

Posted by: lewp on February 3, 2006 at 10:05 AM | PERMALINK

I work for a federal agency that gathers data and releases monthly economic reports. The process is about as efficient as it can be and yet it takes us weeks to properly collect and process the data. Writing a report that analyzes and makes projections from the data takes even longer. For HHS to release such a report, with charts and graphics, on the first day after the reporting period is miraculous! This report must have been written before the plan even went into effect. Wanna bet?

Posted by: Dave on February 3, 2006 at 10:10 AM | PERMALINK

I heard the chocolate ration is going up to 20 grams this week. Awesome!

Posted by: sglover on February 3, 2006 at 10:12 AM | PERMALINK

I've always thought that the Team-In-Charge is a lot more like the Soviet Politbureau than anyone's willing to admit. The similarities run deep and this one is no exception.

If you know anything about the Soviet history, you know how they ran their 5 year plans. They artificially inflated the costs of any enterprise and kept the production quotas artificially low. Then, after only about 2 or 3 years into a 5 year plan, they could claim record level production--often up to 5-12 times the quota from some select workers ("udarniki") at reduced costs.

But even if the quotas and costs were realistic (or if production was even lower than expected or pilfering was higher than expected), the administration could not be prevented from reportiing record-breaking pace. Either the quotas and costs would have been revised in the adverse direction under the guise of "raising standards" or the entire book-keeping would become completely fictitious--that is, they would be producing steel on paper that would never leave the mill (it would then become a problem of inventory control, not production, but that was someone else's department and, therefore, someone else's problem). Anyone consciencious enough to be honest in reporting actual production would soon be demoted, exiled or worse. It would not be unheard of for the most honest person to end up in jail for sabotage or fraud (fortunately, few, if any, have been shot since the mid-50s).

Now, if you review the entire set of claims of the Republican Party from Reagan onwards through Gingrich to Bush II, you will find the economic claims they make are consistently similar to the Soviet five-year plans. The neo-cons are the new Soviets but with more money and unchecked greed.

Posted by: buck turgidson on February 3, 2006 at 10:20 AM | PERMALINK

One of the fundamental problems in the medical industry is that the person prescribing the medicine is not the same as the one who must pay for it. I have worked in the textbook business and it is somewhat analogous. Professors choose the textbooks; students pay for them. They cost a lot and in fact the college bookstores don't make money on them because of very low discounts. That is why they sell used books: better mark up,more profit. New textbooks are a loss leader to build traffic for t-shirts etc. Its not identical bu the take home message is that there really isn't a free market working in medicine.

Posted by: NeilS on February 3, 2006 at 10:44 AM | PERMALINK

craigie,

Is that part of Mensa's outreach program, "Mensa for Dummies".

Posted by: thethirdPaul on February 3, 2006 at 11:02 AM | PERMALINK

"But as plans compete for seniors business, they are driving the costs of prescriptions down. According to our latest estimates, the costs of the Medicare prescription drug benefit are significantly less than expected."

How long will in take (if not already) for the industry to organize themselves and set caps for prescription drugs? As does the Oil and Gas industry. AND to lobby for laws that prohibit companies from cutting prices as in the case of Mid-land oil and gas

Posted by: DA on February 3, 2006 at 11:06 AM | PERMALINK

I heard the chocolate ration is going up to 20 grams this week. Awesome!

How sad is it that I only checked the comments on this post to make sure someone mentioned chocolate rations? Thanks sglover!

Posted by: Hamilton Lovecraft on February 3, 2006 at 11:24 AM | PERMALINK

The 1st month costs -
Many people can not get what they need -
Costs will go way up when it gets ironed out.

States are sueing Federal Medicare to reimburse what they are paying out so our seniors won't croak from lack of medicines.

Posted by: skibumlee on February 3, 2006 at 11:26 AM | PERMALINK
One of the fundamental problems in the medical industry is that the person prescribing the medicine is not the same as the one who must pay for it.

I don't know that I'd call that a fundamental problems; it is a fundamental reasons for market failure and the need for regulation.

If it were a "problem", that would suggest that making doctors pay for drugs they prescribe would be better. I would suggest that that would create just as much of a market failure, for a different reason, since then you divorce the person bearing the cost or receiving the benefit -- the patient -- entirely from the decision.

Posted by: cmdicely on February 3, 2006 at 11:37 AM | PERMALINK

Its not identical bu the take home message is that there really isn't a free market working in medicine.

The problem with oxygen is that the people who breathe it aren't the ones who pay for it. Hence starting next week the government will be auctioning off America's atmosphere to the private sector, who will be able to provide clean air far more efficiently and cheaply, due to the wonders of competition. Here at Oxeon [TM], we will offer two basic pricing plans for air: a pay-as-you-breathe plan which will charge less than one cent per breath, or an all-you-can-breathe plan with a fixed monthly fee.

Posted by: brooksfoe on February 3, 2006 at 12:30 PM | PERMALINK

SGlover,
No, the idea that the chocolate ration is less than 20 grams is malreported.

An unperson malreported that the chocolate ration would be 15 grams. It has always been reported to be 20 grams, and thanks to the actions of the glorious leader the chocolate ration will be going up to 25 grams!

And now you have more choices about how you'll get your chocolate! You can get it 1 OR 2 grams at a time from your pharmacy. Bring your new Mininsurance coupon books with you.

Note: do not listen to malreports that the January Mininsurance coupons haven't been mailed yet. If you don't have your Mininsurance coupons you must have already eaten your ration, or, the Mininsurance has decided chocolate isn't on your plan. Please visit MiniLov.gov for more information.

Posted by: kathryn from Sunnyvale on February 3, 2006 at 12:35 PM | PERMALINK

yes, comrade we are ahead of schedule on the glorious Republican five year plan!

Posted by: j swift on February 3, 2006 at 12:53 PM | PERMALINK

where this saying came from , i have no idea . my grand mother born in 1872 , used it at times when listening to radio news . " if they can't steal it , they will just sit on it and yell mine. " this reminds me of BUSH AND CO.
WANDERER

Posted by: WANDERER on February 3, 2006 at 1:00 PM | PERMALINK

Doubleplusgood, citizen kathryn!

Posted by: sglover on February 3, 2006 at 1:14 PM | PERMALINK

And this doesn't compare the cost of the new program to the previous cost of drugs for the elderly, which would be only true way to tell whether the new program actually reduced costs.

Posted by: cramer on February 3, 2006 at 1:25 PM | PERMALINK

BTW - one little note on the costs. The whole program should cost a heck of a lot less - if no-one is signing up for it. If only 10% of the expected number of elderly are entering the program then of course it's not going to cost much.

Posted by: Samuel Knight on February 3, 2006 at 2:47 PM | PERMALINK

Outside of the Soviet Union the news should come with a serious congressional investigation, not with a grain of salt, but here in the Soviet.... oops...uh..

...where am I....what year is this? Have we reached Mars yet?

Posted by: ChetBob on February 3, 2006 at 5:51 PM | PERMALINK




 

 

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