Will Republicans’ Prescription Drug Entitlement End Up Costing More than “ObamaCare?”

March 29, 2010

Back in 2004, President Bush and many congressional Republicans put into law a large entitlement increase in the form of expanding Medicare to include prescription drugs for seniors.

Last week, President Obama and Democrats in Congress put into law a large entitlement increase in the form of comprehensive health care reform, which critics have dubbed "ObamaCare."

Many Republicans, with the backing of the new tea party movement, have criticized the latter as a huge burden on future generations and something that our nation cannot afford. But many of these same Republicans supported a rather large expansion of Medicare back in 2004. This raises the question: which expansion of government in health care will cost more?

According to CBO, the gross cost of the coverage provisions of the new health care bill in 2019 (excluding reinsurance and repayments) will cost $192 billion. This includes Medicaid expansion and refundable/nonrefundable tax credits to subsidize health insurance coverage for certain people.

According to President Obama's most recent budget, according to the current baseline, Medicare Part D (prescription drug benefits) will cost $103 billion (after premiums), which is a little over half of the size of "ObamaCare" for 2019.

(I'm ignoring the financing of either bill and just looking at gross costs, as well as the fact that there are many regulatory provisions in the new health care bill that expand government's reach in health care.)

However, Medicare Part D, like much of Medicare, is likely to grow much faster than the new health care entitlement that went into law. Therefore, if the new health care entitlement grows at a rate of say 6-7 percent per year, whereas the prescription drug benefit grows at rate of say 9-10 percent per year, it will turn out that around 2040, the Republican entitlement will be costing more than "ObamaCare."

Of course, who knows what Congress is likely to do in terms of changing any of these policies going forward, meaning these numbers are totally back of the envelope. The point here, however, is that just like Obama will say one thing when it sounds good and do something that totally contradicts what he has said, many "small government" Republicans who are supposedly concerned about the future financial health of the nation will talk a good game about their philosophy until it becomes politically expedient to do otherwise.


Related Articles