Medicare Drug Plans

NYT reported The Bush administration has told states that they cannot steer Medicare beneficiaries to any specific prescription drug plan, even if state officials find that one or two insurance plans would provide the best deals for elderly people with low-incomes.

State programs that steer people to a specific drug plan are "contrary to Medicare policy goals" and "may violate federal fraud and abuse laws," said the memorandum, signed by Leslie V. Norwalk, deputy administrator of the federal Centers for Medicare and Medicaid Services. By enrolling low-income people in a preferred plan, Ms. Norwalk said, state officials are violating beneficiaries' freedom of choice and undermining competition among insurers. Moreover, she said, if states receive money - rebates or other "financial benefits" - in return for sending people to a particular drug plan, such payments may constitute illegal kickbacks.....

Federal officials were alarmed to learn that some states were drafting legislation that would allow them to act as "authorized representatives" for people in state drug assistance programs. Using this power, state officials could enroll certain state residents in a preferred Medicare drug plan. The drug plans are expected to negotiate with drug companies to obtain discounts, rebates and other price concessions.

Ms. Norwalk said "we are particularly concerned" that such rebates would go into state coffers, rather than being used to reduce drug prices for low-income Medicare beneficiaries. High drug prices mean "higher costs for all Medicare beneficiaries and for the Medicare program," she said.

Under the law passed by Congress in 2003, Medicare will subsidize the basic drug benefit and will provide extra subsidies to defray costs for low-income people. By favoring one Medicare drug plan, Ms. Norwalk said, states would illegally discriminate against the others, impairing their ability to recruit members and secure discounts.

Nathan blogged So Much for States Rights

That is the conflict you get when you want the Federal government to pay for something; it wants to control how its money is spent. If the states want to control everything, they should ask for the right for their state to completely opt out of Medicare/Medicaid, and the state could run a program for its citizens just using state tax revenue. But if you want the Feds to tax other states to send money to your state, you have allow them to control how that money is spent.

.... The Bush administration response. Threaten to throw state officials in jail

Actually the referenced article does not mention the word "jail", it just says that State programs that steer people to a specific drug plan are "contrary to Medicare policy goals" and "may violate federal fraud and abuse laws,"

.... The Medicare legislation prohibits the federal government from negotiating lower prices from pharmaceutical companies

the reason for that is that the drug companies depend on the profits they make from US sales to support their research and development. If the US forces prices down there will be no money to develop new drugs. Personally I would not mind seeing them do that, since I think it would mean they would have to raise prices not just for the US but also Canada and Europe and the rest of the world, so that everyone would be paying for the R&D, but there would be a length of time when the drug companies could do no more R&D until their negotiated discounts with the rest of the world expired.

and now states are prohibited from negotiating better benefits for low-income seniors. These folks don't believe in "federalism", just in disabling decent government at every level.

The Golden Rule applies: The man with the gold makes the rules. As I said above, if states want to control the program, they should fund it totally with state revenue sources.

Stirling Newberry blogged And another nice touch, Bush Administration admits that the drug plans are a swindle, and that states have to look the other way, or else.

There is nothing in the referenced article which says that they admit the drug plans are a swindle. There are quotes which indicate that rebates or other "financial benefits" - in return for sending people to a particular drug plan may constitute illegal kickbacks [whether they go to individual state legislators or] into state coffers [to be spent on something else].

Abby commented I hate the Bush administration as much as the next person, and I'm willing to give any criticism of them the benefit of the doubt. That article, however, does a very bad job of explaining exactly what the States were proposing to do and why the Bush administration opposes it etc.

At least Abby recognizes that the article does a poor job of explaining exactly what the States were proposing to do and why the Bush administration opposes it