Report: Provisions Written By Special Interests Waste $80 Billion Annually On Drug Benefits

WASHINGTON, D.C. — Specific provisions of the Medicare prescription drug program inserted at the request of pharmaceutical and HMO interests will cost taxpayers and seniors more than $80 billion a year, according to a report released today by the Institute for America’s Future and the Center for Economic and Policy Research.

The study, released by a coalition of groups led by the Campaign for America’s Future, Public Campaign Action Fund, USAction and Political Action, connects the program’s escalating costs and complexity to the influence exerted by lobbyists for health insurance, health services and pharmaceutical companies in drafting the bill. According to the report, industry campaign contributions totaled $96 million from 2000 to 2004, and industry profits will swell by 500 to 600 percent as the new legislation goes into effect.

Institute for America’s Future co-director Roger Hickey said: “In a sellout to the drug companies, Congress prohibited Medicare from negotiating a better price for seniors. Then it threw in billions of subsides to HMOs, adding another layer of confusion, bureaucracy and costs to the program. America’s most vulnerable—seniors in need of prescription drugs—will pay the cost of this corruption.”

Dr. Dean Baker, author of the report, said that the primary source of the waste is the Bush administration’s decision to provide coverage through private providers and to prohibit—at the behest of the pharmaceutical industry –Medicare from using its leverage as a bulk buyer to negotiate lower prices. Baker compared the current program with the most simple and efficient way to cover the cost of prescription drugs: a simple add-on to the basic Medicare program, comparable to the prescription drug benefit provided by most private health insurers.

Baker also contrasted the cost of the program as written with the costs of establishing a drug benefit under Medicare but requiring the government to negotiate for lower prices. Baker found that if 50 percent of beneficiaries participated in such a Medicare-run system, the savings in lower administrative costs and drug prices would be more than $40 billion per year.

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