Prescription Drugs for Medicare Recipients

The battle storms over the prescription drug benefits issue for Medicare beneficiaries. Members of Congress are presenting their proposals. Everyone recognizes that out-of-pocket costs for prescription drugs paid by Medicare beneficiaries present an increasing financial burden.
To relieve the problem, the recent budget agreement currently allots $300 billion for drug benefits and additional changes in Medicare in the next decade. Even though $300 billion appears to be an astronomical amount of money, the lawmakers are having a hard time recommending a sensible and affordable proposal. The Congressional Budget Office estimates that a total of $1.3 trillion will be spent on prescription drugs for Medicare beneficiaries from 2004 to 2011. The designated budget only covers one quarter of the total cost of the prescription drug spending estimate.
Democrats and Republicans
To balance the budget, the current key Democratic proposal in the Senate recommends a $53 monthly premium for the beneficiaries until the out-of-pocket costs reach $3,500. Democrats are working hard to reduce the $53 monthly premium to about $30 or $35 per month. Democrats are quick to point out that the prescription drug challenge is one of the trade-offs mandated by the 10-year $1.35 trillion tax cut that was pushed through Congress by President Bush earlier this year.
The Republicans dispute the tax cut blame. Sean O''Keefe, deputy directory of the White House Office of Management and Budget maintains that the Democrats are trying to "...politicize Medicare..." He suggests that both parties need to work together to solve the Medicare prescription issue. The current Republican proposal faces many of the same problems that the Democrats face. Last December, the House Republicans attempted to pass a bill that would have the government subsidize insurance companies in order to encourage them to offer drug converges. The insurance industry said that the plan was impractical.
Difficult Issue
There is not an easy solution for the prescription drug dilemma. For three years the Clinton administration, Congress, and currently President Bush have been struggling with prescription drug issues. Presently, about one-third of the elderly do not have any prescription drug insurance. Families USA, a consumer advocacy group, shows that the average number of prescriptions per person was 28.5 in 2000. The report "Disability, Medicare, and Prescription Drugs" released by the White House in July 2000 highlights the numerous reasons for strong requirement for prescription drug coverage for the Medicare beneficiaries.
Other Alternatives
Insurance companies attempt to sell consumers their own solutions. A February 2001 press release from SaveWell.com promotes an inexpensive drug plan that will save all participants up to 50% on prescription drugs. The annual plan quotes each family $52 claiming to be accepted in more than 50,000 pharmacies nationwide. Consumers should always be skeptical about the claims that sound too good to be true because there is usually a catch.
Reasoning
I believe the Unites States government should be able to put together a proposal that works for everyone. Although the Congressional Budget Office estimates a need for over 1.3 trillion drug prescriptions for the elderly, I believe that with some creative thinking, a practical solution can be reached. For example, using the sheer size of a $300 billion budget, a volume purchase plan could be established. The volume discounts could be amplified by setting up government actions. The actions would permit the competing pharmaceutical companies to bid against one another for the drug contracts. Hopefully, the result will create a situation in which all Medicare recipients could afford the prescription drugs they need. I believe the combination of volume discounts and the auctions will result in a win-win solution.
With today''s high drug prices, some Medicare recipients save money by not purchasing the much-needed medication. If the price were not an issue, the consumers would purchase the needed drugs. Therefore, the consumer would win by having access to the necessary medication without worrying about the cost issues.
The government would benefit from the enormous savings created by the combination of the auctions and the volume purchase discounts. The government might even be able to stay within the allocated budget. The National Economic Council states that some citizens may even be able to return to work with the necessary medication (The White House, 2000, p1). Therefore, the government would also benefit.
The pharmaceutical companies that would have placed the winning bid on the government contracts for large volume discounts would also be in a favorable position. Since higher volumes of prescription drugs would be consumed, the pharmaceutical companies would be able to sell more products. The companies would make less money per transaction, but they should be able to make up for it in volume. The higher production volumes should help them achieve greater profits by lowering the manufacturing costs. Therefore, the drug companies would also win.





References
Pear, R., & Toner, R. (2001, July 22). Even most generous drug plan may be
disappointing to elderly. The New York Times. Retrieved July 27, 2001 from the World Wide Web: http://www.nytimes.com/2001/07/22/politics/22DRUG.html
Seniors should weigh options when choosing supplemental prescription drug
coverage; SaveWell may be one option. (2001, February 28). Business Wire. Retrieved July 27, 2001 from the World Wide Web: http://www.findarticles.com/cf_0/m0EIN/2001_Feb_28/70924903/print.jhtml
The White House. National Economic Council / Domestic Policy Council. (2000,
July 31). Executive summary: disability, Medicare, and prescription drugs. Retrieved July 27, 2001 from the World Wide Web: http://clinton4.nara.gov/textonly/WH/EOP/nec/html/ParkMedicareReport000730.html

More firms should be using GAAP.