Plans beating feds at Rx pricing, industry

By LAURA GILCREST, UPI Health Business Editor

WASHINGTON, Jan. 26 (UPI) -- Critics of Medicare's new Part D prescription-drug benefit claim that the program's cost will soar since it gives the government no power to haggle with drug companies for the best prices, but groups representing the private health plans say their experience at the price negotiating table is allowing them to beat the government at its own game.

The issue of whether private health plans should have been involved at all in Medicare's Part D drug benefit came up Thursday at the non-profit Kaiser Family Foundation's forum on the Part D initiative's awkward Jan. 1 debut and on what still needs to be done to make the program more efficient.


Opponents of the Bush administration's experiment in public/private partnering on a government benefit blame its chaotic rollout on the plan's market component and claim the program's costs will eventually spiral out of control with no limits of the costs of drugs, premiums and co-payments.


The seniors who have signed up for Part D so far say the program is "expensive, complicated and doesn't meet their needs," said Barbara Kennelly, president and chief executive officer of the National Committee to Protect and Preserve Social Security, who advocates a completely government-run Part D benefit akin to the basic Medicare program.

"There is no negotiating ability by the government because everybody's in private plans," she told the conference. She argued that, although the Bush administration claims federal entitlements cost too much, "they were happy to give millions of dollars to private companies," rather than devise an efficient, single-payer plan.

Kennelly predicted that Medicare's Part D will become the game of a few health-insurance giants that will eventually squeeze out the smaller players and reap huge profits. She told United Press International that the problem will only get worse as big companies like General Motors trim away perks like retirement pensions and an ever-increasing pool of retirees are forced to turn to Medicare for their prescription drugs.

But Karen Ignagni, president and CEO of America's Health Insurance Plans, countered that so far, health insurers are beating Uncle Sam at the negotiating table.

"I'm hearing shock from (state) Medicaid directors that we're getting better prices than they are," she told UPI. "I don't know of any other government program where the real costs are less than the estimates," she said, arguing that the plans are offering "affordable products" with low premiums and low deductibles.


Ignagni also noted that, once low-cost plans hit the market, Part D's opponents switched tactics. "First it was about the (no coverage) doughnut hole and high premiums, now they're switching to (Part D's) complexity. Is this about politics or about helping seniors?" she said.

But NCPPSS's Kennelly was skeptical of Ignagni's claim that the health plans were coaxing the best prices from the drug companies. "That's not what I'm hearing from my members," she told UPI.

But Leslie Norwalk, deputy administrator of the Centers for Medicare and Medicaid Services (CMS), also defended the private sector's involvement in the program, noting that back in 2000 the Clinton administration also envisioned a role for private insurers in its own version of Part D. "Democrats and Republicans both believed that was the way to go," she said.

Norwalk also claimed price negotiations were going well under the new program, with health plans' average premium five dollars under what was expected.

AHIP's Ignagni said she expected competition among plans offering the Medicare drug benefit to remain fairly even-handed between large and small companies, pointing to the experience with Medicare Advantage plans, where Ignagni said smaller, regional companies have been able to hold their own against the bigger players in that market. "It'll be a year for a shakeout, but I'm not expecting a big shakeout," she said, adding that some health insurers with less experience in government contracting may drop out of the Part D market.


Experts at the Kaiser forum also cited the widely publicized dilemma of the so-called dual eligibles -- those who were automatically switched from Medicaid to Medicare's Part D but who were often turned away at pharmacies because they weren't flagged in the new system -- as the single biggest problem with Part D's introduction.

The problem with these dual beneficiaries was "predictable and predicted," said Barbara Coulter Edwards, the former director of Ohio Medicaid and one of the Kaiser forum's panel of experts. The "massive movement of 6 million people over a holiday weekend was not a good idea," she told the meeting. The switch of a population of "frail people who already had coverage" would have been better attempted in phases, Edwards said.

She said CMS has done a good job in managing the problem but added that much work still remains in matching payments to claims with this group of beneficiaries, as well as getting automatic switchees into formularies that are better geared to their particular drug needs.

Kennelly blasted the program for the dual-beneficiary snafu. "We knew there were 6 million dual beneficiaries; this was a disgrace," she said.

Representatives of other Part D players weighed in with glitches that remain. Vicki Gottlich, senior policy attorney with the Center for Medicare Advocacy, said her members are still dumbfounded over Part D's process for getting an exception to continue pre-existing drug coverage. She also noted that about 60 percent of dual beneficiaries are in plans that don't cover all of their drugs, but people trying to switch into better plans are confused as to when new coverage begins. Also, duals who have had to pay for drugs out of their own pocket need an easy system to get reimbursed, Gottlich added.


Karen Garza, an official with Walgreens pharmacy, said drugstores are anxious for "real-time information" in the CMS system so pharmacists can quickly assess Part D eligibility and more accurate data on co-payments. CMS should make it easier to determine when a "drug not covered" message means the drug is not listed on a plan's formulary or covered at all under Part D, Garza added. "The bottom line is, we have a vested interest, we want to capture the senior business," she said.

Ignagni also said the high number of plan switches in the nascent program is suspect and that "contractors" working for interests like drug companies could be behind some of the switches in an attempt to boost sales.

But even as the Part D's technical glitches are ironed out, there remain "fundamental problems with this program," Kennelly argued. "I don't want to see proponents pat themselves on the back -- there is absolutely no cost containment in this (Part D) bill, this is privatization of Medicare," she said.

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