More Signs That the Medicare D Plan Is Corporate Welfare

The report of the Oversight and Government Reform Committee on the Medicare Part D Program provide more examples of how the plan was more a corporate welfare plan than a means to help Medicare beneficiaries. “Privatizing the delivery of the drug benefit has enriched the drug companies and insurance industry at the expense of seniors and taxpayers,” according to Henry Waxman.  (Pdf of full report). 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.

Besides these advantages for the pharmaceutical companies, Bush’s Medicare D program provides financial windfalls for insurance companies who receive subsidies for patients in Medicare Advantage plans. As in the case with the pharmaceutical companies, the insurance companies have been found to use these subsidies to increase profits as opposed to passing on the benefits to patients.

(Hat tip to Corpus Callosum. Consistent with my previous post, I noted that the poll of readers at this science blog, as opposed to a more partisan Democratic blog, has Obama in the lead, Clinton in fifth place, and Edwards in sixth place. Ron Paul comes in fourth.)

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