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More Medicare
Savings Possible
By Kevin Freking, The Associated Press
October 15, 2007
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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