The costs of a Medicare prescription drug benefit

This paper describes a preliminary cost estimate, prepared by the Congressional Budget Office (CBO), of President Clinton's 1999 prescription drug benefit proposal. The CBO estimated that the new benefit would increase net Medicare outlays by $136 billion between 2002 and 2009, although these estimates are highly uncertain. Because the proposal included an annual cap on the amount of the benefit, it did not require consideration of an important effect of a more comprehensive benefit: higher prices for some drugs. Estimates of future proposals for a Medicare prescription drug benefit may require consideration of that pricing effect.