Fixing Medicare Part D Tops Agenda Of New Congress

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Fixing Medicare Part D Tops Agenda Of New Congress

Lower Medicare prescription drug costs are a top item on the list for the new Congress. One question for lawmakers is how to get rid of the provision of the 2003 Medicare drug legislation that prohibits the federal government from bargaining with drug makers for lower prices. Doing so, consumer advocates say, would cut costs, allowing the government to close the “doughnut hole” coverage gap when beneficiaries are forced to pay the full cost of their prescriptions.

In 2007, under the government’s “standard” Medicare drug plan, the coverage gap starts when a Part D enrollee spends the initial coverage limit of $2,400 (the full cost of prescriptions that both the beneficiary and the drug plan pays). Then, the enrollee pays 100% of the drug costs until he or she has spent a total out-of-pocket of $3,850. That expense does not include the cost of premiums. Once a beneficiary spends $3,850 for the year, the coverage gap ends and he or she then pays only a small co-insurance or co-payment amount for each prescription until the end of the year. About 3 to 4 million seniors are estimated to have hit the “doughnut hole” in 2006.

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Consumer advocates contend that if Medicare were permitted to negotiate prices, it would produce drug discounts similar to those obtained by the Veterans Administration (VA). By law, drug makers must provide the VA with at least a 24% discount on certain covered drugs. If a drug company does not offer a hefty discount, its drug may not make the VA formulary or list of covered drugs. In all, the VA covers about 1,300 medications — under Medicare Part D slightly more than one-half of enrollees are in plans that cover 1,000 to 1,500 medications.

Congress may consider several proposals, such as:

A repeal of the prohibition allowing the government to negotiate drug costs and recommending that Medicare set a top price for each drug available under the program. Private insurers would still be free to bargain for even lower prices. This approach is similar to how drug prices are limited in Canada and European nations, where costs are 30% to 60% lower than in the U.S.
Requiring drug makers to give Medicare beneficiaries their lowest price, as companies must for Medicaid, the state and federal health insurance program for low-income seniors and the disabled.
Establishing a government drug plan to be run like traditional Part A and Part B Medicare. Medicare would use drug prices it negotiated with manufacturers and compete with private insurers. Currently, there is no drug plan available through Medicare. All beneficiaries must get their drug coverage from private drug plans.

TSCL surveys and comments from readers indicate there is broad support among our members for allowing the government to negotiate drug prices. TSCL supports such measures and believes a Part D program run through Medicare should be available to all beneficiaries.

Sources: “On Drug Prices, Are Democrats In A Fix?” Ricardo Alonso-Zaldivar, The Los Angeles Times, November 26, 2006. “Success Of Drug Plan Poses Challenge For Democrats,” Lori Montgomery, The Washington Post, November 27, 2006. “Why Medicare Drugs May Be Sticking Point,” Jane Zhang, The Wall Street Journal, November 24, 2006. “Medicare Touting Success Of Drug Benefit,” Kevin Freking, The Associated Press, December 5, 2006.

January 2007