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Generic Confusion

When you leave, my blog just fades to grey
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News? Check. Politics? Check. Music? Check. Random thoughts about life? Check. Readership? Ummm.... let me get back to you on that. Updated when I feel like I have something to say, and remember to post it.

Tuesday, November 30, 2004

Medicare drug benefit costs

Remember the controversy over the true cost of the Medicare drug benefit? Now we have a first-hand report from one of the central figures of the controversy, Medicare chief actuary Richard S. Foster. The article discusses the issue of being ordered not to respond to Congressional requests, and how that fits with the actuarial profession's code of professional conduct.

One key point is that while the media reports that President Bush or Republicans were part of some sinister conspiracy to conceal the true cost of the drug benefit, Foster reports:

In February 2004, the administration publicly acknowledged our estimates of the cost of the Medicare modernization act as part of the president's fiscal year 2005 budget. This action prompted a new round of news articles, mostly focusing on the significantly higher level of our cost estimate ($534 billion through 2013) compared with the Congressional Budget Office's estimate ($395 billion). Many of these articles also incorrectly characterized our estimates as "new" and "correct," versus the "old" and "incorrect" CBO figures.

In reality, we had been estimating the cost of the legislation as far back as June 2003, as it was being developed. In addition, there is no way to conclude that our estimates are right and CBO's are wrong; the uncertainty is so great that either set could prove more accurate than the other, and, for that matter, both sets of estimates could prove to be well wide of the mark.

Cynical and decidedly non-actuarial conclusion: It's a government program; it is going to cost much more than both estimates.

After reading the article, I'm willing to state two conclusions that I hope everyone can agree with. First, it is best for all involved for information to be exchanged freely; ordering one not to provide information isn't a good thing. Second, if one cherry-picks information to score political points, as these politicians seemed likely to do, no one benefits. Consider all the evidence, and weigh the costs and benefits with a fair and open mind.

Thus, why I'm not a politician.

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