NCPA - National Center for Policy Analysis

Medicare Overpaying By Hundreds of Millions for Supplies

June 10, 2002

Medicare and its beneficiaries are paying above-market prices for medical supplies, according to a new report from the inspector general of the Department of Health and Human Services. The study looked at 16 common medical items that Medicare paid $1.7 billion for in 2000. If the agency had paid what the Veterans Administration paid for the same items, it would have saved $958 million -- or 56 percent.

Some of those savings would have been passed on to Medicare beneficiaries who pay 20 percent of the cost out of pocket unless they have secondary insurance to cover their co-payments.

  • For example, Medicare pays $8.68 for 1,000 milliliters of saline solution, whereas the VA buys it for $1.02 -- 88 percent below the Medicare cost.
  • A standard wheelchair costs Medicare $570.68, compared to $127.72 if purchased by the VA.
  • Medicare pays $109.74 for a commode chair with arms, but the VA is able to buy the same chair for $32.30.
  • Medicare pays $1,754.55 for an adjustable hospital bed and mattress -- an item which costs the VA just $762.10.

Sen. Tom Harkin (D-Iowa), chairman of the appropriations subcommittee on health, says Medicare is often locked into paying escalated prices because the House of Representatives weakened legislation in 1997 that gave Medicare authority to reduce payments to reasonable levels.

Harkin commented," If Medicare just went down the street and bought at retail, taxpayers would save millions. "There's absolutely no reason why Medicare can't engage in competitive bidding."

The report is scheduled for release on Wednesday.

Source: William M. Welch, "Medicare Being 'Taken to the Cleaners' for Supplies," USA Today, June 10, 2002.

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