Waxman Plans Bill To Set Medicare Part D Drug Prices At Medicaid Level For Dual-eligibles

Bill comes on heels of House Oversight Committee report showing Part D plans pay on average 30 percent more for drugs compared to Medicaid.

Rep. Henry Waxman is planning to introduce legislation that would bring drug prices under the Medicare Part D prescription drug benefit in line with Medicaid prices specifically for dual-eligible beneficiaries.

"Under Medicare Part D, the 6 million dual-eligible beneficiaries can take the same drugs they got under Medicaid," the California Democrat said during a July 24 House Oversight and Government Reform Committee hearing. "The only difference is that the federal taxpayer is now paying 30 percent more. Add it up, and it amounts to a drug manufacturer windfall worth at least $3.7 billion in just the first two years of the Part D program." Waxman is the chairman of the committee.

Dual-eligible beneficiaries qualify for benefits under both Medicare and Medicaid. At the launch of the Part D program in 2006, this group of beneficiaries had its drug coverage moved from Medicaid to Medicare.

Waxman's figures come from a report issued by the committee's majority staff and cites "confidential information on drug expenditures for dual-eligible beneficiaries from the 10 largest Part D insurers" as well as "confidential information on Medicaid drug prices directly from the drug manufacturers" as sources for the pricing discrepancies. The report claims that throughout the next 10 years, dual-eligibles are expected to use $432 billion worth of drugs.

"If drug manufacturers provided the Medicare Part D program with the same prices Medicaid receives, these drug costs could be reduced by as much as $86 billion, a large savings for the taxpayers," the report states.

[Editor's note: An ¹ In Vivo blog post on the hearing contains more of Waxman's commentary and some of the discussion by economists who testified.]

Waxman noted that his bill "will guarantee that federal taxpayers cannot be charged higher prices for the dual-eligible beneficiaries under Medicare Part D than under Medicaid."

CMS Acting Administrator Kerry Weems argued during the hearing that price differences between Medicare and Medicaid for dual-eligibles are only part of the equation and that by guaranteeing the Medicaid drug price to dual-eligible beneficiaries, the "most likely initial result would be an increase in Part D for everybody else who's not dually insured. Is that the consequence we'd like to have?"

"The analysis (contained within the report) that needs to be complete is what happens on the other side of the equation," Weems said. "When you press down here, they are going to go up someplace else - the federal employee benefit program, private insurers. We've seen it happen."

Waxman responded: "I don't believe that would be an accurate statement of what would happen."

The committee's minority staff also issued an analysis of the report, calling the criticism of the Part D structure relating to dual-eligibles "simplistic" and arguing that "employers, employees and the uninsured will bear the cost of Part D price controls. Such promises of something for nothing, particularly in the health care finance arena, have to be viewed with far more economic realism than the majority appears willing to confront."

-Gregory Twachtman ([email protected])