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Medicare, insurers push patients to overpay for home medical equipment

By: Carol McKinley
November 13, 2011
photo - Edna Fiore has Chronic Obstructive Pulmonary Disease and relies on on an oxygen concentrator. Photo by Cara DeGette/Colorado Public News
Edna Fiore has Chronic Obstructive Pulmonary Disease and relies on on an oxygen concentrator. Photo by Cara DeGette/Colorado Public News 

Medicare routinely advises seniors to rent home medical equipment when it would be far less expensive if they bought it.

The government health program for seniors isn’t alone in this practice. Some private insurers do the same thing.

Colorado Public News has found that oxygen concentrators, used by patients who have trouble breathing, are a prime example of the high cost of renting home medical equipment. Years of investigations and reforms haven’t solved Medicare’s problem with overpaying, partly due to orders from Congress.

A new concentrator can cost just $695. But Medicare tells seniors to rent the machines on 36-month contracts that add up to $6,234, or nearly 10 times that amount. Prices are set by Congress.

Medicare and taxpayers cover most of that. Patients pay 20 percent of the monthly rental fee of $173.17, but even just the patient co-pays add up over three years to double the cost of buying.

An oxygen concentrator is about three feet tall and some look like a miniature robot – think R2D2 from Star Wars. The device removes nitrogen from the air, leaving concentrated oxygen. It delivers the oxygen through a clear tube under the nose.

Extra oxygen is necessary for people with serious respiratory illnesses, including emphysema, chronic bronchitis and sleep apnea. In Colorado, high-altitude thin air affects some people’s sleep patterns enough that they need extra oxygen at night to get rest.

Rent includes more

Rental companies say their contracts include services, and some patients are too sick to handle even minor maintenance.

“If you buy an oxygen concentrator, you’re on your own; whereas under a rental agreement with the insurance company, we are on call to service your concentrator 24/7,” said respiratory therapist Craig Rapp of Longmont’s Bethesda Home Respiratory Services.    
Still, Medicare and some insurers don’t tell their clients that purchasing is a cheaper option.

Margaret Hrchek has been on overnight oxygen for 10 years to control her severe pulmonary hypertension. The Highlands Ranch woman was on an insurance rental plan, but only because she didn’t know that she could buy a machine herself.

“It took me a long time to buy one, because the provider told me a new one would cost $3,200 out of pocket,” Hrchek said. “But that wasn’t true. It took my husband 10 minutes on the Internet to find out we could get a good one for $800. It worked so well, we went out and bought a second machine” as back-up.

Hrchek and her husband change their own filters and breathing tubes, and call for maintenance on their concentrators as needed.

Medicare routinely pays for oxygen equipment, wheelchairs and other “durable medical equipment” through rental plans. Federal audits have cited the waste, and Medicare says it is working to resolve the problem with competitive bidding.

“We’re spending way too much money on this equipment in the aggregate and we know it.  The office of the inspector general knows it. And the Government Accountability Office knows it,” said Medicare spokesman Mike Fierberg.  

But Medicare won’t reimburse patients who buy their own, even though it saves them and the government thousands of dollars.

Congress prohibited it.

Medicare not alone

Kaiser Permanente is one of the private companies that directs oxygen patients to rent machines. Denver patients typically pay 20 to 50 percent of Kaiser’s cost of $140 a month with Apria. People with higher co-pays could cut their expenses in just a few months by purchasing a used machine for $195.

Kaiser spokeswoman Amy Whited said the rental contract – like Medicare’s – includes maintenance.  

“Our arrangement ...provides for a variety of services to ensure the safety of our patients,” Whited said. Apria “make(s) sure the oxygen generators are calibrated correctly to dispense the appropriate level of oxygen, and they provide preventative maintenance and replacement or repairs when necessary.”

Rapp, of Longmont’s Bethesda Home Respiratory Services, says most of the cost of renting is maintenance, and that’s why people with serious respiratory problems should rent.

“Who’s going to be there for you at 3 a.m. when the power goes out?” he said. “Concentrated oxygen is a prescription drug. It’s not like breathing air.”

His company services its machines at customer’s homes every six months. The kind of patient who should own a machine, Rapp advises, is “someone who is younger, and just using it at night for an illness like obstructive sleep apnea.”

Recently, Rapp went to Edna Fiore’s home in Lakewood to check on her oxygen concentrator, which hums along in her dining room. He exchanged a filter and checked the amount of oxygen coming out of the machine.

Fiore suffers from Chronic Obstructive Pulmonary Disease and is literally tethered to her machine by a 25-foot plastic hose attached to her nose, so that she can breathe while she does her chores around the house.

At first, she says, it was a nuisance, but now the tubes are a way of life.  “I always said God thought I was flowing around too much, so she gave me a leash!” Fiore said.

At 78 years old, Fiore knows without oxygen she would pass out and die. For her, buying her own oxygen concentrator is out of the question.

“Are you kidding?”  She laughs with Rapp, who is changing her machine’s air filter. “I’m not an engineer. These are highly sophisticated pieces of equipment.”

John More, customer service manager at Centennial’s American Medical Sales and Repair, says maintenance is easy. Owners must clean filters, set dials, and change out tubes. He recommends professional servicing and calibration once a year.

But More says buyers should beware, as some people sell concentrators out of their garages with no follow-up.

Reform attempts

Medicare’s Fierberg says the agency is working on its severe overspending on home medical equipment, on which it spent $8 billion in 2009. After investigations ( by Congress’s General Accounting Office ( and others, Medicare started competitive bidding on various equipment in nine cities last January, resulting in a 30 percent savings, he said.

Fierberg says Medicare has had fewer than 100 complaints with the new bidding program “and that’s amazing considering this affects millions of beneficiaries.”

But bidding won’t go into effect in Denver- Aurora and Colorado Springs until July 2013, according to a schedule that Fierberg says was set by Congress. There’s no date yet for the rest of the state.  
Medicare expects bidding to save the government $18 billion over 10 years.   

The New York Times in 2007 detailed years of attempts to cut Medicare payments to oxygen companies, including one by then-President Bush to slash payments by 63 percent. Congress rejected it after providers fought it, and their patients called Congress, sometimes in panic, to insist there be no changes.


Medicare overpays on other equipment as well. A CNN investigation found Medicare paid $1,200 for a scooter that can be purchased for $349 from the same supplier. Medicare cut the three-year cost of a home hospital bed from $4,500 to $3,200 with bidding, but a similar bed can be found on the Internet for $1,300.

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