Medicare Bill's Fee-For-Service "Savings" are Really Costs 
Jeff Lemieux
originally published 7/14/2003, revised 7/28/2003 (revisions in italics).

Note--this analysis was based on preliminary estimates of the House and Senate Medicare bills from the Congressional Budget Office (CBO).  However, more complete estimates, released on July 22, imply that the illusory savings in the Medicare bills are more likely to total only $5-10 billion over 10 years.


It's not huge numbers -- "only" $13-24 billion -- but the House and Senate Medicare drug bills include illusory, out-year "savings" via reduced payments to physicians and other health care providers that are never intended to materialize.  The so-called savings make the bills seem less expensive than they really are.

The House Medicare bill contains "savings" of $18 billion over ten years from the traditional fee-for-service program.  But look closely:  The bill would actually raise fees and payments to health providers by $6 billion in 2004-2006.  But then, in the more distant years of 2007-2013, Congress would supposedly make cuts to provider payments totalling $24 billion. 

The Senate bill contains "Fee-for-service Improvements" that would cost a nearly identical $6 billion in 2004-2006, but then would reduce payments to health providers by about $13 billion between 2007 and 2013.  

Congress has absolutely no intention of actually achieving the "savings" scheduled for 2007 and beyond.  Those provisions are simply added to both the House and Senate drug bills to make the apparent, bottom line cost of the bills seem lower.

Links:
Congressional Budget Office Estimate of the Senate Drug Bill (June 18, 2003)
Congressional Budget Office Estimate of the House Drug Bill (June 25, 2003)
Centrists.Org Drug Benefit Will Cost 1 Percent of GDP By 2030 (If CBO's Right) (June 25, 2003)
Centrist Policy Network 2003 Medicare Drug Resource Page