Published October 05, 2009
From wheelchairs and walkers to orthopedic shoes and needles, Medicare buys tens of thousands of products every day for elderly Americans. And as the single largest buyer of medical products, you'd think it would at leastget a volume discount.
But it doesn't. In fact, Medicare doesn't even get the best price.
According to their own auditors, Medicare knowingly overpays for almost everything it buys. Examples include:
-- $7,215 to rent an oxygen concentrator, when the purchase price is $600.
-- $4,018 for a standard wheelchair, while the private sector pays $1,048.
-- $1,825 for a hospital bed, compared to an Internet price of $1,071.
-- $3,335 for a respiratory pump, versus an advertised price of $1,987.
-- $82 for a diabetic supply kit, instead of a $47 price on the Web.
Last year, the Health and Human Services Department tried to replace its archaic fixed-price fee schedule for 10 commonly purchased products with a competitive bidding program in 10 cities. The department said the program could save Medicare $125 million in a single year, or $1 billion if adopted nationwide. But Congress stepped in to stop it.
"There were products that we had as much as 75 percent savings. The average was 29 percent," said Mike Leavitt, the former HHS secretary who oversaw the program.
"It would have saved billions if we could've actually implemented it, but Congress deferred it. In Washington speak, that means we put it off forever," he said.
Leavitt blames Congressmen Pete Stark (D-Calif.) and Dave Camp (R-Mich.) for introducing legislation that terminated the contracts and postponed the program for 18 months. Leavitt says the congressional intervention helps explain why many are suspicious of claims that Washington can cut enough waste to actually pay for health care reform, as President Obama told a joint session of Congress last month.
"Reducing the waste and inefficiency in Medicare and Medicaid will pay for most of this plan," Leavitt said.
"The problem here is one man's waste is another man's living, and whenever there is an effort put forward to actually make an efficiency, someone goes on the offensive and hires lobbyists and does what they can to constrain Congress from doing it," Leavitt said.
According to the Center for Responsive Politics, the health care industry is currently spending $2 million a day lobbying Congress. Leavitt's pilot program died after small business suppliers claimed it would have put them out of business. Eventually, industry agreed to help pay the cost of terminated contracts that Medicare had already negotiated.
Industry officials argued the new system would unfairly disqualify some suppliers, and others with little experience would get the business, causing a decline in quality and service.