WASHINGTON -- Internet sale price for a standard back brace: $99.99.
What Medicare pays for the item: $900-plus.
A federal report released Wednesday offers a look at how wasteful spending drives up health care costs as investigators found that Medicare paid $919 on average for back braces that cost suppliers an average of $191 each.
"The program and its beneficiaries could have paid millions of dollars less if the Medicare reimbursement amount ... more closely resembled the cost to suppliers," according to the report from the inspector general of the Department of Health and Human Services.
In a written response, Medicare's administrator, Marilyn Tavenner, said Medicare will consider including back braces in a competitive bidding plan for medical equipment. The bidding experiment, expanding across the country, has been shown to save taxpayers money.
Budget talks between President Barack Obama and House Speaker John Boehner, R-Ohio, may lead to more competitive bidding, a shift that some Democrats are urging and industry is fighting.
It's estimated that the health care system squanders $750 billion a year, about 30 cents of every medical dollar, through unneeded care, wasteful spending and fraud. Part of the problem is prices can vary widely depending on who's paying the bill. Prices that government programs pay can be way off the mark.
Medicare spends more than $10 billion a year providing beneficiaries with medical equipment, from power wheelchairs to blood sugar monitors. It's an area that has been rife with fraud. Unscrupulous suppliers sell beneficiaries items they may not need and bill the cost to Medicare.
The $96 million that Medicare spent on back braces in 2011 was a small sliver of its total spending, but that amount had more than doubled in just three years, up from $36 million in 2008, the report said. Investigators decided to take a closer look, before the line item for back braces could reach the $200 million or $300 million mark.
The inspector general's office focused on a type of back brace that is fairly standard. Dozens of medical device manufacturers produce such braces for thousands of suppliers around the country.
The brace is worn around the midsection of the body, and usually features rigid panels on the front and back, along with straps for adjustment. It's prescribed to help back-pain sufferers maintain proper body alignment. Medicare paid for more than 121,000 of the braces in 2011, compared with fewer than 49,000 in 2008.
Investigators pulled a random sample of claims from more than 300 suppliers and took a deep dive into the paperwork. They found that the price Medicare was willing to pay was more than four times what the braces cost suppliers. The average difference: $728 per brace. The high costs were shared by beneficiaries, who are responsible for a 20 percent co-payment.
The reimbursement amount set by Medicare goes beyond just equipment cost, also including fitting and education for the patient. So the inspector general's office took a look to see if that might explain the high cost to the program.
But investigators found that for one-third of claims, suppliers did not report any fitting and adjustment help. Support services varied for the remaining two-thirds of cases. Some suppliers reported taking hip and waist measurements. Others said they adjusted the braces in some fashion. Nearly half the claims involved services from medical professionals such as doctors, chiropractors and physical therapists.
"For the vast majority of claims, suppliers did not provide any additional services ... other than general instructions," the report said.
A reporter's quick Internet search suggested there's a thriving business in back braces. One medical supplier in the Midwest aimed its pitch directly at doctors.
"Your peers are using back braces to help generate additional revenue for their office," the promotional material said. It explained how doctors can make an added $350 to $650 for each Medicare patient who qualifies for a brace.