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Column: No-bid Medicare's sticker shock

As I reported in January, the publisher of the Wall Street Journal and others are suing to gain detailed access to Medicare billing records through the Freedom of Information Act. Off-limits to the public since 1979, such data could hold the key to billions of dollars in savings, once journalists armed with modern technology sift through it for evidence of waste, fraud and abuse. Doctors are fighting the lawsuit, claiming that their taxpayer-funded earnings are none of the public's business.

There's still no ruling in the case, but readers I heard from unanimously backed the Journal. I didn't receive one email supporting the doctors. What I did get was a flood of first-person testimony about outrageous Medicare bills.

One reader in Northern Virginia told me a supplier to his doctor had billed Medicare almost $230 for a hand brace that retails for $30.99.

Another — Michael April, a specialist in physical medicine and rehabilitation in Montgomery County, Md. — wrote that Medicare reimburses power-wheelchair suppliers between $4,000 and $5,000 for a basic chair that costs the supplier $700 and sells for a retail price of $2,500.

I decided to check these stories with the Centers for Medicare & Medicaid Services and other sources. What I found was a classic Washington good news/bad news story. The federal government is addressing some problems that readers noted, with significant results to show for its efforts so far. But the time and political effort it's taken to get to this point does not bode well for future Medicare reforms.

Most reader complaints revolved around inflated reimbursements for wheelchairs, oxygen tanks, beds and diabetes test strips, known in Medicare-speak as "durable medical equipment, prosthetics, orthotics and supplies" — DMEPOS. In fact, as a slew of inspector general and Government Accountability Office reports attest, excessive DMEPOS costs have plagued Medicare for years.

Part of the problem was Medicare's lax screening of suppliers, which attracted hundreds of swindlers to the business. But the real scandal was how much you could charge Medicare legally. Congress drew up the DMEPOS reimbursement schedule in 1989 based on mid 1980s economics and left it unchanged thereafter, except for sporadic inflation adjustments. In short, the law required Medicare to overpay.

The obvious solution was competitive bidding. But Washington doesn't do obvious solutions, at least not immediately. Congress authorized two small five-year pilot projects in 1997. After those ended, it approved wider trials, to begin in 2007, in nine notoriously expensive metropolitan areas. Medicare didn't start taking bids for this program until 2009, however, because industry complaints about inevitable operational hiccups caused Congress to vote for a delay.

Meanwhile, between 2000 and 2010, Medicare spent $69.4 billion on DMEPOS, almost all of it based on the old, inflated reimbursement rates.

One man's absurd waste of taxpayer funds, however, is another man's rice bowl. Organized into an effective lobby, medical equipment manufacturers and distributors resisted change.

Some of the lobby's arguments made sense and have been incorporated into policy: for example, that Medicare needed such simple antifraud measures as surety bonds for suppliers. Other industry arguments — that price competition would inflict cut-rate, low-quality products on the infirm — were more self-serving.

In fact, Medicare saved $202.1 million in the year after its nine-market test finally took effect on Jan. 1, 2011. Monitors recorded a mere 151 complaints among 2.3 million patients and "no negative health care consequences."

A second, expanded phase of competitive bidding begins in July, encompassing 91 markets and most of the U.S. population. Obamacare expanded this from a planned 70 markets and mandates nationwide competitive bidding by 2016.

Medicare's easy money for distributing diabetes test strips, power chairs and the like spawned mom-and-pop operations across the country. Now some of them are going bust. That's what happens when you stop subsidizing inefficient, low-volume dealers.

That's not good enough for the DMEPOS lobby or its allies on the Hill, including some ostensible foes of federal waste. A group of House members, led by such tea party stalwarts as Tom Price, R-Ga., and Joe Wilson, R-S.C., have filed an industry-backed bill to revamp the whole process until it's more to the liking of these "small businesses" that live off government.

Enough already. Congress should accelerate the planned introduction of nationwide competitive bidding on DMEPOS to 2014, and extend it to medical devices, lab tests and advanced imaging services by 2015, as recommended in a recent Center for American Progress report. The savings could total $38 billion over the next decade. Medicare is supposed to be a health care program for seniors, not a cash cow.

© 2013 Washington Post

Column: No-bid Medicare's sticker shock 03/09/13 [Last modified: Thursday, March 7, 2013 5:12pm]
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