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April 09, 2014 5:11 PM The Specialists’ Cartel in Action

By Ed Kilgore

There’s big and alarming news out today in a new federal government report on the pricing of medical services to Medicare. Wonkblog has the essentials:

Today, the government released a trove of information on Medicare pricing, showing how much it paid, for what, and to whom for Medicare patients’ health care. Medicare sets the prices that effectively determine the cost of medical treatment in much of the private sector as well.
One particularly striking example in the new data: billing in ophthalmology. The data show that there were nearly 4,000 individual physicians who each billed Medicare for at least $1 million in 2012 alone. As The New York Times noted, ophthalmology was the specialty that billed the highest total.
As The Post reported in December, the story of Avastin and Lucentis, two nearly identical drugs for blindness, offer a glimpse into the problematic world of Medicare pricing. A dose of Avastin costs only $50. A dose of Lucentis costs $2,000. Both Avastin and Lucentis are made by the same company, and they’re remarkably effective in treating a form of macular degeneration that was long the leading cause of blindness among the elderly, The Post reported. They are very similar on a molecular level and probably cost about the same amount to manufacture.
Nonetheless, doctors prescribe Lucentis almost as often as Avastin. They also make more money doing so. Medicare is legally obliged to pay for any drug a doctor prescribes, and doctors also receive commissions of 6 percent to cover their own expenses. The commission a doctor collects on each dose of Avastin would be only about $3, as opposed to $120 on each dose of Lucentis. Congress and the courts have refused to allow Medicare to save money by scrutinizing doctors’ decisions.
As a result, taxpayers spent about $1 billion in 2012 more than they would have if doctors had been prescribing Avastin. Avastin, for all intents and purposes, has been shown to be equivalent to Lucentis in six studies and one massive review of Medicare records.

This is just one example of the price-fixing and taxpayer-gouging features built right into Medicare by a system that lets medical specialists figure out their own reimbursement rates behind closed doors and bars the government from negotiating on Rx drug prices. It should be very familiar to those of you who read Haley Sweetlands Edwards’ piece (“Special Deal”) in the July/August 2013 issue of the Washington Monthly on the expensive conflicts of interest that boost Medicare costs unnecessarily. Perhaps the new report will finally get some serious attention from the media and policymakers about this infuriating problem.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

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