NCPA - National Center for Policy Analysis

Drug Benefit More Expensive Than Clinton Estimates

July 22, 1999

The Congressional Budget Office says that the cost of paying for drugs for those on Medicare will be much higher than White House estimates. The prediction drew a sharp rebuke from President Clinton, who said that "whenever there's been a difference between the CBO and us, we've been right and they've been wrong."

  • The CBO figures the benefit would cost $50 billion more over 10 years than administration estimates.
  • The administration predicts the cost over a decade would be $118 billion, while the CBO says it would reach $168 billion -- or 40 percent higher.
  • In addition, the budget office says that the proposed savings in the traditional Medicare program -- which the White House estimated at $64 billion over 10 years -- would actually amount to only $48 billion.

Experts say that if the Clinton plan becomes law, Medicare officials will do everything they can to make sure costs don't rise faster than projected. Prescription-drug expenditures for the elderly are growing at an annual rate of about 15 percent. But the administration projects only a 5 percent a year increase.

The Clinton plan is to hold down costs by assigning a single management firm to negotiate prices and specify drug choices for each geographical region of the nation. Few doubt that full- blown price controls on pharmaceuticals would follow.

Experts warn that controls would spell the beginning of the end of pharmaceutical research here.

Source: Laurie McGinley, "CBO Pegs Cost of Medicare Drug Benefit Far Above Estimate in Clinton Proposal," and John E. Calfee, "Price Controls Are a Prescription for Disaster," both in the Wall Street Journal, July 22, 1999.


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