Taxpayers Paid Nearly $175M for Penis Pumps Between 2006 and 2011

Federal government paid more than double the retail price

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January 13, 2014

Taxpayers paid nearly $175 million for vacuum erection systems (VES), commonly known as "penis pumps," from 2006 to 2011, according to an inspector general report released on Monday.

The federal government paid more than double the retail price for VES, the Department of Health and Human Services IG found. Medicare prices for the systems, the report said, "remain grossly excessive compared with the amounts that non-Medicare payers pay."

Medicare paid 473,620 VES claims during calendar years 2006 through 2011, according to the IG report.

Health care policy experts said the revelations in the IG report are a troubling indication of what they describe as wasteful spending in federal health programs.

"The fact that taxpayers have spent more than a quarter of a billion dollars over the past decade on penis pumps via Medicare is obscene and insulting - even more so when you consider that this is an arena of Medicare expenditures rife with fraud and where the government doesn't even bother to assess medical necessity," said Ben Domenech, a senior fellow at the Heartland Institute.

"This is a perfect example of what happens when government becomes the be all and end all of human existence - a system where everyone has a right to a taxpayer-funded penis pump."

Vacuum erection systems, which are used to treat impotence, are covered by Medicare Part B under its Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) competitive bidding program.

Medicare payments for VES have swelled in recent years. The Department of Health and Human Services paid $20.6 million for 61,589 claims in 2006. It paid $38.6 million for 103,448 claims in 2011.

That increase came despite recommendations from federal watchdogs that HHS limit payments for certain DMEPOS claims, including those made for VES.

The Centers for Medicare and Medicaid Services recommended changing the fee schedule for VES and five other DMEPOS products in a 1999 notice in the federal register.

Existing fee schedules, CMS said, were "grossly excessive." Medical device manufacturers, though, "expressed concerns about the payment limits," the IG noted.

Congress instructed the Government Accountability Office to examine the issue. It mostly concurred in 2000 with CMS’s recommendations for a revised fee schedule. HHS issued regulations granting CMS the authority to adjust the pay schedule, but the agency never actually did so.

Most VES, the IG noted, are purchased through mail-order services online, over the phone, or by mail. The authors examined retail prices through Google and Yahoo! search results.

"Medicare currently pays suppliers more than twice as much for VES as the Department of Veterans Affairs and consumers over the Internet pay for these types of devices," the IG found.

By exercising that authority and limiting Medicare payments for VES, the IG found, CMS could save taxpayers millions. For the six years examined in the report, a pay schedule on par with standard consumer prices would have saved Medicare, on average, $14.4 million per year.

Because Medicare covers 80 percent of DMEPOS claims, with consumers footing the other 20 percent, a revised fee schedule could also provide direct savings for Medicare beneficiaries themselves, to the tune of $3.6 million per year.