Medicare Spends Billions Annually On Products Available At Lower Prices From Retail Pharmacies, Online Stores, New York Times Analysis Finds

Main Category: Medicare / Medicaid / SCHIP
Article Date: 03 Dec 2007 - 8:00 PST

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"Despite enormous buying power, Medicare pays far more" than individuals for equipment and services that are "available at far lower prices from retail pharmacies and online stores," the New York Times reports. As a result of "fierce patient and corporate lobbying," Medicare in many cases pays prices for products and services based on rates established in the 1980s, "when devices were often much more expensive than they are now," according to the Times.

The "widespread price discrepancies ... have been noted in dozens of regulatory reports," but, when lawmakers "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," the Times reports. Former Sen. Alan Simpson (R-Wyo.) said, "These industries rely on a basic threat: If you mess with us, we can turn the seniors against you," adding, "Angering seniors is the quickest route to political suicide."

Oxygen Equipment
The Times highlighted the prices that Medicare pays for oxygen equipment. Individuals who purchase oxygen equipment from pharmacies and other retailers pay about $3,500 for a three-year supply. Medicare, rather than purchase oxygen equipment, pays as much as $8,280 to rent the equipment for 36 months and cover the cost of a "variety of services that critics say are often unnecessary," the Times reports. According to the Times, some lawmakers maintain that the "only way to lower Medicare's payments is to bypass the political process altogether, to insulate individual politicians from blame."

Deputy CMS Administrator Herb Kuhn said that the agency has faced political and logistical problems in efforts to reduce the prices Medicare pays for equipment and services, adding that the agency has begun to implement a competitive bidding system to address the issue. Kuhn said, "There's no question that parts of Medicare are mispriced" (Duhigg, New York Times, 11/30).

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