The engine most likely doesn't need to be replaced, but he is correct that it still might be cheaper to replace the engine. If I remember correctly, the dealer wanted 11K-12K to swap out my lifters and cam. My engine didn't need the lifters or cam replaced, I just wanted to swap the lifters because of the truck's mileage and to avoid any potential reliability concerns in the future. I went ahead and purchased the lifters, trays, pushrods, etc. and did it myself over the weekend for a little over $2,000 in parts, replacing everything with OEM parts, bolts, gaskets, etc. You could probably save a bunch using aftermarket components, but I stuck with OEM and have put an additional 40K miles on it since then.
Out of curiosity, I asked the dealer what a brand new engine would cost and it was around 7K if I remember correctly. But that was just for the engine, no labor. If you are willing to do the work, or have a good mechanic that is cheaper than the dealer, a new engine might definitely be cheaper than the cost of having the dealer tear into the old engine to replace the cam and lifters.
With my truck sitting at 160K miles right now, I know that if I ever do have lifter issues, I'd probably just buy a new engine and install it myself since my miles are getting high.