Monday, March 24, 2008

Walmart and Medicare

Brian Schwartz alerted us to an article in the Rocky Mountain news from January 9, 2008 about the fact that Medicare costs for the prescription drug program had caused a 6.7 % increase in health spending during 2006.

In fact, Medicare's spending in 2006 increased by 18.7%, driving the entire national health care spending up 6.7%, according to CMS figures. This government agency that runs Medicare and Medicaid reported that almost all other sectors of spending had a slower rate of increase than in previous years -- doctors, hospitals, clinics, home health care, private insurance, etc. So, if the government had not added the prescription drug program, medical costs would have even risen slower and might have been even with the rest of the economy.

But who would have helped the seniors to buy their drugs?

Walmart. That's who.

In Sept. 06, Walmart started its $4 prescription program -- which it now reports has allowed consumers to save over $1 billion dollars nationally (and $13 million in Colorado) in just 18 months. That's a great record - and you don't need a Medicare or Medicaid card to get those savings. In fact, you don't need an insurance card of any kind. Now that's a way to reduce health care spending. You can find out from Walmart what drugs are included in the Walmart program, and the savings per state.

Paul Hsieh, MD previously blogged on this Walmart program. But now we have something to compare it to. It's not a direct comparison because the government bought drugs the entire year, and Walmart's savings extend over 18 months beginning in Sept. 2006. But, that's another difference between the government and Walmart. Walmart can give us figures monthly or even weekly, because they have to be able to report to their stockholders and to the government. However, the US government in January 2008 was reporting on expenses in 2006. Their reports almost always take a year or more to compile. So, next year, we can see what the government spent in 2007, and meanwhile, we can see how much Walmart saves consumers week by week.

But more importantly, let's look at what this means.

Walmart reports that 30% of these prescriptions are filled for those without any insurance -- the uninsured. And these $4 prescriptions are also a huge plus for those Medicare seniors who are in the doughnut hole, which occurs when a senior has between $2,400 and $5,421.25 in drug expenses per year. In that hole, Medicare coverage disappears. So, more people can buy the drugs prescribed by their doctors and take all of the prescribed amounts -- not taking half or skipping doses because of costs. In addition, Walmart has picked up customers. And, as a result, competitors Target, Costco and Kroger have followed with their own programs as well. So, nationally, more and more prescription drug consumers benefit.

In several states, there are government restrictions on Walmart's ability to sell $4.00 prescriptions. These states include Colorado. So, without government restrictions, Colorado consumers could save more. We'll check into this and report back.

In the meantime, imagine a Free Market!