Gouging Grandma

Posted on Oct 17, 2007

By Marie Cocco

WASHINGTON—With all the waste, fraud and abuse to be uncovered in government, it’s hard to get excited about exposing the first, relatively innocuous member of this unholy trio. But then, you have to recall that a big point of creating the Medicare drug benefit as it was crafted by the Republican Congress in 2003 was to build in enough waste to pay off the insurance companies and drug manufacturers for their years of loyal campaign contributions.

That’s why elderly people, who are used to getting insurance directly from Medicare, were forced to buy their drug coverage from private insurers and to navigate a sea of competing marketing claims and coverage options to get their prescriptions.

And it’s why Rep. Henry Waxman—who is busy enough plumbing the unfathomable depths of malfeasance in Iraq—is right to get beyond the government’s own account of how well the Medicare drug plans are working and probe just how much more that elderly beneficiaries and taxpayers are forking over because lawmakers refused to let Medicare patients buy their prescriptions directly from Medicare.

No question the drug program has met its basic goal: Millions of elderly people who previously had no insurance coverage for their prescriptions now are covered. But at what price?

Democrats on the House Oversight and Government Reform Committee, which Waxman chairs, tallied administrative and marketing costs—as well as profits—of private Medicare drug plans and found them to be six times higher than the administrative costs of the broader Medicare program, which covers hospital and outpatient care. If insurance-industry middlemen were cut out and if the administration of the drug benefit were turned over to Medicare, Waxman’s committee calculates, the savings would amount to $3.9 billion this year.

But that’s only one form of the gouging embedded in the drug program. Private insurers also have failed to obtain the deep discounts on drugs that are achieved by the Department of Veterans Affairs, Medicaid and even Pennsylvania’s state program for helping the elderly with prescriptions. By law, pharmaceutical companies must offer Medicaid drugs at the lowest price that manufacturers offer any customer; the VA demands prices below wholesale.

The government programs that purchase drugs directly are negotiating exactly the way Wal-Mart does: by demanding the lowest price in exchange for giving the manufacturer access to a huge base of customers. The Waxman panel estimated that if Medicare obtained the same rebates on prescriptions as does the Medicaid program for the poor, the savings to taxpayers and beneficiaries would be $10.7 billion. 

Republicans on the committee protest. “Clearly, any comparison between negotiated rebates obtained by [Medicare drug benefit] providers and other government-run programs is not a comparison between like programs,” they said in a report meant to counter the Democrats.

Well, yes. That’s the point.

The complex, private drug program that has dozens and dozens of insurers negotiating for relatively small groups of their own beneficiaries is less efficient and more costly than the direct, government-administered programs that negotiate for a much larger pool of patients.

A study by the Commonwealth Fund, a private health care research group, concluded that elderly people who obtain their prescriptions through Medicare are not only paying more compared with those covered by the VA, they’re paying more compared with those who still are covered by their former employers.

“The odds of (Medicare) enrollees spending at least $300 per month on medications were more than twice those of seniors with employer-sponsored coverage and more than three times those of seniors with VA drug benefits,” the researchers concluded in an August study. The chances of a Medicare prescription drug beneficiary going without medication, or delaying having a prescription filled, were about twice those of the elderly still in employer-based plans. Among those most affected, the researchers conclude, are elderly people with “multiple chronic illnesses,” who are “spending significantly more out of pocket” for their many medications if they’re enrolled in the Medicare drug plan.

Democrats who took over Congress this year should have undertaken a complete rewrite of the drug benefit. But with the president having forced a political showdown even over the extension of the popular State Children’s Health Insurance Program, the timing is inauspicious.

The task will fall to the next president and the next Congress to revamp the Medicare drug program so that its mission is not to prop up pet industries, but to get medicine to the elderly cheaply. Otherwise they shall be known by this slogan: Wasteful is as wasteful does. 

Marie Cocco’s e-mail address is mariecocco(at)washpost.com.

© 2007, Washington Post Writers Group

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