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Medicare Drug Program News
Administration Says Medicare Drug Program Cost Drop
Shows No Need to Negotiate on Drugs
Most antifraud complain reports by prescription drug
plans are missing at CMS
 January 8, 2007 Immediately after the Bush
Administration announced revised estimates that lower the expected cost
of the Medicare drug benefit, Health & Human Services Secretary Mike
Leavitt says it proves there is no need for negotiated drug prices. The
Medicare daily report by KaiserNetwork.org also finds problems with the
Centers for Medicare & Medicaid Services missing antifraud "compliance
plans" from Medicare prescription drug plans. (The complete news release
from HHS is below news report.)
 Bush
Administration Lowers Estimated Cost for Medicare Prescription Drug
Benefit by 10% for 2007-2016
The Bush administration on Saturday said the
projected federal cost of the Medicare prescription drug benefit from
2007 through 2016 is now $964 billion, a 10% decrease from a July 2006
estimate of $1.077 trillion, the
New York Times
reports.
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Related Stories |
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Critics Take Stage as Dems Push Bill Forcing
Medicare to Bargain on Drug Prices
Pelosi spokesman says savings should start
to close donut hole
 January 8, 2006 As Congress prepares to take
action this week on the Democrats proposal to require Medicare to
negotiate for lower prices from the drug companies (HR 4), a survey of
news reports by KaiserNetwork.org finds doubters and critics grabbing
the spotlight. Two items being most discussed are a portion of the bill
that prohibits Medicare from using a preferred list of drugs and
suggestions that the donut hole can be eliminated with savings from
lower drug prices. Read more...
Read the latest news
on
Medicare
or
Medicare Drug Program |
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HHS
Secretary Mike Leavitt said the lower estimate demonstrates that it is
not necessary for Congress to pass
legislation
that would require the agency to negotiate with pharmaceutical companies
under the drug benefit to lower prices.
"Our new estimates provide clear evidence that
consumer choice is working," Leavitt said, adding, "Government
interference will result in fewer choices and less consumer
satisfaction."
Acting
CMS
Administrator Leslie Norwalk said drug costs have been increasing more
slowly than expected, while enrollment in the drug benefit has been
lower than expected because some beneficiaries have equivalent
prescription drug coverage from other sources (Pear, New York Times,
1/7).
Compliance Plans
In related news, 72 of the 79 antifraud "compliance
plans" filed with CMS by insurers that sponsor Medicare prescription
drug plans are missing required information, according to a recent
report by HHS
Inspector General
Daniel Levinson,
CQ HealthBeat
reports.
Under the 2003 Medicare law, insurers sponsoring
PDPs are required to develop compliance plans that meet eight elements
designed to reduce fraud. Many of the insurers that did not submit
complete plans were missing elements that require the companies to
develop internal monitoring and auditing procedures and to designate
compliance officers and committees, the report found.
The report said that those two elements are
"essential" to successfully implementing an antifraud program. The
report also found that many insurers' filings did not include details
about how they would comply with the plans. Those details "are essential
for ensuring that a compliance plan is actually functioning within an
organization," according to the report.
In addition, the report found that CMS to date "has
not specifically audited PDP sponsors' compliance plans or fraud, waste
and abuse programs to determine whether sponsors have addressed the
eight elements established by regulation." CMS plans to begin routine
audits of the plans beginning this year and will hold PDP sponsors
accountable for meeting the requirements, the report said.
CMS Response, Recommendations
CMS in comments included in the report said that
its managers have been conducting "routine compliance efforts" with PDP
sponsors since the drug benefit began in 2006, CQ HealthBeat reports.
Some sponsors might not have met the requirements because of the short
timeframe for implementing many provisions of the 2003 Medicare law, CMS
said.
In addition, CMS said it might not have been
possible for some sponsors to address all requirements by the time they
were reviewed by OIG. However, OIG said in the report that PDP sponsors
were informed of all requirements in a summary document issued in June
2005.
That document should have provided sponsors with
adequate time to address the requirements, OIG said. OIG recommended
that CMS "encourage sponsors to provide sufficient detail" to
demonstrate how they are implementing the plans.
CMS also should ensure that sponsors meet all
requirements for compliance plans, OIG said. CMS spokesperson Jeff
Nelligan said, "We are reviewing the recommendations exceedingly
closely" (Reichard, CQ HealthBeat, 1/5).
Letter to the Editor
"By their decisions on switching to lower-cost drug
plans after
Humana's
huge premium hike, we shall see how much 'consumers' surplus' Medicare
beneficiaries are willing to surrender to Humana," Uwe Reinhardt, a
professor of political economy as
Princeton
University, writes in a letter to the editor of the
Boston Globe
in response to an
article
that examined increases in the price of Humana's Medicare prescription
drug plans for 2007.
Consumers' surplus "is what economist mean by the
difference between the maximum price consumers would have been willing
to pay for a thing and the price they actually have to pay," Reinhardt
writes, adding, "For most buyers and most goods and services, the former
price exceeds the latter."
He continues, "Americans must realize that, in any
market system, the supply side will always seek to minimize the
consumers' surplus left on the table for consumers to enjoy. It is part
of the suppliers' natural instinct to maximize their profits and must be
judged perfectly fair under the ethics ruling the marketplace."
Reinhardt concludes, "If Americans find that ethic
unsuitable for health care, they question the suitability of the market
approach for health care" (Reinhardt, Boston Globe, 1/8).
News Release- Health & Human Services
Projected Medicare Part D Costs Drop By 30
Percent
Independent estimates for the Medicare Part D
prescription drug benefit for the FY 2008 budget cycle show that net
Medicare costs are 30 percent less -- $189 billion lower -- than were
originally predicted when the benefit was created in 2003, HHS Secretary
Mike Leavitt announced today. In addition, based on strong, competitive
bids by health care plans for 2007, average monthly premiums will be
approximately $22 for beneficiaries, down from $23 in 2006, if enrollees
remain in their current plans. The initial estimate for 2006 premiums
was $37.
"Our new estimates provide clear evidence that
consumer choice is working," Secretary Leavitt said. "Government
interference will result in fewer choices and less consumer
satisfaction. Actuaries have told us that government interference will
not lead to lower drug prices either."
According to actuaries with the Centers for
Medicare & Medicaid Services (CMS), the updated Medicare Part D baseline
of payments to Part D plans for the FY 2008 budget cycle has decreased
from last summers mid-session review numbers by $113 billion over the
next ten years (2007 - 2016). Importantly, of the $113 billion
reduction, $96 billion is a direct result of competition and
significantly lower Part D bids.
"Part D drug plans produced greater-than-expected
savings by competing for Medicare beneficiaries and aggressively
negotiating with drug companies," said Acting CMS Administrator Leslie
V. Norwalk. "Strong, competitive bids and informed beneficiary choices
are bringing down premiums yet again. The bottom line from the news
today is that beneficiaries are paying less in premiums and taxpayers
are seeing billions of dollars in savings."
In addition to the $96 billion reduction -- due to
substantially reducing their bids in 2007 in an effort to compete with
rival plans -- there are two other factors that lowered the estimated
cost of Part D payments to plans: lower growth in drug costs in general,
and lower enrollment than originally expected.
Lower actual growth in drug costs in 2005, compared
to last summers mid-session review estimates, resulted in an
approximate $13 billion reduction in the new baseline. The reduced Part
D cost estimates reflect lower actual growth in drug costs than had been
expected, with a single-digit percentage increase (5 percent in 2005)
observed for only the second time in more than a decade.
Relatively slow growth in actual drug prices and
costs, compared to past trends, is expected to persist over the next few
years, as more generic drugs become available and aggressive steps to
keep down drug costs continue.
Lower-than-anticipated enrollment in Part D reduced
the new Medicare Part D payments to Part D plans by $20 billion when
compared to last summers mid-session review figures. As the CMS
actuaries discovered, many Medicare beneficiaries had creditable
prescription drug coverage from other sources (such as FEHB, Tricare,
and the VA), and did not need to sign up for what would have been
duplicative coverage under Part D.
The new baseline numbers also reflect an increase
of $16 billion due to updated figures from the 2002 to the 2003 Medicare
Current Beneficiary Survey.
"In addition to this huge savings as a result of
drug plan competition, it is important to note that beneficiaries are
saving more as well by overwhelmingly selecting less-costly drug plans
for themselves," said Norwalk.
"The average monthly Part D premium in 2006 for the
standard benefit package would have been about $32 if beneficiaries had
enrolled in plans randomly, without a preference for the lower-cost,
lower-premium plans. Instead, enrollees actually paid premiums that
averaged about $23 in 2006, reflecting their choice of more efficient
plans with lower premiums."
The actuaries note that this pattern is expected to
occur again in 2007, as beneficiaries opt for the best bargains among
competing plans, and should further lower the average monthly premium.
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