Congressman Dennis Kucinich: Private Medicare Drug Insurers Are Driving Costs Through the Roof

October 15, 2007
1:30 PM

CONTACT: Congressman Dennis Kucinich
Natalie Laber 202-225-5871


Kucinich: Private Medicare Drug Insurers Are Driving Costs Through the Roof

WASHINGTON, DC - October 15 – Congressman Dennis Kucinich (D-OH) said today’s report on the Medicare Part D drug program, released by the Oversight and Government Reform Committee, was further proof that insurance companies are driving up the cost of health care at the expense of seniors.

The new report states that the high administrative costs of the private Part D insurers, combined with their failure to negotiate significant drug savings, will cost taxpayers and seniors almost $15 billion this year. Kucinich requested the report along with several of his colleagues on the committee.

“Senior citizens deserve better than a drug plan that requires them to subsidize the counterproductive existence of a middleman, the insurance industry,” Kucinich said.

“This report is yet another confirmation of what we’ve known – the insurance industry is profiteering on the backs of seniors who are too often struggling to make ends meet. The insurance industry shouldn’t be in the Medicare drug benefit and they shouldn’t be in health care.

“HR 676, the Expanded and Improved Medicare for All act would get rid of the insurance industry and would save enough money to cover everyone in the United States with no copayments, no deductibles, and no premiums.”

The investigation by the House Oversight and Government Reform Committee is the first independent analysis to have access to proprietary data about drug plan costs and drug prices. Key findings include:

High administrative expenses. The private Part D insurers report administrative expenses, sales costs, and profits of almost $5 billion in 2007 -- including $1 billion in profits alone. The administrative costs of the privatized Part D program are almost six times higher than the administrative costs of the traditional Medicare program.

Small drug rebates. The drug price rebates negotiated by the Part D insurers reduce Medicare drug spending by just 8.1%. In contrast, rebates in the Medicaid program reduce drug spending by 26%, over three times as much. Because of the difference in the size of the rebates, the transfer of low-income seniors from Medicaid drug coverage to Medicare drug coverage will result in a $2.8 billion windfall for drug manufacturers in 2007. The Part D insurers receive no rebates or other manufacturer discounts for three-quarters of the drugs used by seniors.

Failure to pass through rebates to seniors. When the insurers do obtain drug price rebates, they do not use the rebates to reduce pharmacy drug prices. This year alone, the private insurers will receive $1 billion in rebates on purchases that seniors in coverage gaps, such as the donut hole, pay for out of their own pockets.

“This report also confirms what I’ve been saying for years: Competition in health care doesn’t work. It has never been effective in lowering costs. Why would we expect it to work with a privatized Part D plan?” Kucinich said.