Medicare looks to the free market

Senior citizen puzzles over Medicare changes


Bob Moon: A relatively small change in the way Medicare does business is set to go into effect next week, but we're not talking small change when it comes to the money that the government and Medicare patients could save.

It seems Medicare has been paying as much as double the retail price for some medical equipment, but as of July 1, suppliers are supposed to start submitting bids.

David Leonhart writes about this today in his business column in The New York Times.

David, thanks for joining us here once again.

David Leonhart: It's nice to be back.

Moon: You start your story today with a basic piece of medical equipment -- a walker -- and you show a huge gap in what you'd pay at Wal-Mart, for example, and what Medicare pays. Why is there such a difference?

Leonhart: Well, it's because Medicare doesn't buy these things on an open market. Instead, Congress has established this fee schedule that determines how much the government -- which is taxpayers -- pays for all sorts of pieces of equipment like walkers or beds or oxygen equipment. As a result, the companies selling this don't have to compete with each other in an open marketplace and the government ends up overpaying for almost all of this equipment.

Moon: So what kind of price disparity are we talking about here?

Leonhart: On Wal-Mart's website, you can buy this kind of walker that I looked into for $60. Medicare has been buying them for $110. Now, the equipment makers will point out that they also deliver it and they will help you set it up and that's fair enough, so maybe we shouldn't expect Medicare to be paying as little as Wal-Mart sells it for, but Medicare recently conducted a bidding experiment and that really showed how much these things should be priced.

Moon: And how did that work?

Leonhart: Basically, these walkers that are selling for $110 by congressional law instead went for about $80 once they did the bidding. On average, the things that Medicare is buying are overpriced by 26 percent, which is really quite stunning.

Moon: Now you point out that there's actually some holdup in Congress to get these prices lowered. Why the opposition?

Leonhart: Some of it is that the Democrats who now control Congress are sometimes skeptical of the workings of the free market -- sometimes they're right to be skeptical of the workings of the free market; In this case, I think they're wrong. Some of it is also that the medical equipment industry has launched a very effective public relations campaign. They've increased their contributions to Congress and they're raised all sorts of little issues including some scare tactics about how this could potentially deprive people of medical equipment that they need and what they're really trying to do is prevent competition from coming to this market and they're trying to protect their outsized profits. And I think if we have a real push for health care reform, we're going to see this again and again in which constituencies that benefit from the waste we now have in our medical system are going to go to Congress and fight to keep their share of the waste and they're not going to say "We're fighting to keep our share of the waste." They're going to claim that they're actually protecting patients.

Moon: You're suggesting that this is a sneak peak at a battle royale that would ensue if we tried to change the entire health care system. Are you suggesting that this is just impossible?

Leonhart: I don't want to suggest that it's impossible. To me, it's really a sign of how hard health care reform is going to be. All of us would benefit from a competitive bidding system in Medicare because we would pay less in taxes to fund Medicare. But the numbers are so small for each one of us, whereas for these equipment makers that are now benefiting from this closed system, it's a huge part of their business and so they have such a bigger incentive than we do to fight it.

Moon: I guess the bottom line here is if you're interested in this issue, you'd better write your congressman, huh?

Leonhart: I think that's right.

Moon: David Leonhart is a business columnist for The New York Times. Thanks for joining us.

Leonhart: Thanks a lot.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.
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I need to buy a new wheelchair cushion. Searching for ROHO Enhancer online, I have not found a single company where the price is not $319. Not one place where it's a different price. The medical equipment industry needs free market pricing. This is akin to the same thing anti-trust laws were made to combat.

I am glad to see that you finally understand that biding does not necessarily lead to "a low-balling bidder". However, I am disappoint that it took you more than one month to do that, it took less time for my 9 year old daughter to do that. But then again, her allowance does not depend on her not understanding it.

I know why you didn't win the contract - because the government discarded your bid as frivolous and a silly waste of time. If you (and your 9 year old daughter) think you proved something by that stunt, you're wrong. DoD isn't foolish enough to give you the time of day - and neither am I.

I have repeated this so many times, yet "us" still do not understand that the only difference here is biding and that it has nothing to do with service.

This reminds me of a quote by Upton Sinclair who said: It is difficult to get a man to understand something when his salary depends upon his not understanding it (from: An Inconvenient Truth, By Al Gore).

Jinchun Yuan: It has everything to do with service. Examples: walkers, power wheelchairs, oxygen systems. Low-ball the price and you ensure that the service and emergency care component to homecare minimal. "Us" is the homecare infrastructure in the US.

Michael Reinemer
American Association for Homecare

Please read this again. "Basically, these walkers that are selling for $110 by congressional law instead went for about $80 once they did the bidding". The tax payers (you and I) have been over charged 38 percent. The only difference here is bidding. It has nothing to do with service as you suggested previously. It has nothing to do with government as Terry suggested. And it has nothing to do with reimbursement as you are suggesting now.

If walkers are a poor example, show me a better example with bidding and no bidding prices.

Who is "us", where may I find you all if god forbidden something like that happens?

"Responsible Home Medical Equipment suppliers" would like that you and I equal bidding to "a low-balling bidder". But, I can assure you that they are different. We (me and my 9 year old daughter) recently put in "a low-balling bidder" to US Department of Defense to produce Refueling Tanker for $10. The contract went to someone else for $35 billion. You know why?

Yuan, when people who can't even remember who their doctor is, let alone understand HCPC/ICD9 coding, try to submit their Wal-Mart walker to Medicare for reimbursement, they'll find that they will end up eating the full $60 or $80 for that walker instead of the Medicare 20% coinsurance.

But again, you choose to ignore the fact that the walker is a purposely poor example to use, when life-sustaining equipment is included in this process.

If you're ever on oxygen, please be sure to share with us your experiences with a low-balling bidder providing your maintenance and service while you do all your own reimbursement paperwork.

"Basically, these walkers that are selling for $110 by congressional law instead went for about $80 once they did the bidding". Charging something of $80 for $110 was overpricing it by 38 percent. The only difference here is bidding. Deb, it has nothing to do with service. Terry, both $80 and $110 are paid to government, so it has nothing to do with government either. Deb, don't be stunned. "On Wal-Mart's website, you can buy this kind of walker that I looked into for $60. Medicare has been buying them for $110." This difference is 83 percent. Here, you may say that service is a factor. Nobody demands that our "responsible Home Medical Equipment suppliers" charge Wal-Mart price. Just that they charge a responsible price for tax payers not just their shareholders.

Storys about governments paying more for what they buy than the best price an induividual could get. Some time ago one of the local TV stations ran a series on Medicare/Medicade paying higher prices. The repoter found a supplier that would talk on air. He gave a very good reason for charging more. The amount of time and effort it took him to get paid. Government programs then ( maybe there have been improvements since then ) set the supplier a PO and it could take months and several hours of work to get paid.

"The stunning fact that on average, the things that Medicare is buying are overpriced by 38 percent is a comparison between competitive and non-competitive bidding"

No, it's a comparison between non-serviced and full-serviced medical supplies and equipment.

You're not working with a full equation.

Speaking of which, now I'm the one who is stunned... 83%?


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