Low-hanging fruit Medicare could pick to cut costs

Medicare costs are rising and new information shows that a third of health care spending is on wasteful practices. StockXchng image.

Editor’s Note: Allen, who lives in East Montpelier, is a regular contributor for In These Times. This piece was first published in the June edition of the monthly magazine. 

Up to 30 percent of health care expenditures are wasteful, Medicare’s chief actuary estimates, and Medicare could trim up to $150 billion from its $500 billion in 2010 tab without harming care.  Some of the problems can only be addressed on a national level, but others could be incorporated into Vermont’s reform efforts.

Here, just a few examples of the low-hanging billions in waste, fraud and poor practices in the nation’s Medicare system:

Pharma fraud

The $4 billion worth of medical-related fraud the feds recaptured last year could be a fraction of the taxpayer-subsidized scams that the pharmaceutical industry got away with. The top 10 federal False Claims Act settlements in 2010 were all health-care related; pharmaceutical company fraud accounted for eight out of 10 claims. In a typical case, the U.S. government was billed $70.30 for a drug pharmacies purchased for $3.07.

Generic drugs delayed

When patents are expiring, drug companies pay off other firms to delay marketing cheaper generics. According to the Federal Trade Commission, the deals raise costs for consumers, including Medicare and Medicaid, by $3.5 billion a year.

Antipsychotics erroneously used for dementia

Most of the antipsychotic prescriptions Medicare paid for in the first half of 2007 were “erroneous,” the Health and Human Services inspector general found. In a 2007 case, Medicare was billed $230 million a year for off-label use of antipsychotics to drug 1 in 7 nursing home residents, mostly dementia patients. Not tested for or known to ameliorate dementia, the antipsychotics were promoted by companies that paid kickbacks to doctors, the Center for Medicare and Medicaid Services reported.

Hospital infections drive up costs

About 1 in 10 hospital patients acquires an infection that causes preventable deaths and chalk up $6.7 billion to $11 billion a year in extra costs.

Drug prices nonnegotiable

Congress barred Medicare/Medicaid (unlike the Veterans Administration), from negotiating bulk discount rates, thereby funneling an estimated $14 billion a year from taxpayers to drug companies.

Consumers forced to pay top dollar

Drug companies charge Americans far more for brand-name meds than much of the world pays. If U.S. consumers paid the same as Canadians (rather than 38 percent more), they would have saved $50 billion in 2003, Boston University researchers found.

An ever-bigger advertising dollar

Only the United States and New Zealand allow direct-to-consumer drug ads. The U.S. health care and pharma industries pay out $4.5 billion a year for ads on the Internet, TV, radio, print, etc.

Perks to influence docs

About 100,000 pharma reps visit America’s 311,000 office-based physicians to influence drug choice through perks and junkets at a cost of $19 billion a year.

Co-pay cards’ hidden price

Drug companies pass consumer costs to Medicare through co-pay cards. For example, using a Pfizer-issued co-pay coupon card, insured patients pay as little as $4 for a month’s supply of Lipitor, making it competitive for the patient with a generic. Medicare is stuck with the bulk of the tab.

FDA testing falling short

Require that new drugs be tested not only against placebos (sugar pills), but against existing treatments. For example, it turns out Avastin at $50 per injection was little different from Lucentis at $2,000 a shot for treating macular degeneration. In 2008, 480,000 Avastin shots cost Medicare $20 million, while only 337,000 of Lucentis totaled $537 million.

Paying for unneeded tests

Expensive and often invasive diagnostics can do more harm than good. The New York Times reported that in 2009, Medicare paid doctors more than $100 million for nearly 550,000 colonoscopies –with 40 percent going to patients over 75 for whom routine screening is neither safe nor effective. Medicare spent more than $50 million in 2008 on routine screening for prostate cancer in men 75 and older, and for cervical cancer screening in women 65 and older with previously normal Pap smears. Medicare pays $1.6 billion on drug-coated cardiac stents when studies show them often no more effective in preventing heart attacks or death than drugs or lifestyle changes.

Drug company profits are soaring

Pharmaceutical corporations justify massive profits by arguing that a new drug cost $1.32 billion to develop. After government grants and tax breaks, the real figure is $55 million.