Oversight Committee Finds High Expenses, Low Rebates from Medicare Part D
Private Medicare Drug Plans: Seniors and Taxpayers Hurt by High Expenses, Low RebatesWASHINGTON, DC -- Today Chairman Henry A. Waxman and 12 members of the Oversight and Government Reform Committee released a new report: Private Medicare Drug Plans: High Expenses and Low Rebates Increase the Costs of Medicare Drug Coverage.
"Privatizing the delivery of the drug benefit has enriched the drug companies and insurance industry at the expense of seniors and taxpayers," said Rep. Waxman. "The program's inflated administrative costs and meager drug rebates will cost taxpayers and seniors $15 billion this year alone."
The investigation by the staff of the House Oversight Committee is the first independent analysis to have access to proprietary data about drug plan costs and drug prices. Key findings include:
High administrative expenses. The private Part D insurers report administrative expenses, sales costs, and profits of almost $5 billion in 2007 -- including $1 billion in profits alone. The administrative costs of the privatized Part D program are almost six times higher than the administrative costs of the traditional Medicare program.
Small drug rebates. The drug price rebates negotiated by the Part D insurers reduce Medicare drug spending by just 8.1%. In contrast, rebates in the Medicaid program reduce drug spending by 26%, over three times as much. Because of the difference in the size of the rebates, the transfer of low-income seniors from Medicaid drug coverage to Medicare drug coverage will result in a $2.8 billion windfall for drug manufacturers in 2007. The Part D insurers receive no rebates or other manufacturer discounts for three-quarters of the drugs used by seniors.
Failure to pass through rebates to seniors. When the insurers do obtain drug price rebates, they do not use the rebates to reduce pharmacy drug prices. This year alone, the private insurers will receive $1 billion in rebates on purchases that seniors in coverage gaps, such as the donut hole, pay for out of their own pockets.
