Health care economics is unbelievably complex in the U.S. Money is not spread around evenly. There are distinct winners and losers. MRI and other imaging centers, for example, are clear winners, as are PBMs (pharmacy benefits managers).
Primary care is pretty much the all-time loser, with vast underpayment for your PCP’s services for the past 30 years or more. That chronic underfunding is the root cause why people have such a hard time getting in a primary care practice or actually seeing a physician in a timely fashion.
When winners gobble up too much money, it starves the losers because it is a bit of a zero-sum game. I’ll explain this in more detail in another article early in the new year. But to get more reimbursement for primary care, the money may have to come from the winners. Let’s consider durable medical equipment, or DME.
Exorbitant Prices for Brace
Before my recent knee replacement, I was having real pain walking. An off-loader brace is a device frequently offered to people in my condition. It lessens pain by reducing the pressure on the cartilage on the inner half of the knee. I was fitted for a Thuasne brand brace at my orthopedist’s. I received it two weeks later after Medicare gave approval. It helped modestly for the two months or so before I had surgery.
I recently received the Medicare EOB for the brace. The orthopedic practice’s charge to Medicare for the device was $1,494.24. I do not know what the practice paid their supplier. Medicare approved $704.91, with $552.65 paid by Medicare and the remainder by my Medicare secondary. That seemed a lot of money for a cloth and Velcro strap sleeve brace with simple hinged metal joint, but what do I know?
Same Device 75% Cheaper on eBay
So, I decided to check online for knee braces. It turns out the identical Thuasne brace, by brand and model, is available new on eBay for$175. That is one quarter of the price paid by Medicare and just modestly more than the 20% Medicare copay.
I find that astounding. I don’t think anyone is working in bad faith, certainly not my orthopedist. That is just the way it works. DME is one of the winners. It gets more than its fair share of the pie. And, I suspect, very few people do price comparison shopping when Medicare is paying the bill.
Why Does This Matter?
Overall DME expenditures in the country were $72.8 billion in 2023. Of that, Medicare spent $15.9 billion, with an additional $4 billion paid by Medicare recipients or secondary insurers, giving a U.S. total just about $20 billion.
Massachusetts has about 2% of the U.S. population so, as an approximation, Medicare spent $400 million here. Assume the knee brace is representative of all DME. Even a 50% reduction (twice the online price) would free up $200 million here for other medical expenses (think geriatric physicians for Medicare patients). That’s meaningful money. And Blue Cross and normal commercial insurers pay for DME for younger people. I suspect (but don’t know) that the DME margins are the same.
Follow the Money
We need to carefully look at all the big money winners in health care (PBMs, DME, forever patented drugs) and then work hard to pry some of that back to help the health care losers, such as primary care and nonprocedural medical specialists, if we ever are to get meaningful improvements in the care access, quality and cost that normal people experience.