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The Future of Medicare: 15 Proposals You Should Know About

Pros and cons of options on the table in Washington

4. Require Drug Companies to Give Rebates or Discounts to Medicare

Under current law, drug manufacturers are required to give rebates or discounts to the Medicaid program for prescription drugs purchased by Medicaid beneficiaries. However, Medicare Part D — the optional prescription drug coverage — does not require similar manufacturer rebates or discounts. This proposal would require manufacturers to provide Medicare with the same rebates or discounts as those Medicaid receives for drugs purchased by certain low-income Part D enrollees.

PRO: Before 2006, drug companies provided discounts on drugs prescribed for all Medicaid beneficiaries. In 2006, legislation moved many of these beneficiaries to Medicare and ended the required discounts. As a result, the price of drugs for Medicare enrollees is higher than that under Medicaid and other government programs. Drug companies managed fine before 2006 and they can do so again. Restoring the discounts will save the Medicare program $112 billion over the next decade. This is a simple and effective way to save money for Medicare and help lower the federal budget deficit. (Henry J. Aaron, Brookings Institution)

CON: Some people think requiring drug companies to reduce the prices they charge Medicare for low-income seniors with Part D drug coverage would reduce Part D costs and be a good idea. It's not a good idea. Prices would just go up for other Americans, and there would be less research on cures for diseases such as Alzheimer’s. This is not to say nothing is needed. Like other parts of Medicare, the revenue from Part D premiums covers only a small part of the actual cost. So today's and tomorrow’s taxpayers will have to write bigger and bigger checks to the Internal Revenue Service if no action is taken. (Stuart Butler, Heritage Foundation)

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