Berry offers bill to let Medicare negotiate drug prices

— Rep. Marion Berry of Arkansas has introduced legislation that would allow the federal government to negotiate prescription-drug purchases under Medicare, the health-care insurance program for the elderly and disabled.

His bill is designed to apply the buying power of the federal government to the program, which was designed to spur competition among participating insurance companies.

Berry said the market power of the federal government, tested under the traditional Medicare system, could save money for the program's prescription-drug plans, which were first instituted in 2006.

"Medicare has been the most cost-effective-run health-care system in the world," Berry said.

Others contend the government wouldn't negotiate drug prices with companies, so much as dictate them.

"The federal government says, 'This is what we're going to pay,'" said Bill Foudy, secretary of the Association of Health Insurance Advisors, which supports a private health-insurance market. "They can set their prices at whatever they want."

Medicare's Part D prescription-drug benefit, created by the Medicare Prescription Drug, Improvement and Modernization Act of 2003, allows private heath-insurance companies to offer drug coverage to Medicare recipients.

The Centers for Medicare and Medicaid Services has posted information on the 55 plans that will be available next year to eligibleArkansans on its Web site, www.medicare.gov.

Berry, who contends the 2003 law was written to give insurance companies "an opportunity to rob senior citizens," said the centers had "completely abdicated their responsibility of overseeing these private plans."

An Oct. 15 study by the House Committee on Oversight and Government Reform found that the private insurance companies have higher administrative costs than the traditional Medicare program.

The committee studied financial information from 12 insurers who provided drug benefits to more than 18 million Medicare recipients. It found that administrative costs, added to the $1 billion in profit companies made, totaled $4.6 billion, or 9.7 percent of the program's total expenses in 2007.

In comparison, administrative costs account for only 1.7 percent of Medicare's hospital and outpatient expenses.

Some contend it's not a fair comparison. "The basic premise is backwards," said Foudy.

Foudy said that hospital and outpatient payments are typically 53 cents to 56 cents on the dollar.

Hospitals wind up footing the rest of the bill, and pass charges onto others. "The private sector has to make up the difference," he said.

And the Centers for Medicare and Medicaid Services point out that premiums charged by the private plans are actually lower than expected.

In 2008, the centers anticipate premiums to run $25 a month for basic coverage. The original estimate was for a $41 premium.

"Part D continues to be a solid success in virtually every area of measurement," Joseph Kuchler, a spokesman for the centers, said in a statement.

Kucher said the benefit's annual cost to the federal government is $190 billion, 30 percent less than the initial estimate, and that the average beneficiary saves $1,200 annually buying prescription drugs.

Bill Vaughan, senior policy analyst for the Consumers Union, publisher of Consumer Reports, which supports Berry's bill, said while a plan might advertise low drug prices initially, the prices often are raised over the life of a plan.

"There's an element of baitand-switch on this," he said.

Berry, a Democrat, introduced the bill, called the Medicare Savings and Choice Act, with Rep. Jan Schakowsky, a Democrat from Illinois. In the Senate, Democratic Sen. Dick Durbin of Illinois offered similar legislation.

The Congressional Budget Office has not yet studied the bill's projected budgetary impact.

Berry said that, if enacted, the plan would save taxpayers $40 billion annually.

The legislators offered similar bills last year, but they did not make it out of committee.

Front Section, Pages 3 on 10/24/2007

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