Medicare Is Grievously Overpaying for Penis Pumps

And yes, there's a public policy lesson in this. 
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Department of Health and Human Services

Perhaps you had assumed that penis pumps were merely novelty items, sold mostly by email spammers and in a few musty sex shops. If so, you might be interested to learn that they're actually considered a medical fallback option for men whose erectile dysfunction cannot be cured by drugs like Viagra—and that Medicare has been vastly overpaying for them for years. 

So says a new report by the U.S. Department of Health and Human Services Office of the Inspector General, descriptively titled: "Medicare Payments for Vacuum Erection Systems Are More Than Twice As Much As the Amounts Paid For the Same or Similar Devices By Non-Medicare Payers."

A "vacuum erection system," in case anybody's unclear, is just a penis pump. Between 2006 and 2011, Medicare spent a total of $172 million to purchase 473,620 such devices, at an average cost to the government of $360 each. The Veterans Administration, by comparison, pays just $185 per pump. With a little Google searching, the OIG found options available for an average of $164. 

Had Medicare paid those sorts of prices, it could have saved $14 million during each of the five years the report examined. 

So why is Medicare getting fleeced? While HHS uses a competitive bidding process to get the best possible price on some medical devices, penis pumps aren't one of them. Instead, Medicare pays for them using a set formula based on the historical prices, which presumably were much higher in the days before the little blue pill gave most patients a better option. The overpayment problem isn't new, either. The Center for Medicare and Medicaid Services proposed fixing it all the way back in 1999. 

Which brings us to a broader lesson: The reason that Medicare is more efficient than private insurance, usually, is that it has the power to negotiate prices from suppliers. When we deny it that ability, such as with prescription drugs, the problem is far more severe than overpaying for a few vacuum erection systems.

(h/t The Washington Free Beacon)

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Jordan Weissmann is a senior associate editor at The Atlantic.

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