"Use of private insurers to deliver Medicare drug coverage is driving up costs ... six times higher than administrative costs of traditional Medicare

Report criticizes of Medicare drug plan costs | By Lisa Richwine | Oct 15, 2007

WASHINGTON (Reuters) - U.S. taxpayers and Medicare patients could have saved almost $15 billion in 2007 if private health insurers had cut expenses for prescription drug coverage and negotiated bigger discounts, a report from Democratic staff of a House of Representatives panel said on Monday.

The Medicare prescription drug benefits offered by private insurers operate with "high administrative costs, sales expenses and profits," the report said.
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"Use of private insurers to deliver Medicare drug coverage is driving up costs and producing only limited savings on drug prices," the report said.
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The report said administrative expenses, sales costs and profits of private insurers offering Medicare drug plans are almost six times higher than the administrative costs of traditional Medicare coverage, costing almost $5 billion or about $180 per beneficiary in 2007. The insurers' profits will account for $1 billion, the report said. ...
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The companies failed to negotiate significant rebates from drug makers, the report also said. Insurers did get discounts in the form of rebates that reduced spending by 8.1 percent in 2007. But that was less than the 26 percent the Medicaid program secured from drug manufacturers. ...