The Department of Disingenuity and the Real Medicare Scam

Reading an article in the Wall Street Journal from DHHS Secretary MICHAEL O. LEAVITT:

Will Congress Continue a Medicare Scam?

I was torn between laughter and teeth grinding annoyance.  In short, Mr. Leavitt is lashing out at DME providers (durable medical equipment, payed for under Part B Medicare) for daring to lobby government to rescind the 10% cuts to Medicare fees for certain equipment.  Mind you, Mr. Leavitt is on to something when he talks about price fixing and Medicare regulations that are dunning American Tax payers out of their hard earned money as I explained here.  His major malfunction is that, like most government agents, it's always the contractors who are driving the crisis with their unnecessary and costly demands instead of government regulations that try to get something for nothing and end up costing way more than they should.

Unfortunately for Mr. Leavitt, he happened to pick a subject and item I happen to have some experience with: Oxygen Concentrators, their cost, service and what is actually being covered under that charge.  By the way, he's talking about oxygen concentrators used at home by home bound patients who are not in the hospital or other care facility that would otherwise cost the tax payer through state or federal benefits between $300 - $500 per day. 

Let's start with Mr. Leavitt's claims:
 

An oxygen concentrator, for example, is a device that delivers oxygen through a tube to patients, and it costs about $600 on the open market. Medicare beneficiaries typically rent the machines.The rental period, set by statute, is up to 36 months. The monthly rental payment, also set by statute, is $198.40. So renting an oxygen concentrator for 36 months costs $7,142.

First of all, who set the statute and prices?  Was it the providers?  Certainly, they had some input through provider organizations along with doctors.  In the end, though, it's congress who sets these fees through law, not the providers.  But what Mr. Leavitt fails to tell here is the why, utilization and what is included.

For instance, more than 20% of patients that receive equipment under their DME benefits are oxygen patients.  We are talking about hundreds of thousands of people on oxygen.  Second, more than half of these patients are "mobile" (ie, not confined to bed or home).  The concentrator is for use at home.  When they leave their home, even for short periods of time, they use "portable oxygen" which consists of a regulator and an oxygen tank. 

While Medicare pays for the regulator ($28/mo avg), they do not pay for the tanks which costs between $4-$6 to fill each one.  The average oxygen tank use per patient is approximately 20 per month or 4/week.  That is an average of $80 - $120 month cost just for the oxygen. Some patients use as high as 40 to 60 tanks of oxygen a month and others as few as 3.   If Medicare had to buy the tanks along with the oxygen, it would be approximately $110/tank.  Even if they were refilled, the average patient would still need to own another $500 - $800 in equipment (paid for by Medicare) and Medicare would have to start paying for every refill every month. 

That would be considerably higher than the $80-$120/month cost to refill because someone is going to have to pick up and re-deliver filled tanks (like they do now under the current monthly one fee system).  With the cost of gasoline and labor (requiring special training for liquid oxygen), Medicare would find itself paying as much as, if not more, than the $248/mo they pay now for the equipment.  Certainly, most of the patients on oxygen equipment at home are not healthy or strong enough to put 5 to 20 tanks in their car to deliver to a place where they can get them refilled for cheap.

Oh, not to mention government regulations that expect a certain number of oxygen tanks being transported must be secured and protected for obvious hazardous reasons.  Plus, aside from these oxygen tanks, the patients get tubing, connectors, nasal cannulas and the equipment gets maintenance every six months (at least) as required by law (congress and various regulatory agencies).  All under this one price. 

The reason that this all sorts out to one such monthly fee is that, in the long run, its actually cheaper for Medicare to pay for this average utilization, supplies and maintenance in one monthly fee that covers every patient, regardless of how high or low their utilization.   Further, there is not the added cost of having to process additional claims for every individual, unbundled service or supply that would likely increase Medicare claims for DME by four fold.  

What that sorts out to is that, yes, indeed, Medicare is getting a half way decent deal by paying for oxygen equipment in this manner.  Even over 36 months.  Now, that 36 months may seem arbitrary, but what most people don't know is that, indeed, 36 months is the average utilization for an oxygen patient.  Some of who get better and no longer use the equipment in much shorter time and some of whom are on oxygen for six to ten years.  However, there is the great mass majority whose prognosis, like COPD or Congestive Heart Failure, simply deteriorate and expire within three years (36 months) of being prescribed oxygen. 

Again, on the average of $7,142 for those 36 months that is cheaper in the long run than actually having to pay for a total of at least $1,200 in equipment plus the $200 to $300/mo of oxygen refills (with no real control over the utilization, thus the cost, mind you, unless Medicare is going to start telling patients they can't leave their homes by limiting the number of refills they will pay for).

Beyond that, I'm not going to bore you with the one hundred things that Medicare and other federal regulatory agencies requires the provider of DME and the patient's doctor to do in order to safely provide quality medical care for the patient that is also covered in this "out of line" fee.

Of course, Mr. Leavitt would hit on Oxygen as his pet peeve.  While its only used by 20-30% of the Medicare DME population, it accounts for 40-50% of all monies paid for DME services.  So, of course, it would seem like a good idea to hit on this one piece of equipment.  And, its a much bigger price tag than say a standard wheelchair that Medicare will also rent for up to $60 month for an average of 13 months (that's appx $780) when a basic wheelchair costs as little as $150 from the manufacturer.  That accounts for about 10% of all services rendered and could save up $500 per patient if Medicare simply let the doctors indicate that the equipment is lifetime use and then have Medicare buy it outright.

Of course, I would be as disingenuous as Mr. Leavitt if I failed to tell you that at least 50% of wheelchairs are provided for short term use between one and three months.  Still, in the end, it would cost less just to buy it outright because the provider has to pick up and deliver this equipment which costs as well as maintain it, for free, while its being rented.  Every pick up and delivery is added to the over all cost of providing services and figured into the costs charged to Medicare.  And, hey, how about those lovely "medical necessity" documents that doctors have to fill out and the provider has to track down and send to Medicare in order to get paid in the first place.  That all costs time and money, too.

Want to cut down on costs?  Cut down on the number of services that have to be provided under the guise of delivering equipment, proving "medical necessity" or otherwise maintaining essentially cheap equipment that could be as easily and more cheaply replaced than the rental and maintenance fees.  Certainly, cheaper and less labor intensive than an oxygen patient.

Want to talk about hospital beds?  $600 cost, $2,600 over 13 months.  And, that equipment requires no supplies, no "refills" and rare maintenance if it is bought new every time.  Certainly, for the most part, if it malfunctions, it rarely costs anyone their life.  The draw backs are, again, it is sometimes short term use and, if it does break down, Medicare has to pay for its maintenance or a whole new piece of equipment.  Which, studies indicate, is somehow more expensive than this current rental "scam".  

Seriously, though, I could pick apart or support, every piece of equipment that Medicare pays for under DME Part B benefits.  The truth is, though, that Mr. Leavitt, nor CMS, nor Congress is really interested in making health care less expensive.  Neither, by the way, are DME providers.  Largely because it would put them out of business.  What this little article by Mr. Leavitt is about is trying to leverage the DME providers out of whatever profit he can by using public outrage to force them to capitulate to the 10% decrease in Medicare fees.  Doing it by a totally political machination of omitting information and blaming it on the "unscrupulous" provider.    

That's too bad, really, because he actually almost tells the truth about why Medicare costs so much and what could be done about it.  

De-regulate.  Cut paperwork.  Re-evaluate costs, purpose, expectations and outcomes.  And, as a reminder, if you want services to include quality, quantity and regular maintenance, it is going to cost.  

PS...when you try to reduce any services, the senior citizen organizations are going to beat you to a pulp in the press using the same techniques as Mr. Leavitt just tried on DME providers: fear, shame and outrage.