Schakowsky Statement on New Medicare Part D Report

SCHAKOWSKY STATEMENT ON NEW MEDICARE PART D REPORT

Washington, D.C.–U.S. Representative Jan Schakowsky (D-IL), a member of the House Energy and Commerce Committee, released the following statement in response to a report that was released today by the House Oversight and Government Reform Committee on the Medicare drug program. The report reveals that the administrative costs of the private Medicare Part D insurers are almost six times higher than the administrative costs of the traditional Medicare program. The report also concluded that private Part D plans were unable achieve the savings that would be possible under a Medicare administered plan.

"Today's report proves that President Bush misled America's seniors and persons with disabilities when he promised that they would save more money and benefit from lower drug prices by privatizing Medicare Part D,... said U.S. Representative Jan Schakowsky. "Instead of saving seniors and people with disabilities money, private insurers are actually costing American taxpayers and seniors almost $15 billion a year. Next week, Senator Durbin, Rep. Berry and I will introduce the Medicare Prescription Drug Savings and Choice Act to give seniors and persons with disabilities the option of choosing a Medicare-operated drug plan instead of a private drug plan....

Key findings of the report 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 windfall 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. If the Part D program obtained rebates as large as those received by Medicaid, drug spending would be reduced by 26% or $15.6 billion, saving taxpayers and beneficiaries an additional $10.7 billion.

• 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.