Click Here to Read the Staff Report

WASHINGTON, D.C.- Rep. Tom Davis, R-Va., ranking member and former chairman of the House Oversight and Government Reform Committee, said today he finds it “hard to understand why our committee continues to focus all its oversight energies on Medicare Part D, which works, and turn a blind eye to Medicare Part A, which we know is in trouble,” as the committee prepares for a hearing tomorrow.

The hearing focuses on “dual-eligibles” – low-income seniors who were eligible for prescription-drug insurance under Medicaid before Part D was enacted in 2003. The committee’s majority staff, in a report issued in advance of the hearing, accuses pharmaceutical companies of deriving windfall profits on the backs of these seniors.

In fact, according to recent data, profits are trending slightly downward for drug manufacturers serving the dual-eligible market. In addition, numerous surveys by government agencies and others show seniors are exceedingly happy with the program and dual-eligibles have the highest satisfaction rates of all.

Dual-eligibles are so satisfied with Part D, in fact, that many of them are forgoing registering for Medicaid because they can get what they most need – access to affordable prescription drugs – through Part D without all the hassle.

Moreover, the cost to taxpayers has come in nearly 40 percent lower than original estimates.

“Dual eligibles are thriving in Part D,” Davis said. “More economically disadvantaged seniors have access to the drugs their doctors prescribe than ever before in American history. They’ve learned to love Part D. Good luck trying to use this excuse of purported windfall profits to take it away from them.”

According to a report from the minority committee staff, “Congress was familiar with alternate drug benefit structures already in use by the federal government.  The Medicaid drug benefit utilizes statute-based price controls and the Veteran’s Administration operates on the basis of a strict centralized formulary, without private pharmacy delivery. Congress rejected those options because the Medicaid model – mandated rebates and discounts – inevitably shifts costs to other payers and the VA model arbitrarily limits access to new and innovative therapies.”

The majority contends government pays more for dual-eligibles than it would under a Medicaid-like system of “best price” or 15 percent off manufacturers’ average price. But another provision in the bill puts the lie to this contention.

Before Part D, states shared the cost of providing drugs to disadvantaged seniors. When Congress enacted Part D, those who drafted the legislation realized shifting all this cost to the federal government would result in a budget windfall for states. So Congress included a provision that required states to pay to the federal government what it would have spent under Medicaid. At first, the payment amounts were based on historical Medicaid data. Since 2006, they have been indexed to the growth in average per-capita Part D costs.

But since per-capita costs of serving Part D beneficiaries have been so much lower than projected, the amounts states have had to pay has fallen every year since the program was enacted. The same public – the poorest, least healthy and most dependent on prescription drugs in the entire program – is being served. Part D makes more drugs available to seniors and with fewer limits than most state programs. And there is no cost shift to speak of – dual-eligibles receive subsidies that cover the entire costs of their drugs.

The only explanation left is that the market-based system enacted under Part D works better – delivers more drugs at less cost to more seniors than ever took place under Medicaid.

“Here we have a program that has worked better than any of us ever imagined,” Davis said. “And we can’t hold enough hearings to tear it apart. We should be looking into the parts of Medicare that aren’t working well, such as Part A.”