Ask The Advisor: October 2011

Ask The Advisor: October 2011

Q:  Are you pushing to get Part D placed under original Medicare where it belongs?  The government has a bigger bargaining chip to negotiate prices, than private industry.  Private sector companies have no incentive to provide drugs at lower cost other than to compete with each other for enrollees.  Also studies have proven over and over again that Medicare is far more cost-efficient than private plans.

A: Unlike original Medicare Parts A and B, no comparable Part D option is available.  In 2003, Congress established Medicare's prescription drug program to be offered by an array of private insurance plans.  The government subsidizes the plan premiums, and adjusts the annual "cost sharing" amounts of a "standard" government plan.  Drug plans are free to design their own plans, as long as they offer coverage at least equivalent to the standard government plan.

Under the 2003 legislation, the federal government was prohibited from negotiating drug costs with manufacturers.  Virtually no other health care sector enjoys such protection of their prices.  Medicare establishes "approved pricing" for all other health care providers, services, durable medical goods and the few prescription drugs that are covered under Part B - those administered in doctors' offices.

The Administration recently said that competition among the private plans is saving money.  It is unclear how much of that money consumers are saving, however.  The Boston Globe has reported that, depending on their drug plan, many seniors recently got unwelcome surprises, with some paying premium increases this year as high as 466%.  While there is widespread support for the government negotiating prices, and interest in providing a drug plan through original Medicare, Congress is confronting how to fund the benefit without making Medicare's financing problems worse than they already are.  Despite the savings under the current program, President Bush recently proposed Means Testing Part D premiums to cut costs.

TSCL supports allowing the government to negotiate drug costs and believes a Part D program run through Medicare should be available to all beneficiaries.  TSCL believes, however, that establishing Part D under Medicare must be done in a careful, responsible way in order to prevent unsustainable cost increases for seniors and taxpayers.

Sources:  "Medicare Drug Program Costing Less Than Estimates," Robert Pear, The New York Times, January 7, 2007.  "Insurer Hits Millions Of Seniors With Drug Cost Hike," Jeffrey Krasner, The Boston Globe, December 31, 2006.