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Ballooning Medicare costs mean Congress must negotiate prices

February 2, 2004

Ballooning Medicare drug estimates illustrate need for government to negotiate drug prices

(Washington, D.C.) — New White House projections that the Medicare prescription drug plan will cost taxpayers $139 billion more than Congress estimated just two months ago illustrates the key problem with the Medicare benefit – a specific prohibition against the government negotiating for lower drug prices on behalf of seniors.
“The news just gets worse and worse for consumers,” said Gail Shearer, health policy director for Consumers Union. “First, Congress specifically prohibited the successful practice of the government negotiating lower drug prices for consumers, and now, we find out that taxpayers are going to get socked with an even higher Medicare bill because of it.”
Shearer said if Congress and the Administration truly want to help Medicare beneficiaries with their prescription drug costs, they would include a provision allowing the government to use its enormous purchasing power to make drugs more affordable for seniors, such as it currently does for veterans through the Department of Veterans Affairs. But by prohibiting this money-saving mechanism, the newly passed Medicare bill will leave consumers and taxpayers paying to boost profits of the pharmaceutical and insurance industries.
Shearer said the VA has led the way in providing quality, affordable prescriptions for veterans. By using a standard benefit (a national formulary), the VA was able to establish substantial bargaining power, and this led to veterans paying prices that are even lower than the federal supply schedule — which are among the lowest prices paid in the prescription drug marketplace.
“The new cost estimates highlight another structural flaw in the legislation: instead of holding private insurers to a higher cost-efficiency standard, the bill rewards inefficient private insurance practices,” Shearer said. “It funnels new subsidies to HMOs and other health insurance companies. The result for taxpayers: when more beneficiaries enroll in private plans, the cost to taxpayers increases.”
To read CU’s analysis of the Medicare Bill, click here.
Calculate your drug costs under the plan.
For more information contact: Gail Shearer, (202) 462-6262