Originally posted by Da Geezer
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Medicaid is a federally mandated state insurance program for the poor. The Feds provide block funding. The Medicaid program has a statutory mechanism of price controls. That mechanism involves setting upper limits for the price of a drug. The upper limits are not static.
In 1991, over strong criticism from the states about unfunded mandates for Medicaid beneficiaries, congress implemented a second level of indirect price controls involving a requirement for drug manufactures to offer rebates for their drugs to appear on the Medicaid formulary.
To answer your question, why can the government negotiate prices for Medicaid but not Medicare, the simple answer is that they are different programs with a different statutory basis for each of them.
Interestingly, there have been proposals to bring Medicare part D coverage for drugs in line with Medicaid's. The article I've linked to below, for those interested in the complexities involved in doing something like this and the alternatives, explains them. Something I did learn in finding this article is that imposing price controls on Medicare drugs puts upward pressure on drug pricing for beneficiaries not eligible for Medicare. Since most private insurance is provided by employers, you can imagine there has been considerable pressure from the business community not to consider proposals like this.
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