Medicare Compliance & Reimbursement

Congress passes legislation despite federal disapproval.

Amidst heated debate over the efficacy of current Part D legislation, the new House passed H.R. 4, the Bipartisan Prescription Drug Negotiating Authority Bill on Jan. 12 by a vote of 255 to 170. "[The] vote is a resounding victory for American's seniors over the special interests," House Speaker Nancy Pelosi said. Despite Speaker Pelosi's optimism, skeptics allege that the proposed changes to Part D could negatively impact Medicare beneficiaries.

Proposed changes include a requirement that the Department of Health and Human Services' (HHS) secretary negotiate with the pharmaceutical industry on a bi-annual basis in an attempt to lower prescription costs for Part D beneficiaries. Rep. Louise Slaughter (D-NY) pointed out that this legislation will allow Medicare to compete on an even footing with other public health ventures. "Unlike the individual states, Fortune 500 companies and even the Department of Veterans Affairs, Medicare is the only major health care entity in this country that cannot bargain for lower prices," Rep. Slaughter's communication director John Santore said in a statement.

Though Speaker Pelosi and others claimed victory with this bill's passage, Centers for Medicare & Medicaid Services officials suggested that the bill will save little or no money for Medicare beneficiaries.

Requiring HHS secretary Michael Leavitt to negotiate with drug companies will not produce any savings for Part D plans unless he receives additional bargaining power, explains Paul Spitalnic, director of the Parts C and D Actuarial Group. "Although the bill would require the secretary to negotiate with drug manufacturers regarding drug prices, the inability to drive market share via the establishment of a formulary or development of a preferred tier significantly undermines the effectiveness of this negotiation," Spitalnic said in a statement.

The nonpartisan Congressional Budget Office (CBO) echoed Spitalnic's doubts. "CBO estimates that H.R. 4 would have a negligible effect on federal spending because we anticipate that 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 PDPs under current law," officials maintain.

The current legislation on Part D prescription coverage certainly has produced tangible benefits to Medicare recipients; monthly premiums have fallen from $38 to $22 since the drug program's inception in 2003, a 42 percent reduction. "There's just no evidence that government makes better choices for consumers on their health than consumers do for themselves," Leavitt notes.

In addition to these savings for consumers, Leavitt says that the government has become more efficient with its Medicare dollars as well. "The net Medicare cost of the drug program has fallen by close to $200 billion since its passage in 2003," Leavitt claims.

The most recent Part D budget estimates indicate that savings will continue, as payments to Part D plans look to be $113 billion lower throughout the next 10 years. "Importantly, of the $113 billion reduction, $96 billion is a direct result of competition and significantly lower Part D plan bids," adds CMS' acting administrator Leslie V. Norwalk. This combination of competitive market forces and lower Part D plan bids already fosters an atmosphere of negotiation, and CMS actuaries do not foresee Leavitt's potential power as a source of additional savings, she contends.

"The bottom line from the news today is that beneficiaries are paying less in premiums and taxpayers are seeing billions of dollars in lower costs, without the need for government to interfere and reduce access or convenience for beneficiaries," concluded Norwalk.

To Speaker Pelosi, the bottom line might actually be the bottom line. She attacked the pharmaceutical industry, claiming that profiteering has robbed America's Medicare recipients.