News & Events

Insurance companies run wild with public $ (MC)

Please post: For those who are optimistic that the public sector can  "keep the insurers honest", or that we have the political will and the dedicated financial and human resources to do so, or who believe that this is an efficient and effective way to run a healthcare system:
HHS Inspector General Finds Insurers Overcharged Beneficiaries, Taxpayers By Billions For Medicare Part D

Keep in mind that 2006 was the first year that Medicare Part D was effective.  Not only is HHS not equipped to audit private insurance plans (and only a sample at that) for the first year, this "deficit" will only accumulate year upon year (as anyone who has managed an organization or program knows very well). 

This McClatchy article, "Insurers overcharged Medicare for prescriptions,"
(, reports that "Eighty percent of the participating insurance companies owe the program an estimated $4.4 billion for 2006 alone…The program’s nearly 27 million beneficiaries generally pay for the coverage, known as Medicare part D, through a monthly premium that’s deducted from their Social Security checks. That and Medicare subsidies paid for by taxpayers pay for the $60 billion program…However, none of the findings resulted in changes to the program, the inspector general found, because the bid audits are done after the contracts with the insurance companies are signed and beneficiaries are enrolled."

In the report, the IG says, "Bid audits are not designed to lead to sanctions," the report says. "However, without any consequences . . . their deterrent effect is limited."

Another way that the Part D costs and profits are inflated is through the windfall profits that pharmaceutical manufacturers benefit from because Medicare is not permitted to negotiate drug prices for Medicare or for Medicaid programs in  which "dually-eligible" low-income seniors are covered by the Medicare drug benefit; this restriction was made part of the Part D legislation that was  written by the pharma industry.

The House Committee on Oversight and Government Reform found that "taxpayers and Medicare Part D beneficiaries could have saved almost $15 billion in 2007 — and could save more than $75 billion over the next five years — by reducing administrative expenses and drug prices.14"

" Drug Expenses for Dual Eligible Beneficiaries: $3.7 billion. With the advent of Medicare Part D, individuals who are dual eligible for both Medicare and Medicaid began to receive prescription drugs under the Medicare Part D drug program rather than Medicaid. A report released by the Committee in July 2008 shows that the switch produced a windfall of $3.7 billion dollars to drug manufacturers for the first two years of the Medicare Part D program. 15"

Like the billions of dollars that are wasted in fraud and abuse by the insurance plans without consequences to them, these latter figures are also only annual financial outcomes, not total program overcharges.

These are not "unintended consequences of government intervention," as some would opine.  The take-away lesson is that these consequences are very much intended by the for-profit sector industries when they are permitted by the politicians who depend on them for financial contributions and future careers to write our public legislation and policies.

 Submitted by Anne Carroll to NPSF listserve June 30 09.