TW: As Obama embarks on his crusade, one issue that almost all agree must be addressed else it suck the marrow out of our fiscal bones is Medicare. But the Atlantic frames an example of why reforming Medicare is so infuriatingly difficult. This example merely addresses trying to reduce the price Medicare paid for some medical equipment. Never forget your cost is someone else's revenue.
From Atlantic:
"How hard will it be for President Obama to fulfill his campaign promise to reform the health care system by the end of the first term? The answer, of course, is "very." In large measure, this is because reform requires trade-offs and nobody's volunteering to make them. When the ball gets rolling, look for Big Insurance, Big Pharma and their ilk to push back the hardest against reforms that threaten their bottom lines (or even their entire business models). But let's not forget Big Durable Medical Equipment Suppliers.
...Starting in 2007, the federal agency that runs the Medicare program started implementing a congressionally mandated new competitive bidding process for durable medical equipment, known in Medicare circles as DME. As of July 1, 2008, suppliers in 10 metropolitan areas were supposed to be subject to the bidding process and only winning bidders could provide supplies to the lucrative Medicare market. The program was to phase in nationwide over several years. Compared to overhauling the entire health care system, this was small potatoes. Only it never happened. The DME industry's mounted a lobbying campaign, resulting in an 18-month delay of the bidding program. I covered their lobbying efforts pretty extensively. In the process, learned that rearranging even a relatively small corner of the health care market can be very, very hard indeed.
The concept behind the DME competitive bidding program was simple: If suppliers of oxygen tanks, power wheelchairs, canes, diabetes test strips . . . etc . . . etc . . . etc . . . were forced to submit bids to offer their wares to Medicare beneficiaries on a regional basis, the government would save money.
The impetus behind this program was also simple: a federal audit in 2006 concluded that Medicare was grossly overpaying for these products. Noticing that Medicare spending on durable medical equipment was skyrocketing (and not knowing why) the auditors dug down into the numbers.
They started, cleverly enough, with prices. For example, they compared the Medicare rate for oxygen tanks to the retail price. The result? Medicare paid $7,215 to rent this equipment, when comparable devices were available through internet vendors for $587. No, that is not a typo. Thus was born the competitive bidding program.
The Bush administration said it would reduce government spending on durable medical equipment by 26%. DME companies, including heavyweights like Invacare and Lincare, went to war to stop it. They had lots of complaints, chief among them was the fact that the auditors' report did not account for their costs to service the equipment they rented or sold.
Of course, in grand lobbying fashion, they also griped about the bidding process, threatening to go out of business of prices were set that law, and issuing dire warnings about grandmas choking for breath while their oxygen tanks went unfilled. And in grand lobbying fashion, lawmakers were swayed by their efforts. Though they did extract a tribute of sorts, in the form of a 9.5 percent cut in Medicare fees for the equipment, Congress delayed the competitive bidding program, which died on the vine.
Despite near-universal recognition on the part of Congress that Medicare spends too much on this equipment, legislators found they just could not stomach the political or economic disruption that would result from market intervention. Congress-the same folks charged with translating Obama's health care platform into legislation-blanched at taking a tiny baby step towards tackling rising health care spending in this one small area of our massive healthcare market. Rinse and repeat with insurers, doctors, nurses, and pharmaceutical companies, and you've got some idea of the herculean task facing Obama and his allies if they want to get serious about health care reform."
http://business.theatlantic.com/2009/01/pay_up_or_grandma_gets_it_the_perils_of_medicare_reform.php
2 comments:
This is an extraordinarily biased and misleading account of the bidding program disaster, which Congress wisely reformed and postponed. However the poster for the Atlantic, Jeffrey Young (a reporter for a Capitol Hill newspaper) does very accurately parrot the arguments set forth by the Bush Administration for a rush-to-the-bottom approach to home medical care in Medicare. Just one of the many distortions and ironies of Young's blog is the fact that the bidding program was DESIGNED to get the majority of home medical equipment providers (mostly small Mom and Pop practices) out of Medicare regardless of what reimbursement rates they agree to. In other words, the program is designed to drastically reduce the number of competitors -- who currently compete on the basis of quality, since Medicare sets prices (which have been cut or frozen repeatedly over the past 10 years). It's also a little breath-taking to see elderly COPD patients used as a punch line in this blog. The more than one million Medicare beneficiaries who depend on medical oxygen therapy in order to live surely don't think the quality of their oxygen service and equipment is a joke. Young does even get the terminology right by referring to "oxygen tanks." Young fails to mention that durable medical equipment is growing at an incredibly slow rate -- 0.75 percent per year, according to the National Health Expenditure data just published by CMS (2007 data). This compares to more than 6 percent growth for Medicare overall. Nor does Young mention that providing medical oxygen therapy including the required services to beneficiaries in their homes costs less than $7 dollars per day, which includes 24-7 on call service. Nor does Young mention the many consumer and patient organizations such as Muscular Dystrophy Association and ALS Association, that adamantly opposed the bidding program. The deep 9.5 cut that took affect on January 1 is hardly "a tribute of sorts." That nationwide cut equals the amount of money the bidding program had been projected to save. Moreover, the bidding program did not die "on the vine" by a long shot. In fact, the Bush Administration issued a rule starting up the bidding again this year in a regulation published literally in the last hours of the Bush era. A larger point, that escapes Young completely, the is fact that of course Medicare reform will in fact fail if it is pursued with the same incompetence that the Bush Administration applied to the home medical equipment and service sector. Finally, the headline -- Pay Up or Grandma Gets It -- is exactly the argument that the AMA uses, successfully, every year to avoid reimbursement cuts. But I don't expect to see a nasty, error-filled rant against doctors by Jeffrey Young.
Thanks for the comment!!
I am largely with you on this, but the article and your response ultimately support the thesis...of why reform is in fact so challenging.
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