Say Anything Blog

Because government is the absolute worst instrument for managing prices there is.

Case in point: Medicare.

“DME prices are based on a fee-schedule established by law in the 1980s and subsequently updated for inflation. But the fee-schedules weren’t based on competitively determined market prices. It is a price-fixing program, and the equipment suppliers like it because they get overpaid and don’t have to compete.

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.

As with most items and services in Medicare Part B, beneficiaries pay 20% of the costs, and Medicare pays the remaining 80%. The government, therefore, pays $5,714 - almost 10 times the free-market price of purchasing a concentrator outright. The patient pays $1,428 - more than twice the free-market price of purchase. Even allowing for the costs of setting up equipment, training and fitting the beneficiary, and other things, the rental fee is way out of line.

In light of this, when Congress passed the Medicare Modernization Act in 2003, it included a section instituting competitive bidding for DME, starting in selected communities. We’ve now conducted the bidding in 10 locales.

Unsurprisingly, the bids came in substantially below what Medicare pays - on average 26% below. These new prices took effect on July 1, benefiting taxpayers and patients.

But those who benefit from excessive fees in the current system are now in lobbying overdrive, as they stand to lose substantial business. In the 10 communities where competitive bidding has been conducted, there are a number of DME providers who either chose not to participate or weren’t successful. They and others are putting significant pressure on Congress to delay the competitive-bidding program.

Most people who support socialized medicine, or “universal health care” as they euphemistically put it, do so because they think it will make health care cheaper.  Which is an illusion supported by the idea of simply going to a government-run clinic or hospital and not having to pay out-of-pocket for the care you receive there.

The problem, of course, is that taxpayers will pay for universal health care.  They’ll pay with sky-high taxes as health and human services bureaucrats struggle to make ends meet with budgets that include the sort of poor spending choices illustrated above.

We know the government is incapable of spending money efficiently.  We’ve all laughed and/or cringed at stories about some hapless bureaucrat paying a vendor $400 for a toilet seat, or $175 for a hammer.  The question is why anyone thinks the government would suddenly find the efficiency it has never had before once it is tasked with providing the entire nation with an unlimited supply of health care?

Does anyone honestly think that the cost of health care is going to go down once the health care industry is nationalized?  Admittedly the cost of it would be more indirect, being filtered through government and infused into the taxes we pay, but we’d still pay for it.  And we’d pay more for it than we are paying now.