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Back in 2003, when the so-called
Medicare Modernization Act was being debated in Congress, we warned that this latest round of
Medicare privatization contained
severe flaws that would hurt consumers and taxpayers while lining the pockets of special interests. With nearly two years of hindsight, we can safely say we were right: The MMA has been a major disappointment for consumers and taxpayers, but
a windfall for private insurance and drug companies.
We've laid out the extent of the MMA's failures in a new report: Medicare Privatization: Windfall for the Special Interests. The report chronicles the failures of the MMA in three key areas: Medicare Advantage overpayments, subsidies to regional PPOs, and drug prices.
Among the key findings:
$ Under the MMA, Medicare has been significantly overpaying private plans under Medicare Advantage. In 2005, Medicare overpaid private plans by at least 7% per beneficiary, costing taxpayers $2.7 billion. In 2006, overpayment reached 11% per beneficiary, costing taxpayers $4.6 billion.
$ Under the MMA, Congress set aside $10 billion for an unnecessary subsidy (or "stabilization fund") to regional PPOs. This year, however, 88% of beneficiaries have access to a regional PPO, before the so-called "stabilization fund" was even tapped--no subsidy was necessary.
$ Medicare Part D drug prices are substantially higher than the prices obtained by the Department of Veterans Affairs (VA), which negotiates prices on behalf of consumers. For all of the top 20 drugs prescribed to seniors, the lowest price charged by any Part D plan was higher than the lowest price secured by the VA. Yet Congress refused to let Medicare negotiate directly with the drug companies, as the VA does.
Bottom line: this report shows that, unfortunately for consumers and taxpayers, the MMA has not even come close to meeting the high expectations set for it by Congress.
Consumers are getting hurt and taxpayers fleeced, while insurance companies and drug manufacturers are raking in money faster than they can count it. Congress needs to move away from this deeply flawed privatization model, and instead focus on strengthening Medicare."