Economists Predict That Medicare Cuts Will Trigger An Exodus Of Wheelchair Providers And Sharply Reduce Patient Access, USA

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Caregivers / Homecare
Article Date: 03 Nov 2006 - 0:00 PDT

email to a friend   printer friendly   view / write opinions   rate article

The American Association for Homecare (AAHomecare) today released a detailed economic study concluding that cuts to the Medicare power mobility benefit scheduled to take effect on November 15 will have a devastating impact on both the industry and beneficiaries who need wheelchairs. The study forecasts an exodus of at least 1,500 wheelchair suppliers and a net cost increase to the Medicare system of $2.7 to $5.9 billion over the next eight years.

The study indicates that Medicare's direct expenditures on power mobility will decline but notes the reimbursement cuts of 21 percent to 41 percent amount to price controls. The cuts to the mobility benefit will ultimately increase Medicare expenditures for hospitalization, physician services, and homecare services for beneficiaries who qualify for power wheelchairs but won't acquire them because the cuts will "impose massive short-run shutdowns of supplier firms."

Conducted by economist Clifford L. Fry, Ph.D., and his team at RRC, Inc, the study recommends that the Center for Medicare & Medicaid Services (CMS) rely on market forces, and not price controls, for Medicare's provision of products and services. "Price controls will impair the functioning of market forces and decrease access to power mobility…." the study said.

"This comprehensive study by Dr. Fry provides important information that will help CMS, Congress, and stakeholders to fully gauge the impact of the cuts to power mobility that are scheduled to take effect on November 15," said Tyler J. Wilson, AAHomecare's President and CEO.

The study found that:

-- Medicare is imposing price controls below market price for power mobility and the services necessary for the qualified beneficiary to obtain the power mobility device;

-- While Medicare's direct expenditures on power mobility decline there is a risk that price controls will impose massive short-run shutdowns of supplier firms as they escape the costs of providing services for which they will not be reimbursed;

-- The analysis suggest that there may be declines on the order of 30 to 50 percent in power mobility access in response to the new regulation due to the assessment that many firms will cease providing power mobility and the services connected with it, and that beneficiaries will not be able to provide mobility services for themselves.

-- The change in reimbursement policy will likely impose a net cost on Medicare in the range of $2.7 billion to $5.9 billion in present value terms for the period 2007-2015. The higher Medicare costs are due to higher Medicare expenditures for hospitalization, physician services, and home health care services for those qualified for power mobility but who cannot acquire it.

-- There could potentially be an exodus of at least 1,500 power mobility providers from major metropolitan areas and additional numbers from rural markets. The remaining suppliers will reduce services and not replace services lost by exiting firms.

-- Medicare's proposed reduction in prices will not cover the total cost of providing power mobility, which includes the services necessary for many to acquire power mobility. The services provided by suppliers are necessary, and in many cases required, and cost of these services is not covered by the proposed Medicare reimbursement rates. Until these costs are part of an assessment of pricing, Medicare would best delay the reduction in reimbursement rates.

-- Medicare should rely on market forces, not price controls, for provision of products and services. Price controls will impair the functioning of market forces and decrease access to power mobility more severely than would a simple reduction in Medicare's reimbursement amounts.

"The study raises legitimate questions about whether CMS had sufficiently examined the impact of their price cuts on access to power wheelchairs for the Medicare beneficiaries," Dr. Fry said. "It certainly seems that they have overlooked the impact of having 1,500 or more suppliers abruptly leave the market, and the long-term impact of paying more in healthcare costs for beneficiaries who don't have the power wheelchairs that they need. It is hard to argue why these cuts would be seen as good public policy."

The study is posted at http://www.aahomecare.org.

The American Association for Homecare (AAHomecare) is the only national association that represents every line of service in the homecare community, including home medical equipment providers, rehab and assistive technology, home health agencies, respiratory therapy, infusion therapy, home hospice, and telemedicine. AAHomecare represents more than 4,000 member locations nationwide. For details about home oxygen therapy, see http://www.aahomecare.org.