Having won the election, Democrats may find it difficult to deliver on their campaign promise to save taxpayers' money by giving Medicare the power to negotiate drug prices for seniors.

Although incoming House Speaker Nancy Pelosi promised to accomplish this in the first 100 legislative hours next year, House staffers say no firm plan is in place and predict hearings to explore options before action.

Democrats say if Medicare weren't forbidden by a 2003 law from bargaining with drug makers for lower prices, the government would spend less on the new Medicare prescription-drug benefit and could afford to improve it. The program, which took effect in January, is subsidized by the federal government and offered through private insurers.

Republicans say giving government the power to negotiate with drug makers could be tantamount to price controls, and warn that could discourage development of drugs and, ultimately, give seniors fewer drug choices.

One question for Democrats is how to get rid of the provision in the 2003 law. They could strike the provision and give the Department of Health and Human Services the authority to bargain with drug companies -- power that HHS Secretary Mike Leavitt says he won't use. Or they could order the secretary to negotiate, and spell out how he should bargain with drug companies over prices.

Given a narrowly divided Senate and a Republican president with a veto pen, Democrats may be unable to pass new legislation affecting the Medicare drug benefit. And repealing the 2003 provision without mandating that HHS negotiate with drug companies would give them an opportunity to declare political victory, but wouldn't have much effect. The drug benefit would still be delivered through private insurance plans, which negotiate with drug makers. Indeed, some drug industry lobbyists promise a fight, but say stripping the "non-interference" language would have little effect -- at least for the rest of the Bush administration.

Alternatively, Democrats could create a government-run plan that negotiates with drug makers, and competes with private insurers' drug plans, an approach favored by Sen. Richard Durbin of Illinois and Rep. Pete Stark, a California Democrat who will head the Ways and Means health subcommittee.

Another approach Democrats could try would be requiring drug makers to give Medicare beneficiaries their lowest price, as companies must for Medicaid, the state-federal health-insurance program for the poor and disabled. Or, Democrats could push Medicare to copy the Department of Veterans Affairs, which maintains a formulary, or list of approved drugs that are part of its veterans health program; lower prices, among other factors, can help drug makers get on the VA's list.

A key player is Sen. Max Baucus, who is set to become chairman of the Finance Committee. An aide says the Montana Democrat would like to give more time for the benefit to work, but he'll "carefully consider" proposed improvements.

For the public, any decision Democrats make will be measured simply: Does it lower drug costs without undermining the Medicare drug-benefit market? Despite seniors' early frustrations due to system glitches and often-confusing choices, polls indicate the taxpayer-subsidized drug insurance now is more popular among beneficiaries. Monthly premiums are lower than the government had forecast, and more private insurers than expected are offering the plans.

"It's working better than ... I thought possible," says former HHS Secretary Tommy Thompson, in an interview. "Why change something that's working?"

Even without a specific plan, Democrats have gained support from groups such as AARP, the seniors' advocacy group that helped to pass the 2003 Medicare law.

It isn't clear that a government-run drug insurance plan would push prices down. Private plans often rely on pharmacy benefit managers, or PBMs, to obtain rebates and discounts with manufacturers and contain costs. But Medicare has traditionally been a fee-for-service program, without much experience in price negotiation.

Leslie Norwalk, acting administrator of the Centers for Medicare & Medicaid Services, the agency that manages Medicare, says she doubts Medicare would do a better job than private insurers in negotiating drug prices. Indeed, the agency probably would contract with PBMs to do the work. "They are doing that already," she said at a recent meeting with The Wall Street Journal. Medicare actuaries and the Congressional Budget Office say the government wouldn't save money by negotiating drug prices.

Some conservative analysts say they fear government negotiation might morph into de facto price controls. The government already pays 46% of health-care costs of all Americans -- through Medicare, Medicaid and coverage of civilian and military employees. If Medicare bargained for drugs, "it's not a negotiation," says Joseph Antos, a health analyst at the conservative American Enterprise Institute.

But Ron Pollack, executive director of Families USA, a liberal Washington advocacy group, says Medicaid-style discounts could benefit seniors. Some low-income seniors who were shifted this year to Medicare's drug benefit from Medicaid are paying more for drugs because Medicare doesn't have Medicaid's best-price rules, he says. "It was far more effective than what we are seeing now," he says.

Another model Democrats are discussing is based on the approach by the Department of Veterans Affairs. By law, drug makers have to provide the department at least a 24% discount on certain covered drugs. The VA, which has a national formulary -- or list of approved drugs -- also negotiates with drug makers for lower prices for the list. In 2005, that saved the agency $245 million, says spokeswoman Laurie Tranter.

The VA pharmacy has 4.4 million users compared with Medicare's drug insurance plan, which has nearly 23 million enrollees. And unlike Medicare, which relies on private pharmacies, the VA has its own pharmacies, home-delivery systems, doctors and other staff that help keep costs down.

About 500,000 veterans have signed up individually for the Medicare drug benefit, which HHS Secretary Leavitt says indicates that they prefer the Medicare alternative. Michael Valentino, chief consultant for the VA's pharmacy-benefits management group, disagrees. "We have not seen any mass exodus from VA to Medicare Part D," he says. "It's a lot cheaper to get drugs from the VA."