CBO faults medicare drug plan

[Ron Burgundy]

AP - Rep. John Dingell (news, bio, voting record), author of a bill requiring the government to negotiate drug prices on behalf of Medicare beneficiaries, says he's not discouraged by a Congressional Budget Office conclusion that such negotiations would not save money.

"The secretary would be unable to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by (the plans) under current law," Donald B. Marron, the CBO's acting director, told Dingell, D-Mich., in a letter made public Wednesday.

The measure requiring the secretary of the Health and Human Services Department to negotiate drug prices is a priority of new House Speaker Nancy Pelosi (news, bio, voting record) and is set to be taken up Friday by the House.

Current law prohibits the government from negotiating drug prices in Medicare Part D. Rather, insurers have that role. The insurers get a federal subsidy for administering a plan. Beneficiaries also pay for the benefit.

House Democrats say the government can use its leverage to strike a better deal than the insurers get. Dingell was not dissuaded by the letter, which quickly made its way around Capitol Hill.

"This isn't the first time the Congress and CBO differed on the amount of savings a particular bill would achieve," Dingell said. "Common sense tells you that negotiating with the purchasing power of 43 million Medicare beneficiaries behind you would result in lower drug prices."

Dingell said he was confident Health and Human Services Secretary Mike Leavitt will be able to achieve better drug prices for seniors.

The CBO's letter came on the same day that the Bush administration announced that more than 1 million seniors and disabled people have enrolled in the program in recent months, raising to more than 90 percent the number of seniors with some kind of drug coverage.

The program, which began in 2006, just completed an open-enrollment season that allowed seniors to enter the program Jan. 1. The update increases the enrollment in private plans from 22.5 million to 23.5 million, or about 4.3 percent.

In addition, businesses get a tax credit when they offer prescription drug coverage for their retirees. The number of Medicare beneficiaries getting drug coverage through that subsidy increased from 6.9 million to nearly 7.1 million. Some analysts had predicted a gradual decline in that category.

"I will admit to being surprised by that number," said Leslie V. Norwalk, acting administrator for the Centers for Medicare and Medicaid Services.

Medicare officials later stressed that the 7.1 million estimate was a "snapshot." The number often changes and could easily go higher or lower in coming weeks.

Norwalk said the enrollment numbers signal that people like the benefit, which cost the federal government about $30 billion in 2006.

"They're satisfied with the program. The costs to beneficiaries and the costs to taxpayers are both down," she said. "Most importantly, beneficiaries are leading healthier and better lives thanks to their access to drugs. All good."

The administration's update on enrollment numbers comes just two days before the House considers Dingell's bill on government negotiations.

The administration opposes the measure. Leading up to the vote, it has aggressively touted Medicare Part D. Over the weekend, it lowered the benefit's estimated costs by about $80 billion over the coming decade. On Tuesday, it waived the late enrollment penalty for poor seniors who qualify for the low-income subsidy.

Drug makers have also been busy leading up to the vote. Full-page ads taken out by the Pharmaceutical Research and Manufacturers of America note an 80 percent satisfaction rate among those enrolled in the program.

"Give it a chance. It's working," the ad reads.

Groups such as Consumers Union and the AARP have taken the other side.

"Congress should take the handcuffs off Medicare and let it negotiate better deals from the drug industry," said Bill Vaughan, senior policy analyst with Consumers Union, the publisher of Consumer Reports. "Seniors and taxpayers deserve the best deal possible, and right now, we simply aren't getting a good price on prescription drugs."

The group touts a study from Families USA, which compared the price of drugs obtained by the Veterans Affairs Department versus the price of drugs charged by the largest Medicare plans. The comparison showed that the VA, which negotiates with drug companies, overwhelmingly paid lower prices.

For instance, the lowest VA price for a year's treatment of Toprol XL, a beta blocker, was $250. The lowest price charged by the largest of the private plans is $395, a difference of about 58 percent.

However, Norwalk said that comparing the VA to private plans is comparing apples to oranges because the programs are so different. In particular, Medicare plans offer more choice in drugs, she said. Also, Medicare beneficiaries can use local pharmacies, while the VA's medicine can be obtained only through mail or at the VA's hospitals and clinics.

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