Magazine article Insight on the News

Pricing Is a One-Way Street

Magazine article Insight on the News

Pricing Is a One-Way Street

Article excerpt

Medicare spending clearly is out of control when it makes the Department of Veterans Affairs look frugal by comparison.

According to a report by the General Accounting Office, or GAO, Medicare continues to pay wildly inflated costs for medical equipment because of labyrinthine regulatory and administrative procedures that prevent cost-effective changes.

In 1994, Medicare spent $162 billion - 14 percent of the federal budget - on behalf of 37 million elderly and disabled people. Much of this cost stems from funding allotted by the Health Care Financing Administration, or HCFA, for overpriced products.

A specific type of gauze pad for example, carries a lowest suggested retail price of 36 cents. While the Department of Veterans Affairs pays 4 cents for each pad, Medicare shells out 86 cents. The fleecing continues because HCFA is authorized to increase payments annually based upon median prices listed in consumer price indexes, but has no authority to reduce the payments without undergoing an exhaustive regulatory process.

According to the GAO report, HCFA is investigating overpricing of oxygen concentrators. The Office of the Inspector General estimates that Medicare would save up to $4.2 billion over five years if it could manage to buy the equipment at the same price paid by the VA. Whether that will happen, though, is another matter, since HCFA's price-adjustment process can take years. A recent change lowering the Medicare price for home glucose monitors from $200 to $59 took almost three years in what industry sources called an unusually swift response.

The report, which criticizes the HCFA for being "reluctant to adopt private sector business practices," recommends that the secretary of Health and Human Services be allowed to set maximum prices on the basis of market surveys, or at least to make interim fee adjustments while formal rulemaking takes place. Such changes, however, could take place only under "explicit authority from the Congress."


A New Mexico couple is waiting to hear from the federal government - and all they want is an apology.

Four years ago, 85 armed, camouflage-wearing agents, representing the Drug Enforcement Administration, the Bureau of Alcohol, Tobacco and Firearms, the Customs Service and the New Mexico National Guard, stormed onto the 32-acre property of florist Leland Elders and his wife, Mary Schultz, near Albuquerque. …

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