Medicare overpaying millions on ‘erection pumps,’ report says

A government investigator found that Medicare is paying twice the amount for erection assistance devices compared to private providers.

Investigators said the cost was “grossly excessive compared with the amounts that non-Medicare payers pay,” and that the federal government could have saved $86.4 million dollars over the past six years.

And going forward, “if Medicare reduced payment to the level of non-Medicare payers, the federal government could save about $18 million and Medicare beneficiaries could save about $4.5 million each year,” according to a report by the Health and Human Services Department’s internal watchdog, the Inspector General.

Tom Schatz, the president of Citizens Against Government Waste, said high prices have been a common problem for durable medical equipment like the erection assistance devices.

“Anytime that Medicare pays twice as much for any piece of equipment or any item for which it provides coverage, then taxpayers should be concerned,” he said.

The amount Medicare has been paying for the devices — known as vacuum erection systems (VES), which assist men suffering from impotence — has increased in the six years investigators studied, from $20.6 million in 2006 to $38.6 million in 2011.

The Centers for Medicare and Medicaid Services has done little to correct the problem since 1999, the IG said, when investigators first pointed out the excessive spending. The agency has the power to determine that the prices are excessive and refuse to pay a certain amount through a “special payment limit,” but investigators said “CMS has not used that authority to adjust pricing for VES” in the past 15 years.

In a response to the report, CMS said they were looking into why costs were so high, and were taking steps to reduce waste.

A spokesperson for CMS said the agency does not have the authority to competitively bid contracts for the equipment, something that could drive the price down.

“While Medicare strives to pay appropriately for items and services … CMS does not currently have the authority to subject this equipment to competitive bidding,” a statement from the spokesperson said.

The agency would need congressional approval, the spokesperson said, adding that competitive bidding across Medicare could save taxpayers billions of dollars over the next decade.

But the IG said there were steps CMS could have taken without congressional approval, such as setting a special payment limit when it deems a particular item to be far too expensive. This would mean that CMS would refuse to pay over a certain amount for an item, something the agency should have done, Mr. Schatz said.

“When CMS knows about something like this and they could establish a special payment limit, they shouldn’t be wasting any time,” he said. “It’s a problem that’s been going on for 14 years and they could have fixed it anytime.”

Investigators found that another agency — the Veterans Affairs Department — has been paying fair prices and is not wasting money. A comparison between the two showed the VA was paying an average of $185 for each VES, while CMS was paying nearly double that amount: $360.

As for the inevitable eyebrow raising over the government paying for this equipment, Medicare has long covered similar medical supplies like Viagra, Mr. Schatz said, noting it’s difficult for people not suffering from the condition to judge whether or not the government should help pay for it. Either way, it’s a separate debate from the waste it is currently causing.

“The first step is to fix the pricing,” he said. “The second step is to have a more comprehensive review of which medical supplies or procedures would be covered by Medicare.”

The IG noted that CMS was considering changing some of its payments for medical devices, which could cut the cost of some items in half, but may or may not affect VES.

• Tom Howell Jr. contributed to this report.