Democratic report says more savings possible in Medicare drug program

Seniors and other taxpayers could have saved nearly $15 billion this year if the government slashed administrative costs in the Medicare drug program and negotiated the same kind of discounts it does for poor people under Medicaid, Democratic lawmakers said Monday.

Currently, private insurance companies get a federal subsidy to administer a prescription drug plan, but their overhead costs are much greater than in traditional Medicare, the lawmakers said in a report issued Monday.

The lawmakers obtained proprietary data that's unavailable to the public for the 12 leading insurers offering Medicare drug coverage. Those plans cover more than 18 million elderly and disabled enrollees. The lawmakers said the plans' administrative expenses, including profits, were about six times higher than what's incurred through traditional Medicare.

Eliminating that difference would save taxpayers and beneficiaries nearly $3.9 billion this year, the lawmakers said in a report released by the House Committee on Oversight and Government Reform.

The report also said taxpayers and beneficiaries would save billions more — about $10.7 billion in 2007 alone — if the private plans obtained discounts as large as those received in Medicaid.

On average, private insurers offering prescription drug coverage negotiated discounts of about 8.1 percent compared to what consumers would spend if they paid for the drug out of pocket, the report said. In contrast, the Medicaid program, which covers the poor, gets discounts of 26 percent.

Many Democratic lawmakers have long contended that the federal government would save money if it cut out the middle man. Instead of relying on private companies, the lawmakers prefer that the government administer the program and negotiate the price of medicine taken by beneficiaries. The report may bolster their efforts to make changes to the program.

Overall, the federal government and beneficiaries through their monthly premiums will spend about $47 billion on the Medicare drug benefit this year.

According to the Democratic report, about a tenth of that amount will pay for administrative costs, including the plans' profits.

In response, the Bush administration said it would carefully analyze the report. But it noted that about 90 percent of participants in public opinion surveys say they are satisfied with their drug coverage.

"On every level, the Medicare prescription drug program has exceeded expectations," said Kimberly Kleine, spokeswoman for the Centers for Medicare and Medicaid Services. "It has high satisfaction rates and is saving seniors and taxpayers significantly more than was ever expected."

Karen Ignagni, president and CEO of America's Health Insurance Plans, said no government program has the drug benefit's track record of coming in so far under budget. Monthly premiums are 40 percent lower than originally projected, she said.

One of the reasons the program has cost less than anticipated is that drug plans help manage a patient's care to ensure they take the most appropriate medicines for their condition, which saves taxpayers money in a way that the report doesn't take into account.

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