That’s what staffers from a Democratic House panel conclude in a new report. US taxpayers and Medicare patients could have saved almost $15 billion this year if private health insurers had cut expenses for prescription drug coverage and negotiated bigger discounts, according to the report released today by the House Oversight and Government Reform Committee.

The Medicare Part D benefits offered by private insurers operate with “high administrative costs, sales expenses and profits,” the report said. The conclusions were based on proprietary cost and pricing data obtained from 12 insurers that provide drug coverage to more than 18 million Medicare patients, Reuters writes.

“The cost and pricing data obtained by the committee reveal that use of private insurers to deliver Medicare drug coverage is driving up costs and producing only limited savings on drug prices,” the report said. (This is the full report). [UPDATE: For those readers who didn't realize that the Republican response was on the jump page, we are providing a link here as well].

Democrats question whether private companies can be as efficient and wield as much negotiating power as traditional Medicare. “Privatizing the delivery of the drug benefit has enriched the drug companies and insurance industry at the expense of seniors and taxpayers,” Henry Waxman, who chairs the committee, said in a statement. He released the report with 12 Democrats on his committee.

Aetna, UnitedHealth Group, Humana and other companies offer drug plans through Medicare, the federal health coverage for the elderly and disabled. Karen Ignagni, president of America’s Health Insurance Plans, said Medicare drug coverage had cost taxpayers and patients less than originally projected and offered more benefits.

“This program has on every level beat expectations,” Ignagni tells Reuters, adding that the industry group still is reviewing the report.

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, Reuters notes.

The companies failed to negotiate significant rebates from drug makers, the report concluded. 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.

When a Republican-led Congress created the Medicare drug coverage in 2003, supporters said using private insurers would promote competition and cost savings. The benefits took effect in 2006. And this is the Republican response…

“To be fair to our friends in the Majority, it was assigned a nearly impossible task – to find credible reasons to criticize a federal program that has a near-90 percent approval rating and has come in a third under budget…The Majority did half the job. It found reasons to criticize Part D. It did not find credible reasons.

“It says administrative costs are too high for Part D because they are higher than for other parts of Medicare where government controls the payouts. Administrative costs are higher, but that’s because the private plans that operate Part D actually attempt to administer the program in a professional way. They set up formularies, design products to meet the individual needs of patients, negotiate price rebates and other discounts and, of course, have to market their products. It’s significantly cheaper – from an administrative standpoint – to simply write checks, as other agencies do.”

[NOTE TO READERS: A couple of you have written to note that the report contains errors, or at least misstatements. And we appreciate your close reading and willingness to point out, or at least take issue, with the contents and the committee's motivations. We recognize that Medicare Part D has accomplished some needed goals. Our post, basically, carried a summary that was, in large part, a Reuters dispatch, although we did provide direct links to the full report and committee statement, along with the Republican statement.

In addition, we have modified the headline to note the description of the Medicare program so that it reflects the committee's findings. This is the description provided by the committee: "A new report on the Medicare Part D program reveals that the high administrative costs of the private Part D insurers, combined with their inability to negotiate significant drug savings, will cost taxpayers and seniors $15 billion in 2007." In colloquial terms, that sounds like a mess, and we never meant to imply that was our own sentiment. Of course, the horse is out of the barn, but we feel the need to clarify the record.]