"Congress passed the Medicare Modernization (MMA) in 2003 in response to the difficulty that many seniors faced in paying for prescription drugs. However, it was not designed in a way to maximize efficiency. Instead, Congress deliberately designed the bill in way that would ensure that private insurance companies would provide the benefit instead of the Medicare administration or a single designated provider This design both substantially increased the cost of drugs and administrative costs in addition to making the drug program much more complicated for beneficiaries.
This paper uses data from the Congressional Bud get Office (CBO) and other sources to project the savings from a drug benefit program that is centrally administered as an add-on to the traditional Medicare program. "...........
http://www.cepr.net/publications/efficient_medicare_2006_01.pdf