Wednesday, April 19, 2006

Medicare Part D - The Drug And Insurance Company Dream

Many have suspected that while Medicare Part D provides some benefit to seniors the largest beneficiaries of the program are the drug and insurance companies. I did a little experiment, the results of which seem to suggest the truth behind that concern.

I priced the four prescriptions my wife and I take on Medicare's website in order to identify the cheapest provider. They are two generic and two name brand drugs. I then did the same thing on the Costco website, which is a non-Medicare pharmacy known to have some of the lowest drug prices in the United States. Lastly, I priced those same drugs on one of the largest Canadian on-line pharmacies, canadadrugs.com. (Interestingly, it turns out that in Canada one of the name brand drugs is available as a generic.)

The results were illuminating. The cheapest Part D coverage was with a provider called Yourx. The annual Yourx cost for all four drugs, including premium, copay and deductible, was $1088. The unsubsidized Costco price was considerably more expensive, with an annual cost of $2719. The big surprise was canadadrugs, where an annual supply of those same drugs could be purchased for $1666.

Now Medicare won't let us know how many Federal tax ( and borrowed dollars) are used to subsidize the Yourx cost, but it is a safe bet that Yourx is not buying its drugs and administering its plan at a lower cost than Costco. That suggests that the Government is giving Yourx and the drug companies who are supplying it with drugs about $1631 in tax dollars (the difference between $1088 and $2719) for those four prescriptions.

However, since Canadadrug is not saddled with our insurance bureaucracy and and can more aggressively negotiate through the Canadian Government with the drug companies it is able to sell those same drugs (except one being a generic) for only $543 more than Yourx. That means that if Medicare Part D participants could buy their drugs from Canada the U.S. government would only have to provide a $543 subsidy rather than gouging the taxpayers for $1631.

Alternatively we could scrap the Rube Goldberg complexity of Part D and just have it administered like Medicare Parts A and B, and give Medicare the full authority to negotiate for the lowest possible prices. I'm betting Medicare could do at least as well as the Canadians and save taxpayers about two thirds of the current cost of the program.

But then, that wouldn't be the dream program engineered by the drug and insurance companies.

1 comment:

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