What if Medicare’s drug benefit was more like the VA’s?

April 14, 2011 at 7:55 am

Austin Frakt, The Incidental Economist

In his budget deficit speech yesterday, Obama said, “We will cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency.” The accompanying White House fact sheet says, “The framework would limit excessive payments for prescription drugs by leveraging Medicare’s purchasing power – similar to what was called for by the bipartisan Fiscal Commission.”

But the bipartisan Fiscal Commission report says no such thing. About the Medicare drug benefit (Part D), it says only,

Drug companies are required to provide substantial rebates for prescription drugs purchased by Medicaid beneficiaries. We recommend extending these rebates to Medicaid beneficiaries who are also eligible for Medicare (individuals known as “dual eligibles”) and who receive prescription drug coverage through the Medicare Part D program.

That’s got nothing to do with leveraging Medicare’s purchasing power. Thus, if Obama’s statement about “purchasing power” of Medicare means anything for the Part D program, it’s something neither he nor the Fiscal Commission has specified yet. But what? My sample is small, but some have speculated he wants to make Medicare’s drug program more like the VA’s. If you know anything about the VA’s drug benefit, you’ll know that this would be a huge change for beneficiaries and drug manufacturers, and therefore politically unlikely. Yet, it is worth asking, what would happen if Medicare did buy drugs like the VA does?

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