updated 11/13/2006 5:14:17 PM ET 2006-11-13T22:14:17

The nation's top health official said Monday that the government shouldn't negotiate Medicare drug prices, setting the stage for early confrontation with the new Democratic Congress.

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Currently, about 22.5 million seniors and the disabled are enrolled in private insurance plans subsidized by the federal government. The insurers negotiate with pharmaceutical companies over how much they'll pay for drugs covered by their plan.

But Democratic lawmakers have promised a new approach when they take control of Congress in January. They would let the federal government use its massive purchasing power to negotiate the price of drugs that Medicare beneficiaries use. They contend that such leverage would produce substantial savings that would then be used to improve the overall program.

Government-run health care?
"The idea of the government negotiating drug prices really isn't about the government negotiating drug prices," Health and Human Services Secretary Mike Leavitt said in a meeting with reporters. "It's a surrogate for a much larger issue, which is really government-run health care."

While there is much talk from lawmakers about working together, the debate over negotiating drug prices will quickly put those words to a test. During the campaign, Democrats linked a ban on drug price negotiations as proof that Republicans sided with the insurance industry and drug manufacturers over seniors.

Leavitt said Democrats should focus their efforts next year on issues where there is broad agreement, such as expanding basic health insurance coverage.

Rep. Nancy Pelosi, D-Calif., and likely the next speaker of the House, has said that she would quickly push for the government to negotiate lower drug prices.

"The drug prices negotiated on behalf of veterans are substantially lower than the prices seniors and individuals with disabilities receive from the drug plans under the Medicare Part D program," Pelosi said recently. "Requiring the federal government to negotiate on behalf of seniors would generate significant savings, savings which could be used to close the gap in coverage or doughnut hole - that threatens millions of Medicare beneficiaries this year."

The drug program is in its first year. An open enrollment period begins Wednesday. Beneficiaries can pick a new plan during that time. If they prefer staying with their current coverage, they don't have to do anything.

Competing drug plan
Besides negotiating drug prices, some Democrats also will call for the government to run a drug program that would compete with the plans provided by the insurers. Democrats have predicted that seniors would flock to the government-run plan.

Leavitt disagreed. He said the government could not develop a plan that would satisfy the needs of a broad range of consumers.

"Had we had one plan run by the government, with the government making a choice about which drug would be on the formulary and which one wouldn't, you'd have 90 percent of the people who would be unhappy," he said. "We now have 80 percent who are happy."

Supporters of government negotiations often point out that the Department of Veterans Affairs negotiates on behalf of veterans who get their medicine through the VA. Leavitt said the savings come with a trade-off. Veterans have access to a much more limited supply of drugs. In fact, about 1 million veterans opted to enroll in a Medicare drug plan because of the extra choice of medicine available, he said.

Leavitt said improvements in the program have occurred because the private sector responded to early problems.

"I shudder to think what would have occurred if the government had been required to do all of it themselves," he said.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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