By Dave Anderson:
One of the federal government's core competencies is writing checks. Another federal core competency is being a very large purchaser of almost everything. That size can allow the federal government to throw its market weight around to get good deals. That is why Medicare is cheaper on a per unit basis that private insurance; the federal risk pool is much broader and the federal purchasing power is significantly stronger so providers have to cut the federal government a decent deal over their private market rates.
However, the federal purchasing power is not always used to efficiently spend money to provide needed or desired services. The most notable example is the failure to include a public option in PPACA. Additionally, Medicare Part D has been forbidden by Congress to enter 'next best price contracts' where Medicare would get the best price offered to any client for a particular drug, even if that best price was offered to the Veterans Administration.
However, durable medical equipment is a category of Medicare Part D expenses that Medicare can seek a good deal on by leveraging Medicare's size to the government's advantage. Currently, Medicare is working on a pilot program where durable medical equipment is supplied by regional low bidders. This is projected to save $20 billion or more dollars over the next decade. To me, this is a no brainer as services are provided at the same level but at a lower aggregate expenditure which means either more services can be offered for the same budget, or the same services can be offered at a lower budget. Either way is a net social benefit.
However, Congressman Altmire (Douchebag Dem-PA) hates capitalism and loves local political capture through the erection of artificial barriers to competition:
Reps. Jason Altmire, D-McCandless, and Glenn Thompson, R-Centre, have long tried to slow or halt the new Medicare program, which began in January in nine metropolitan areas, including Pittsburgh.
The program, in an effort to cut Medicare Part D costs, has companies offer bids to sell devices like oxygen tanks and power wheelchairs. Medicare selects a group of suppliers for eight categories of devices in each market based on which ones submit the lowest bids.
The device industry is fighting the new program, saying the severe price cuts --- in Pittsburgh, prices have dropped by more than a third --- will force small providers out of business
Economies of scale are saving significant sums of money as Medicare Part D is basically buying commodified products but the inefficient providers are getting squeezed hard and are trying to carve out a protected revenue stream as that is the only way that they can survive when they stomp their feet as they threaten to go Galt on us.
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