NCPA - National Center for Policy Analysis

Comptroller General Questions Stand Alone Drug Benefit

February 11, 2000

A bipartisan coalition in Congress supports comprehensive Medicare overhaul that would give seniors more control over their health care and an updated benefit package, including prescripition drug coverage for the third of seniors who don't have drug coverage. Although traditional Medicare doesn't cover out-of-hospital prescriptions, the other two-thirds have drug coverage from their employers, Medicare+Choice, Medigap policies or Medicaid.

And many in Congress support a bill sponored by Sens. John Breaux (D-La.) and Bill Frist (R-Tenn.) (S.1895) that would give seniors the option of purchasing a policy with drug coverage, using the Federal Employees Health Benefits Program (FEHBP) as a model.

However, President Clinton and some in Congress favor a "stand alone" prescription drug benefit tacked on to the existing Medicare program. For instance, Sens. Olympia J. Snowe (R-Maine) and Ron Wyden (D-Ore.) are sponsoring a bill that would offer seniors a range of private insurance policies to cover drug costs, with the government paying at least 25 percent of the premiums.

But David M. Walker, Comptroller General of the United States, threw cold water on that approach when he testified before the Senate Special Committee on Aging.

"General fund infusions and expanded benefits may well be a necessary part of any major reform initiative...." said Walker. "Such changes, however, need to be considered as part of a broader initiative to address Medicare's current fiscal imbalance and promote the program's longer-term sustainability."

The day after Walker testified, the cost of a new drug benefit in isolation was pointed out when the White House announced that Clinton's proposal to provide Medicare coverage of prescription drugs will cost 35 percent more than it estimated just seven months ago.

  • Last year, when Clinton unveiled his plan to offer drug coverage to all Medicare beneficiaries, he said it would cost $118 billion over 10 years.
  • In his new budget request to Congress this week, he put the cost at $160 billion, although the basic proposal has not changed.
  • The new estimate is closer to a projection made by Congressional Budget Office Director Dan L. Crippen last July, when he testified that Clinton's plan would cost $168 billion over 10 years.

Source: David M. Walker (Comptroller General of the United States), "MEDICARE: Program Reform and Modernization Are Needed But Entail Considerable Challenges," GAO/T-HEHS/AIMD-00-77, February 8, 2000, General Accounting Office, Washington, D.C.; and Robert Pear, "White House Raises Expected Cost of Medicare Drug Plan," New York Times, February 10, 2000.


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