NCPA - National Center for Policy Analysis

Medicare Drug Benefit: Another Straw on the Camel's Aching Back

September 21, 2000

Adding subsidized prescription drug benefits to Medicare raises the broader issue of how much the federal government should support retirees and especially the future wave of retiring baby boomers, says Newsweek columnist Robert Samuelson.

  • In 2000, federal spending on people over 65 (mainly Social Security and Medicare) already amounts to 35 percent of the budget.
  • Under present law, the Congressional Budget Office projects Medicare's costs will rise from 2.3 percent of gross domestic product (GDP) now to 4.4 percent in 2030.
  • A drug benefit (along the lines of the Clinton-Gore proposal) could increase Medicare's costs to 6.5 percent of GDP by 2030 -- almost a tripling of the program's present costs.
  • Social Security and nursing-home care under Medicaid (the federal-state health care program for the poor) cost about 4.5 percent of GDP in 2000 and easily could reach 7.5 percent by 2030.

Thus the cost of federal programs for retirees will roughly double by 2030 -- going from about 7 percent to 13 or 14 percent of the GDP.

Costs for prescription drug benefits will balloon, says Samuelson, because although the CBO estimates the Clinton-Gore plan would cost $338 billion between 2001 and 2010, the estimates stop at 2010 -- just before the oldest baby boomers qualify for Medicare.

Source: Robert Samuelson (Newsweek), "Drug Coverage: It makes sense - in context of comprehensive Medicare reform," Dallas Morning News, September 20, 2000.

 

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