Twenty seven million individuals were enrolled in Medicare Part D as of December 2009. The government spent $51 billion to subsidize Medicare Part D in 2009. The $51 billion spent is in addition to seniors’ premiums and co-pays. The government subsidy was $1,889 per individual subscriber.
Who is making the money?
“A provision in the Medicare Modernization Act (MMA), known as the “noninterference” provision, expressly prohibits the Medicare program (the government) from directly negotiating lower prescription drug prices with pharmaceutical manufacturers.”
This was a gift to the healthcare insurance industry by the government as a result of intense lobbying efforts.
Over 300 private plans (Medicare Plan D sponsors) enter into negotiations with pharmaceutical manufacturers separately to deliver Medicare Part D benefits.
Medicare Part D eligible seniors are forced to deal with an overwhelming number of private plans with varying formularies, premiums, deductibles, and co-pays in order to receive prescription drug coverage. The differences in prices are available but it is difficult to make comparisons.
The government negotiates directly with the pharmaceutical manufactures for the VA system. The VA system pays 42% less than Medicare plans for prescription drugs. The high volume contracts save money for the government and are lucrative to the pharmaceutical companies.
The various Medicare Part D plans cover about 85% of the most popular 200 drugs on average. The VA’s national formulary covers 59% of the most popular 200 drugs.
If Medicare Part D negotiated the same drug prices as the VA, the government would be able to decrease its subsidy $510 per beneficiary per year or a total of $14 billion per year (2009 prices).
Research by respected economist Dean Baker shows that the federal government and Medicare beneficiaries would save $600 billion between 2006 and 2013 if Medicare were allowed to directly offer a Part D benefit and to negotiate prices with pharmaceutical manufacturers. 7Such significant savings could be used to close Part D’s donut hole and to lower cost-sharing for Medicare beneficiaries.
There are reasons for the twenty-six percent difference in formulary. Either the government-negotiated prices are too expensive and deemed marginally more effective than the drug ordered or the less expensive drug is determined to be just as effective.
The judgment is made by the procurement system that negotiates price.
Is the cheaper drug as effective for a particular patient? This decision should be made by the patients’ physicians and patients and not by bureaucrats. It should be the patient’s choice to pay the difference.
The procurement systems bureaucrats could be wrong.
If the government negotiated for all the Medicare Part D participants the government’s purchasing power should be greater than the VA system. Its negotiated price would be better. The savings should reduce the government’s Medicare Part D subsidy significantly.
President Obama sort of understood this concept. He included the government’s right to negotiate drug prices in his Healthcare Reform Act. He subsequently removed the provision from his Healthcare Reform Act in exchange for the healthcare insurance industry’s and the pharmaceutical industry’s support of “Obamacare.” Seniors and the Medicare Part D program have lost.
It is obvious that there is much fraud, waste and abuse in Medicare Part D. February 2011; the Government Accounting Office published an example of CMS bureaucratic inefficiency and waste.
The Government Accounting Office (GAO) has designated Medicare as a high-risk program. The size, nature, and complexity of the Part D program make it particularly vulnerable risk to fraud, waste, and abuse. The GAO and the Inspector General of HHS requires all Part D sponsors (healthcare insurance industry) to have programs to safeguard Part D from fraud, waste, and abuse.
CMS is responsible for managing and overseeing the Part D program. CMS regulations require Part D sponsors to have compliance plans that must include measures that detect, correct, and prevent fraud, waste, and abuse.
Congress asked the GAO to examine the extent of CMS’s implementation of the oversight of Part D sponsors’ (healthcare insurance industry) compliance programs to avoid fraud and abuse.
CMS bureaucrats have written extensive documents containing many rules and regulations to combat waste, fraud and abuse. CMS then outsources the Medicare Part D audit to Medicare Drug Integrity Contractors (MEDICs) to support its Medicare Part D audit efforts.
The 2010 audit was supposed to be finalized in early 2011. It has not been completed as of July 30,2011.
CMS officials reported that they conducted only 33 audits out of 290 Medicare Part D sponsors (Healthcare insurance industry) in 2010.
“The 33 sponsors represented 11 percent of Part D sponsors, 56 percent of plans, and covered 62 percent of enrolled beneficiaries in 2010 according to agency officials. As of February 2011, CMS had not made all audit findings available but had taken formal enforcement actions against several sponsors resulting from the on-site audits according to agency officials.”
“As of December 2010, officials reported that the agency had issued five marketing and enrollment sanctions and one contract termination action based, in part, on the results of these audit findings noting failure to comply with CMS compliance plan requirements.”
It is hard to imagine how many deficiencies exist among the other 257 Medicare Part D sponsors not yet audited. How long should these audits take? How severe will the penalties be? How can seniors know if their Part D plan is sound?
CMS has not been able to audit or enforce its own regulations that are supposed to protect seniors from fraud and abuse efficiently and effectively.
What can possibly go wrong with ‘Obamacare” with 256 new bureaucratic agencies and many thousands of new regulations?
The only healthcare system that could work is a consumer driven healthcare system with alignment of all the stakeholders’ interests.
Unfortunately, that is not going to happen anytime soon. Seniors are starting to take things into their own hands.
“After investigating several Canadian pharmacies, my wife and I paid $624.77 for a three-month supply of drugs at an online Vancouver registered pharmacy. These same drugs cost us $1,208.04 buying at Walgreen’s, Target, and Kmart where we shopped for the lowest prices.”
“What’s the catch? If Big Pharma had its way, customs and the FDA would be confiscating all imported drugs, crying that the government can’t guarantee their safety.”
“But that just isn’t the case. Your pharmaceuticals come in the same sealed packages you get at your corner drugstore.”
“Anyway, it would be politically incorrect to arrest grandma for trying to make ends meet. Some members of Congress even encourage the practice by listing Canadian pharmacies on their Web sites.”
A reader sent me a link to a website. http://babayoga.drugcutpillsrx.com/?camp=priagiji
I reviewed the web site. It is based in San Francisco. The site offers large discounts on branded and generic medication. It is much less expensive than Medicare Part D. Senoirs could afford to buy the medication without using up credits toward the donut and use Medicare Part D only when needed.
It is going to take proactive approaches by seniors (consumer driven) to force the government to serve their vested interests and not the vested interests of the healthcare insurance industry and the pharmaceutical industry.
The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.
*This blog post was originally published at Repairing the Healthcare System*