Monday, December 03, 2007

For the Price of a Cane

We have posted a bit recently about how the US Medicare system, our single-payer federal insurance system for the elderly and disabled, uses an opaque and complex system for physician reimbursement that favors procedures and is helping to wreck primary care (see posts here and here).

The New York Times just published an investigation about how Medicare's reimbursement for simple medical supplies and devices is also irrational.

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.

It is not surprising that the companies that supply these simple devices want as much reimbursement as they can get. Maybe it should not be surprising that they have cloaked their push for generous reimbursement in the mantle of needs of the elderly.

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.

As the nation’s elderly population grows, dozens of industries have tried to harness the political might of older Americans for corporate goals. Physician groups, medical device manufacturers, insurance companies and other businesses have rallied aging voters to protest even minor legislative changes.

'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.'

While any industry can hire lobbyists, few can marshal tens of thousands of older citizens to accuse politicians of trying to take away their lifelines. That ability, say lawmakers and their staff members, is the real clout of home medical equipment companies and other industries that sell to the elderly.

When Congress proposed cutting oxygen payments last year, for instance, trade groups and companies began warning patients that if the law changed, there might be no one to repair their equipment or provide emergency services.

'I’m scared to death that they are going to cut us off,' said Beverly Karagin of Morning Sun, Iowa, whose husband has used oxygen equipment for about 11 years. Mrs. Karagin wrote her senators and congressman after her oxygen delivery company told her about proposed payment cuts, she said.

'If something goes wrong with the machine and Medicare won’t pay to repair it, my husband could die,' Mrs. Karagin said in an interview. 'I told them that this is a matter of life and death.'

Lawmakers say such fears are unfounded. After patients take ownership of the equipment, Medicare pays for repairing machines and backup systems.

Even so, last year 'our office received over a thousand phone calls from oxygen patients in two days, and all of them said they were going to die if we passed this law,' said a high-ranking Congressional staff member who requested anonymity because he was not authorized to speak to the media.

Stealth lobbying, it's as American as apple pie.

Of course, seniors will not be well served in the long run if the Medicare program wastes huge amounts of money overpaying for oxygen and canes, and thus does not have the money to pay for other health care services that might also be of value. As we have noted before, Medicare payments to primary care and cognitive physicians started off low, and have failed to keep up with inflation (see post here). Meanwhile, they shadowy RBRVS Update Committee (RUC) manages to continually boost what Medicare pays for procedures (see posts here and here). Medicare requires physicians to follow arcane and impenetrable rules, and fulfill burdensome bureaucratic requirements (see post here). The result is that primary care is dying off. All for overpriced canes and oxygen tanks.

We clearly need to push Medicare into a rational, transparent reimbursement system that does not penalize primary care and other cognitive physicians.

This is also a reminder that those who put their faith in establishing a single payer health care system to cover all US citizens may be sorely disappointed. If a single payer system continues the irrationality, opacity, and susceptibility to political influence of our current single payer system, having such a system cover everyone might just make things worse.


Vijay Goel, M.D. said...

Great post highlighting how Medicare's approach helps to raise health care spend through its lax/ random approach to supplier payment. A top-down system never reflects pricing that ensures sufficient supply at market-level prices.

I have a similar post on how the lack of pricing transparency and poor collection practices are making the poorest accountable for massive (and unfair) hospital bills due to cost-shifting on my blog

Anonymous said...

The January France magazine has an interesting note that on 30 September France will no longer offer free medical care to those EU members under the age of 65. This is an effort to promote a work ethic along with controlling cost.

While we look upon the EU as some sort of shining light in terms of social care, the reality is they are dealing with an influx of immigrants wanting only their social services. The Danes have recently instituted new rules on citizenship and other countries are instituting programs to lessen the state's responsibility for all social services.

While many look to a single payer system as a panacea for society's problems, we must also be willing to institute the same cost controls on patient usage and corporate profit.

Steve Lucas