Medicare Part “D-saster”:
A Gift for Insurance and Drug Companies

Jan 30, 2006

Medicare Part D prescription drug coverage just started at the beginning of January, and seniors all across the country are already running into big problems.

Many are being charged much higher copays and deductibles than they thought they’d have, and being told that their specific medications are not covered.

Problems are so bad for low-income seniors who are not getting the medications they need, that they are turning to state agencies across the country seeking emergency Medicaid coverage. Vermont’s secretary of human services commented, “The federal system simply is not working.”

This is not a surprise–given how the program was set up.

In most states, on average, there are 30 to 40 different plans that seniors have to choose from, with more than 3,000 plans nationwide. Each insurance company has its own set of plans, each set up to make a profit, each covering different sets of medications. The system is so complicated that there’s no way it can efficiently get people the medications they need.

Medicare D is such a bureaucratic mess because it was set up to be a boondoggle to private companies. The government contracts most of the work with private insurance providers to run it. And they’ve jumped in there every way they can, to squeeze as much out of it as they can.

Private insurers take 25 or 30% of their revenues just for administrative costs. On the other hand, Medicare A and B, which are government-run programs, cost just 5% to administer.

Medicare D is also a gift to the drug companies. It’s why the federal government is prohibited from negotiating prices or setting prices directly. For Medicare D, drug companies can charge as much as they want. In the Veterans Affairs drug plan, in which the government negotiates directly with the pharmaceuticals, drug prices are half of those in Medicare D–or much lower.

Estimates are that drug companies will make more than 13 billion dollars in profits in the first year alone from this one program–and as much as 139 billion dollars over eight years.

In Medicare D, HMOs and drug companies are set to make a killing. Where will all this money come from? First, the “beneficiaries,” through outrageous deductibles and copays. Second, the taxpayers. It’s been estimated that the government will be paying more than 900 billion dollars over the next decade for Medicare D. That means WE’LL be paying.

It’s no accident. This was why Medicare D was set up–under the guise of helping seniors, it was designed to be a huge gift to insurance companies and pharmaceuticals–directly from our pockets to theirs.