A classic healthcare-lobbying story is in the making—a shootout between the government and the medical device industry over cost containment in Medicare, the $508 billion program that the pols have been telling us costs too much. Most of the media, except for a few alert trade publications have been snoozing on this one. And it’s a fascinating tale that gets to the heart of the problem in American healthcare—what to do about its high price.
Medicare, it seems, is trying to do something about costs, this time by reducing what it pays for test strips and other supplies that diabetics use to monitor their blood sugar. This is big money we’re talking about. A fine story by Andrew Wang in Crain’s Chicago Business reported that global market for blood meters, testing strips, and lancets has grown from $6.2 billion ten years ago and is expected to reach almost $11 billion in 2017. It’s also big bucks for Medicare, which covers these items as part of its standard benefit package.
That’s why Medicare has proposed buying them through a competitive bidding process, with beneficiaries getting their supplies through mail order suppliers just the way insurance companies push policyholders to buy their drugs through the mail as a way to lower the costs. Suppliers will submit bids to provide products for diabetics—as well as other “durable medical equipment,” such as hospital beds and oxygen supplies—at a lower price than what Medicare now pays. Medicare will then use these bids to set the price it will pay. Companies with the winning bids that meet Medicare standards will become Medicare’s suppliers. (If seniors don’t want to receive supplies at home, they can go to any local store that’s enrolled with Medicare and buy their supplies.)
Medicare estimates this new way of getting supplies will save $25.8 billion for the program—not exactly pocket change. And it would save about $17 billion for beneficiaries over the next ten years. Even though Medicare covers diabetes supplies, beneficiaries still have out-of-pocket costs, since Medicare pays 80 percent of its allowable charge leaving beneficiaries or their Medigap carriers to pay the 20 percent coinsurance. If a supplier does not accept Medicare’s payment as payment in full, beneficiaries have to cover the remainder. So saving beneficiaries some money is hardly a trivial matter.
But what a stir this proposal has caused in the medical device industry! Conflict! Controversy! And a big push by device makers to roll back Medicare’s rule by July 1, when it’s supposed to take effect!
That’s because lower prices for Medicare and nearly 50 million beneficiaries may mean lower profits for suppliers, and perhaps loss of market share too, since Medicare will be directing consumers away from high-cost providers who may have large shares of the market to lower-cost providers. The industry is not happy about that, and has embarked on a lobbying effort that’s is eerily similar to the health insurers’ successful campaign a few months ago to reverse reimbursement cuts proposed for Medicare Advantage plans. In that instance the lobbying campaign was so successful that Medicare, most likely under political pressure, not only stopped the proposed cuts but gave insurers a raise.
In that case the insurers used an entity called the Coalition for Medicare Choices, a phony grassroots group that AHIP, the insurers’ trade association, calls into action when it needs letters sent to Congress from Main Street to bolster its legislative agenda. In this new lobbying effort, the medical-supply industry is using the Diabetes Access to Care Coalition, “a collaborative effort of patient advocates, providers, suppliers, and manufacturers of diabetes testing supplies that is committed to ensuring that Medicare beneficiaries with diabetes mellitus maintain access to high quality products and services through avenues of their choice.”
The group sprang into action a few years ago in response to Medicare’s first round of competitive bidding for medical equipment products, which began in 2011 in nine regions. Medicare says that pilot reduced the costs for supplies by an average of 42 percent for Medicare patients. The second round—the one set to begin July 1—will expand the program to 91 metro areas.
The coalition is trying to stop it’s website urges beneficiaries to write letters to members of Congress, and offers tips for doing so. And it posts media stories about the competitive bidding process, which mostly promote the industry’s case against competitive bidding. For example, a blog post in early June from ABCNews 4 in Charleston, SC is built almost exclusively around comments from the president of a local supplier of respiratory services, who says the hope is that Washington will delay the rule and consider a different option. While she acknowledged the process could save Medicare money, she argued that it could cost more in the long run if patients don’t have the one-on-one interaction to learn how to use the equipment.
Like the insurers’ campaign against trimming Medicare reimbursements, this one has also included a TV commercial—one that provokes fear and invokes the notion of choice, both powerful weapons in the war to win over the elderly. A recent commercial from Abbott Laboratories that aired on MSNBC, USA Network, and other channels plays on fear, common among Medicare beneficiaries. Medicare is “streamlining,” says the announcer. “Your supplier could try to switch you to a brand that might not be as accurate, a brand your doctor never heard of.” The commercial, though, is really about market share for Abbott, an industry leader in diabetes products, as Ankit Makim, director of CarbonSix, a Chicago market research firm, told Crain’s Wang. “Probably 80 percent is protective and 20 percent is about increasing their share.”
In the lobbying game it helps to have a study or two that adds a patina of authority to your activities. And sure enough, yesterday came an item on the PRNewswire announcing a study by researchers at George Washington University’s School of Public Health, sponsored by the Diabetes Access to Care Coalition, which noted:
The Coalition is concerned that competitive bidding for diabetic testing supplies may cause seniors to lose access to the most commonly prescribed diabetes testing supplies or create confusion about where they can obtain the supplies they are currently using.
The lead author, Sara Rosenbaum, worries that the “competitive bidding program makes an already vulnerable population even more vulnerable” and says the government must take immediate steps to “help seniors with diabetes avoid confusion.”
I asked Medicare about all this. The Centers for Medicare and Medicaid Services said diabetic testing supplies were included in the first round of bidding, and there were very few beneficiary complaints—less than 1% of total call volume—which would suggest that not having enough suppliers to choose from was not an issue. CMS has sent a letter to all beneficiaries announcing the new program and clearly telling them how to find suppliers. That selection process is not much different from finding sellers of Medicare Advantage plans, or prescription drug coverage on Medicare’s website.
There are lots of ironies and contradictions in this tale, and it would be great if the media could build upon Steven Brill’s work in Time that discussed how hard it is for Medicare to lower the cost of its program—unless it can use its bargaining muscle.