Medicare Drug Program Costing Less Than Estimates, U.S. Says

January 7, 2007
By ROBERT PEAR
http://www.nytimes.com/2007/01/07/wa...th&oref=slogin

WASHINGTON, Jan. 6 — The Bush administration lowered its estimate of the cost of Medicare’s new prescription drug benefit Saturday, saying the price tag had come down about 10 percent in the last six months.

Administration officials said they hoped the numbers would undercut support in Congress for a Democratic proposal requiring the government to negotiate with pharmaceutical makers to secure lower drug prices for Medicare beneficiaries.

The 2003 Medicare law prohibits such direct negotiations, relying instead on private insurers and their agents to seek discounts on prescription drugs. Legislation to repeal that ban is a top priority for the new Democratic majority in Congress.

Michael O. Leavitt, the secretary of health and human services, said the new numbers showed that such legislation was unnecessary because competition among private plans had effectively held down costs.

“Our new estimates provide clear evidence that consumer choice is working,” Mr. Leavitt said in an interview. “Government interference will result in fewer choices and less consumer satisfaction.”

Such arguments are unlikely to sway House Democrats, who say older Americans are still paying far too much for medications. But the numbers provide new ammunition for Republicans.

In July, the Bush administration estimated that payments to private plans offering the Medicare drug benefit would total $1.077 trillion from 2007 to 2016. Officials now estimate they will be $964 billion.

The federal government subsidizes premiums and pays a variety of subsidies to insurers to draw them into the Medicare market.

Leslie V. Norwalk, acting administrator of the Centers for Medicare and Medicaid Services, said drug costs in general had been increasing more slowly than expected. In addition, Ms. Norwalk said, enrollment in the new Medicare program is lower than expected, because some beneficiaries found they had equivalent drug coverage from other sources.