Saturday, June 28, 2008

Free Market?

Apparently the concept of a free market only applies if it works to the benefit of business. If it works for the consumer, well, then it's a bad idea. An editorial in today's NY Times gives a good example of this rather twisted rule.

The subject is Medicare and acceptable payments for medical equipment such as walkers and hospital beds. Here's a sampling of the prices Medicare has been paying:

There is little doubt that Medicare has been paying far too much for equipment — including wheelchairs, hospital beds, oxygen concentrators, diabetic test kits, and walkers — under fee schedules based on historical charges. According to federal officials, Medicare currently pays $1,825 for a hospital bed that can be bought online for $754, and $4,023 for a power wheelchair that can be bought online for $2,174.

Sensing that there was something wrong with this picture, Congress decided to do something about it and developed a test program.

To cut costs and reduce fraud in one corner of the sprawling Medicare program, Congress called for competitive bidding on medical equipment that is provided to elderly and disabled Americans and set a sensible schedule for phasing in the program. Demonstration projects were held, the results looked promising, and last year Medicare received competitive bids from companies to supply equipment in 10 metropolitan areas. ...

When Medicare awarded competitively bid contracts to some 325 companies to serve the 10 metropolitan areas, it reduced equipment prices by 26 percent on what it would have paid for the same equipment under the current fee schedule. That means that if the contracts were allowed to proceed, beneficiaries would save 26 percent on their co-payments. Medicare would save $125 million the first year and as much as $1 billion a year if the program went nationwide.

Sounds like a pretty good program, yes? Not only would Medicare costs be cut, but so would the co-payments of the Medicare beneficiaries. Ah, but here's the rub: the equipment suppliers wouldn't make as big a profit as they would under the current fee schedule. Oops!

...... A trade association has sued to stop the program on the grounds that companies were not told what financial standards they had to meet to be deemed eligible, and industry lobbyists have persuaded key members of both parties in Congress to back off.

I guess the concept of competitive bidding is too complicated for today's businesses, or else they've forgotten how that works because it's been so long since the government actually required such a system be used.

And the horrid part is that Congress, which, I would remind you is in the hands of Democrats, is backing off and cancelling the planned program. So now Medicare will have to keep on paying three times the going rate for hospital beds and two times the going rate for powered wheel chairs.


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