(The Center Square) – Recent Medicare changes announced by the Biden administration could cost taxpayers more than $21 billion over the next three years, according to a new analysis by the Congressional Budget Office (CBO).
The CBO’s estimate follows a letter from Republican lawmakers, including House Ways and Means Committee Chairman Jason Smith (R-MO), House Budget Committee Chairman Jodey Arrington (R-TX), and Senate Budget Committee Ranking Member Chuck Grassley (R-IA).
They raised concerns about the costs of a new Medicare demonstration program aimed at capping Part D prescription drug premiums.
“In July, the Biden-Harris CMS scrambled to create a new federal program that will send billions of tax dollars to large health insurance companies to cover up a massive flaw in their so-called Inflation Reduction Act,” Rep. Arrington said in a statement.
Sen. Grassley echoed this sentiment, calling the CMS’s move an “election-year gimmick” that fails to address the consequences of Democratic policies on Medicare. “When Democrats unilaterally enacted major changes to Medicare two years ago, they set seniors up for new expenses and fewer options,” Grassley stated.
The program, introduced by the Centers for Medicare & Medicaid Services (CMS), is intended to limit out-of-pocket costs for seniors by capping monthly premium increases and offering temporary subsidies.
However, the CBO estimates that these changes will increase federal spending by $21 billion over the next three years—starting with $7 billion in 2025 alone.
According to the CBO, the changes made in response to the Inflation Reduction Act have led to an increase in the base premium bids for 2025, resulting in a 179% jump for standard Part D coverage plans.
The agency projects additional federal spending of $5 billion in 2025 and another $2 billion in net spending interest through 2034.
CMS Administrator Chiquita Brooks-LaSure defended the administration’s Medicare strategy.
“While saving Medicare and taxpayers billions of dollars, the negotiated prices will also provide people with Medicare a better deal on some of Medicare’s costliest prescription drugs, promoting necessary competition in the market, and ensuring Medicare is strong today and into the future,” Brooks-LaSure said in a press release.
However, her assertions contrast the CBO’s findings, which indicate that while premiums for seniors might appear to be reduced, the real cost is merely being transferred to federal taxpayers.
The CBO cautioned that temporary subsidies and risk corridors will ultimately increase federal spending significantly, especially since plans now receive higher reinsurance payments once the catastrophic drug coverage threshold is met.
The timing of the Medicare demonstration program—just ahead of the 2024 presidential election—has not gone unnoticed. Critics argue that the move is designed to temper potential backlash from seniors facing higher out-of-pocket costs due to Democratic policy shifts in Medicare.