Outdated Medicare rules threaten older Americans’ access to home medical equipment

Pandemic-related breaks in global supply chains for drugs and essential medical supplies are affecting the more than 4.5 million people who receive health care at home and the companies they count on to provide and service their oxygen machines, wheelchairs, hospital-style beds, prosthetic devices, and other durable home medical equipment.

Compounding the crisis are federal rules that have long underpaid companies providing home medical equipment and that are now forcing them to swallow the pandemic-related cost increases they’re facing. If those rules don’t change, countless people could lose access to home care.

Patients and providers are grappling with shortages of everything from medical oxygen and personal protective equipment to wheelchair parts, walkers, and feeding tubes. A recent survey of 500 home medical equipment suppliers commissioned by the American Association for Homecare (AAHomecare), a trade association for which I currently serve as vice chair of the board, found that 97% had experienced significant delays in receiving medical equipment.

Prices are rising in response. Boxes of nitrile gloves that once cost $2 for 100 gloves now retail for 15 times as much. More than half of home medical equipment suppliers say their costs for Covid-related supplies have increased — in some cases by as much as 30%.

In other industries, companies whose cost of doing business jumped because of the pandemic have raised prices. Restaurants are charging more to offset increases in food and labor costs. Prices of groceries and home improvement supplies are rising.

Suppliers of home medical equipment can’t do that because Medicare sets the prices these companies can charge. That leaves them to absorb rising costs at the risk of going out of business.

Medicare’s rates are set by what is supposed to be a competitive bidding process introduced in 2011. The rates set by this process have never been sufficient, since Medicare bases its payments on the median bid. Under that structure, reimbursement was down 45% on average in 2013 and patients weren’t getting much-needed equipment. Medicare paused the program in 2018 to redesign it to help produce more accurate rates and improve patient access to equipment, but left in place the old faulty pricing. Since competitive bidding began, 36% of durable medical equipment providers have closed their doors or no longer accept Medicare.

Today’s rates are based on bids submitted six years ago. Costs have increased substantially since 2015, and these rates don’t reflect the extraordinary strain the pandemic has put on providers of durable medical equipment.

Even as they struggle with a surge in the cost of their materials, demand for their services has boomed. People don’t want to live in nursing homes or other clinical facilities where Covid-19 has run rampant.

The desire to age in place is part of a long-growing trend. Most seniors hope to live at home for as long as possible. They won’t be able to do so if Medicare’s low payment rates continue to drive out of business the companies that make aging in place possible for many older Americans.

Medicare knows its competitive bidding process isn’t working. After the pause to the program was announced in 2018, it scrapped a new round of bidding in late 2020 when the savings it expected failed to materialize.

Further delay is untenable. Medicare payments are now so out of line with the market that some of the remaining businesses providing older Americans with durable medical equipment will begin to fail, jeopardizing care for many people.

To stop that from happening, Medicare must apply meaningful rate adjustments for home medical equipment and related services that reflect the market realities equipment providers face today.

Doing so would have a negligible effect on Medicare’s finances but could protect access to care for many Americans. Spending on home care equipment represents less than 1.5% of Medicare’s total budget. Between 2012 and 2019, it grew at half the rate of overall Medicare spending.

In other words, providers of home medical equipment are due for a raise. Properly resourced, this small increase in spending could help rein in costs elsewhere: Keeping people safe and independent at home does not just improve their quality of life, it can ward off the need for expensive hospital stays and nursing home care.

One 2019 study compared home care with care in a skilled nursing facility after hospital discharge. Among the 17 million hospital admissions paid for by Medicare between 2010 and 2016, post-discharge home care was associated with average savings of more than $4,500 in the 60 days after hospitalization.

Overall, for every dollar invested in durable medical equipment, the Leitten Consulting group estimated that the health care system saves between $23 and $41, an astounding return on investment.

Medicare should make it possible for more older Americans to age in place. That requires sustainable payment rates that allow providers of home medical equipment to adapt to the rising costs brought about by the pandemic — and rising demand for their services.

Josh Marx is vice chair of the board of directors of the American Association for Homecare (AAHomecare) as well as managing director of sleep and vice president of business development at Medical Service Company in Cleveland.