NCPA - National Center for Policy Analysis


December 3, 2007

Despite enormous buying power, Medicare pays far more than pharmacies and other retailers on equipment for patients, says the New York Times.

Consider medical oxygen equipment for patients with respiratory disease:

  • A basic setup, including three years of deliveries of small oxygen tanks, can be bought from pharmacies and other retailers for as little as $3,500, or about $100 a month.
  • Rather than buy oxygen equipment outright, Medicare rents it for 36 months before patients take ownership, and then pays for a variety of services that critics say are often unnecessary.
  • The total cost to taxpayers and patients is as much as $8,280, or more than double what somebody might spend at a drugstore.

The high expense of oxygen equipment -- which cost Medicare over $1.8 billion last year -- is hardly an anomaly, says the Times:

  • Last year Medicare spent more than $21 million on pumps to help older and disabled men attain erections, paying about $450 for the same device that is available online for as little as $108.
  • Even for a simple walking cane, which can be purchased online for about $11, the government pays $20, according to government data.

These widespread price discrepancies, including those for oxygen services, have been noted in dozens of regulatory reports.  But when officials and politicians 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.

"These industries rely on a basic threat: If you mess with us, we can turn the seniors against you," said former Senator Alan K. Simpson (R-Wyo.), who tried cutting Medicare payments while he was in Congress.  "Angering seniors is the quickest route to political suicide."

Source: Charles Duhigg, "Oxygen Suppliers Fight to Keep a Medicare Boon," New York Times, November 30, 2007.

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