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Bring on the savings! (But no hurry)

Posted By Russ Roberts On January 31, 2013 @ 5:06 pm In Health,Politics | Comments Disabled

Medicare, it seems, has been overpaying for kidney dialysis drugs. Peter Whoriskey at the Washington Post reports [1] (HT: Sarah Nutter):

The Medicare system is recalculating how much it will reimburse hospitals and clinics for the drugs used to treat dialysis patients after federal auditors found recently that the program could save as much as $880 million annually.

An analysis by The Washington Post in August showed that the government was overspending by hundreds of millions for just one group of those drugs.

The overpayment occurs because the government reimburses hospitals and clinics under an assumption that the drugs are being given at the higher doses widely used in 2007. Since then, however, the use of the drugs has declined significantly, partly because of repeated government warnings about their safety and partly because Medicare removed the financial incentives for using larger doses.

“It’s good that Medicare is finally going to set a new, more accurate price,” said Dennis Cotter, president of the Medical Technology and Practice Patterns Institute, a research group, who called for price changes in 2011. “It’s unfortunate that they could have done this two years ago. This has so far cost taxpayers more than $1.6 billion.”

The overpayment, however, will continue until new rates are established in 2014. Medicare could propose a new price this June and finalize it in November.

No hurry. Can you imagine anything remotely like this happening at a private company? How is it possible that you could overpay by billions of dollars for years and do nothing about it?

Medicare officials told the GAO that they had no immediate plans to recalculate the payment, according to the report, and that they did not have the authority from Congress.

The GAO then asked Congress to intervene. The legislation resolving the “fiscal cliff” this month ordered Medicare to “make reductions” to the payment for the drugs based on their lower usage levels.

Medicare officials said they are now recalculating the price.

No hurry. Why isn’t someone fired for this? Why is no one embarrassed? Is it because it is “only” a few billion dollars?

In case you’re wondering, the drugs are made by Amgen. More on that here [2]. Amgen was very active [3] in the political process in 2012. I guess they should have donated more money to the GAO.

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[1] reports: http://www.washingtonpost.com/business/economy/medicare-to-adjust-payment-for-dialysis-drugs-after-overspending-millions/2013/01/30/136fc7ba-6b06-11e2-95b3-272d604a10a3_story.html

[2] here: http://articles.washingtonpost.com/2012-08-09/business/35490064_1_epogen-anemia-drug-amgen

[3] very active: http://www.opensecrets.org/orgs/summary.php?id=D000000391

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