Medicare: Boon for Suppliers; Waste for Taxpayers
From Charles Duhigg in the New York Times (hat tip: C-J), not a big surprise, but it's still good to see the details of this sort of thing...
Millions of people with respiratory diseases have relied on oxygen equipment, delivered to their homes, to help them breathe. A basic setup, including three years of deliveries of small oxygen tanks, can be bought from pharmacies and other retailers for as little as $3,500, or about $100 a month.
Unless, that is, the buyer is Medicare, the government health care program for older Americans.
Despite enormous buying power, Medicare pays far more. Rather than buy oxygen equipment outright, Medicare rents it for 36 months before patients take ownership, and pays for a variety of services that critics say are often unnecessary.
The total cost to taxpayers and patients is as much as $8,280, or more than double what somebody might spend at a drugstore.
The high expense of oxygen equipment — which cost Medicare over $1.8 billion last year — is hardly an anomaly.
Medicare spends billions of dollars each year on products and services that are available at far lower prices from retail pharmacies and online stores, according to an analysis of federal data by The New York Times. The government agency has paid above-market costs for dozens of items, a comparison of Medicare figures with retail catalogs finds.
For example, last year Medicare spent more than $21 million on pumps to help older and disabled men attain erections, paying about $450 for the same device that is available online for as little as $108. Even for a simple walking cane, which can be purchased online for about $11, the government pays $20, according to government data.
These widespread price discrepancies, including those for oxygen services, have been noted in dozens of regulatory reports.
But when officials and politicians have tried to cut these costs, they have often encountered a powerful foe: the companies that sell these devices, who ask their elderly customers to serve, in effect, as unpaid lobbyists, calling and writing to their representatives in Congress, protesting at rallies, and even participating in political attacks against individual lawmakers who take on the issue....
“These industries rely on a basic threat: If you mess with us, we can turn the seniors against you,” said former Senator Alan K. Simpson, Republican of Wyoming, who tried cutting Medicare payments while he was in Congress. “Angering seniors is the quickest route to political suicide.”
Many of those battles focus on the $427 billion Medicare program. Because of fierce patient and corporate lobbying, for instance, Medicare still pays prices for many items that are based on rates established in the early 1980s, when devices were often much more expensive than they are now.
Even as the actual cost of many machines and services has fallen, Medicare has only occasionally lowered what it pays....
Some legislators say the only way to lower Medicare’s payments is to bypass the political process altogether, to insulate individual politicians from blame.
Last year, the Centers for Medicare and Medicaid Services, the agency overseeing Medicare, announced guidelines for a national competitive bidding system for home medical equipment.
In 10 metropolitan areas, Medicare requested that suppliers of some products, like oxygen, submit bids. The agency is in the process of setting payments based on those submissions. The companies proposing the highest prices will be excluded from the program.
The national competitive bidding process was to begin last January, but was repeatedly delayed. Mr. Kuhn, the Medicare official, blamed technological difficulties for those delays.
But other high-ranking Medicare officials, speaking on the condition that they not be identified, said political pressure from medical equipment companies was also to blame for the slow start....