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House Passes Medicare Bill, President Bush Repeats Veto Threat

CNBC.com
Friday, 12 Jan 2007 | 2:24 PM ET

President Bush renewed his veto threat today as the House of Representatives passed legislation that would require the government to negotiate drug prices for Medicare patients.

The bill, the latest in the "first 100-hours" agenda that helped Democrats win control of Congress in last year's elections, would instruct the government to negotiate with drug companies to get lower prices on behalf of Medicare beneficiaries enrolled in the program through private plans.

Democrats said it would save money for the government health care program for the elderly and disabled, but Republican opponents and the White House said it would limit the availability of drugs while achieving no cost savings. They argued that competition among private insurers is working to drive down drug prices. The bill now goes to the Senate.

Republicans countered that the drug benefit, which kicked in on Jan. 1, 2006, has cost less than anticipated, and the large majority of seniors and disabled who use the program are satisfied.

"With all that's right with the program, it seems unwise and unkind to jeopardize its success," said Rep. Michael Burgess, R-Texas.

Bush contends that competition is already reducing prices for seniors and creating an environment that encourages the development of new drugs.

"Government interference impedes competition, limits access to lifesaving drugs, reduces convenience for beneficiaries and ultimately increases costs to taxpayers, beneficiaries and all American citizens alike," the administration said in a written statement Thursday.

White House press secretary Tony Snow said actuaries at both the Congressional Budget Office and the Department of Health and Human Services say the bill will have little or no effect on federal spending and provide no substantial savings to the government.

"If this bill is presented to the president, he will veto it," Snow said.

Presidents have vetoed 1,485 bills during the nation's history. Congress overrode only 106 of them, according to the Congressional Research Service.

Such overrides require that two-thirds of those present in each chamber vote to override the president's veto.

Currently, private drug plans negotiate how much they'll pay for the medicine their customers take. Those plans get a federal subsidy, plus consumers pay for a portion of the medicine.

Dingell said the government can do better than individual insurance companies in getting discounts.

"The president and his Republicans allies have argued that this bill would do nothing. Then why, I must ask, would he bother to veto it?" said Dingell, chairman of the House Energy and Commerce Committee.

Democrats have said that savings produced by the negotiations would be used to reduce a coverage gap that is common in many plans. Reducing the gap, known as the doughnut hole, would lower those beneficiaries' out-of-pocket costs.

But Republicans counter that there wouldn't be any savings. Also, the nonpartisan Congressional Budget Office said the legislation was unlikely to result in savings to taxpayers.

The program cost about $30 billion in its first year. Insurance companies offer competing coverage plans, and seniors may enroll in the one they like best. The administration announced on Wednesday that 23.5 million seniors had enrolled in stand-alone plans as of Jan. 1.

While a majority of seniors are expressing satisfaction with the program, surveys also indicate that they overwhelmingly want the government to have the power to negotiate drug prices.

A survey of seniors for the Kaiser Family Foundation showed that about 81% of seniors want to let the government use its buying power to negotiate drug prices, including 67% who said they strongly favor such negotiations.

The issue is expected to have a tougher time in the Senate. However, Sen. Max Baucus, D-Mont., gave supporters of the measure a lift on Thursday when he said the total prohibition on government negotiations for Medicare beneficiaries should be eliminated.

"I do not buy the argument that the sky will fall on the prescription drug market if we remove this clause," said Baucus, chairman of the Senate Finance Committee, which has jurisdiction over Medicare.

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