Time for a Choice of Public Health Insurance for Medicare Part D

In December 2003 Congress passed and President Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act, MMA for short. The law was laden with ideological changes to the Medicare program. The blind-faith belief that private industry always performs better than government led to the creation of the first Medicare benefit in the history of the 40-year old program that is not available directly through Medicare.

The prescription drug coverage that was added, known as Part D, was made available only through private drug or health plans [1] that contract with Medicare. The MMA also did not allow Medicare to use its market power to negotiate [2] for lower drug prices. That too was left only to the private drug and health plans.

In addition, the MMA increased the number and types of private health plans that contract with Medicare and the amount of money [3] they get paid to provide Medicare benefits to people with Medicare, to the point that they were getting paid up to 19 percent more [4] than it costs to care for the same person under the public, government-run Medicare program.

The result? Much higher drug prices.

One clear example of the inability to private drug and health plans to negotiate good drug prices can be found in what happened to the prescription costs of people who had both Medicare and Medicaid. People who are enrolled in both programs (dual-eligibles) were switched from Medicaid prescription drug coverage to a private Medicare drug plan when the Medicare drug benefit began in January 2006.

According to the House Committee on Government Oversight and Reform [5], prescription drugs for this population cost 30 percent more under the new private Medicare drug plans than they did under Medicaid, increasing pharmaceutical companies’ profits by at least $3.7 billion dollars in just the first two years of the program. For example, Bristol Myers earned a windfall of almost $400 million, thanks to higher prices for the stroke medication Plavix.

The private Medicare drug plans could not compete with the VA either. A study by Families USA [6] found that:

“[F]or all of the top 20 drugs prescribed to seniors, VA prices are substantially lower than the lowest prices charged by the largest Part D insurers. The median difference was 58 percent. In other words, for half of the 20 drugs, the lowest price charged by the largest Part D insurers is at least 58 percent higher.”

Beyond the numbers are real people getting hurt. The Medicare Rights Center collects many of their stories [7], such as this one from a man from Hendersonville, NC:

“I am a 40 year old male who was diagnosed with Multiple Sclerosis in 2004. I began collecting disability in 2005. In the beginning with no drug coverage the drug companies were providing me with my medications at no cost. When part D took effect I qualified for 100 percent assistance [8]. This year I received an $890 year cost of living raise and fell into the 75 percent assistance level. My drug costs in the first two months have meant an out-of-pocket of over $800 dollars and now with the donut hole [9] I will be looking at nearly half of my Social Security benefit by years end. I have been grateful that the Social Security benefit was there and I have been able to live in my own home but I don't see how that is going to be possible in the future. (Submitted March 3, 2008)”

This failure of reason over ideology may finally be corrected. On January 27, Congressional Quarterly [10] reported that:

“Senate and House Democrats introduced legislation that would allow Medicare to offer seniors a government-run prescription drug plan as an alternative to private plans currently offered in the Medicare drug program.

“Senate Majority Whip Richard J. Durbin, D-Ill., along with House Democrats Marion Berry of Arkansas and Jan Schakowsky of Illinois, said that allowing the traditional Medicare program to create its own prescription drug plan for beneficiaries would bring more competition to the Medicare drug program, which Congress created in 2003…

“Having the Medicare program negotiate directly with drug makers could produce deep discounts that private sector prescription drug plans can’t match, Berry said.”

As the demand builds [11] for a choice of public health insurance to be provided to everyone as part of comprehensive national health reform, why should people with Medicare not have that same choice for their drug coverage?