Senate Approves $10 Billion Reduction in Medicaid, Medicare

The Senate Finance Committee on Tuesday voted 11-9 along party lines to approve a fiscal year 2006 budget reconciliation package that would reduce Medicaid and Medicare spending by $10 billion over five years. An estimated $4.3 billion in net savings would come from Medicaid, with the remaining $5.7 billion coming from Medicare. Among its provisions, the package would:

• Revise the formula Medicare uses to reimburse pharmacists for drug costs by basing the calculations on the average manufacturer price instead of the published average wholesale price for a savings of $6.3 billion;
• Eliminate a "stabilization fund" created under the 2003 Medicare law intended to encourage health plans' participation in the program;
• Increase Medicaid rebates paid to the federal government by pharmaceutical companies from 15.1% to 17% for brand-name drugs and from 11% to 17% for generic drugs for a savings of $1.4 billion and;
• Make podiatrists eligible for Medicaid reimbursement.