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November 20, 2003

Honorable William "Bill" M. Thomas
Chairman
Committee on Ways and Means
U.S. House of Representatives
Washington, DC 20515

Dear Mr. Chairman:

The Congressional Budget Office has estimated the effects on direct spending and revenues of the conference agreement on H.R. 1, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. CBO estimates that enacting this legislation would result in direct spending outlays totaling $395 billion over the 2004-2013 period. It would also lead to an increase in federal revenues totaling $0.5 billion over that 10-year period. The enclosed tables provide additional detail on these estimates.

CBO has not had an opportunity to review the final legislative language, and this estimate could change upon completion of that review. Also, the estimate does not include the act's potential effects on discretionary spending.

If you wish further details on this estimate, we would be pleased to provide them. The CBO staff contact is Tom Bradley.

Sincerely,

Douglas Holtz-Eakin
 

Enclosure [The PDF version of this estimate includes the detailed tables on CBO's estimates mentioned in this letter.]
 
cc:      Honorable Charles B. Rangel
Ranking Member

Identical letters sent to Honorable Jim Nussle, Honorable Don Nickles, Honorable Charles E. Grassley, and Honorable W.J. "Billy" Tauzin.

                             
CBO Estimate of Effect on Direct Spending and Revenues of Conference Agreement on H.R. 1
      By Fiscal Year, in Billions of Dollars
      2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004-
2008		 2004-
2013
CHANGES IN DIRECT SPENDING (Outlays)
 
Prescription Drug Benefit (Title I) 0.3 0.8 25.7 39.0 44.6 48.7 53.7 58.6 65.3 73.1 110.4 409.8
Medicare Advantage (Title II) 0.5 0.8 0.4 1.7 1.7 1.7 1.8 1.9 1.8 1.8 5.2 14.2
Fee-for-Service Provisions (Titles III-VII) 1.8 2.5 0.6 -1.0 -2.4 -3.3 -4.1 -4.8 -5.3 -5.5 1.4 -21.5
Cost Containment (Title VIII) 0 * * -0.2 -0.5 -0.9 -1.8 -2.7 -3.1 -3.9 -0.8 -13.3
Administrative Improvements (Title IX) * * * 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.5
Medicaid and Other Provisions (Title X) 1.2 1.8 0.8 0.7 0.5 0.2 0.1 0.1 0.1 0.1 5.1 5.7
Access to Affordable Pharmaceuticals (Title XI) * * * * * -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.6
 
  Total, Direct Spending Changes 3.8 6.0 27.5 40.2 44.0 46.5 49.8 53.0 58.7 65.5 121.4 394.8
 
CHANGES IN REVENUES
 
Titles I and XI * * 0.4 0.7 0.8 0.8 0.9 1.0 1.2 1.3 1.9 7.2
Health Savings Incentives (Title XII)a -0.2 -0.5 -0.6 -0.6 -0.7 -0.7 -0.8 -0.8 -0.9 -0.9 -2.5 -6.7
  Total, Revenue Changes -0.2 -0.5 -0.1 * 0.1 0.1 0.2 0.2 0.3 0.4 -0.7 0.5
 
NET BUDGET IMPACT
 
Net Increase in Deficits or Decrease in Surpluses 4.0 6.5 27.6 40.2 43.9 46.4 49.6 52.8 58.4 65.1 122.1 394.3
NOTES: Estimates are preliminary and are subject to further review of the legislative language.
* = costs or savings of less than $50 million.
a. Estimate provided by the Joint Committee on Taxation.