Government
Medicare to recover billions from drug plans
NEWS IN BRIEF — Posted Oct. 22, 2007
The private insurers that administer the Medicare drug benefit must return roughly $4 billion to federal coffers because government officials determined that total drug costs in 2006 for nearly all of the plans were below initial estimates.
When insurers bid to offer drug benefits to Medicare beneficiaries, they estimate how much total spending they will incur for the year. When the Centers for Medicare & Medicaid Services accepts a bid, it agrees to pay the plan prospectively based on this estimate and to reconcile final cost levels after the year ends.
Because 2006 was Medicare Part D's first year, insurers generally overestimated costs, because they did not have a baseline from which to judge how much beneficiaries actually would spend on medications, the agency said. For the benefit's second year, plan bids were much lower.
Note: This item originally appeared at http://www.ama-assn.org/amednews/2007/10/22/gvbf1022.htm.
