WASHINGTON, DC – Last week CMS’ Office of the Actuary released its national health spending projection for the period 2017-2026 which estimates 5.5% annual growth. Total health spending is expected to reach $5.7 trillion and increase 2 percentage points to account for 19.7% of GDP by 2026. So, what are the statistics for home medical equipment (HME)?
This is where it gets disappointing and quite mind boggling as a taxpayer. In 2016, HME accounted for 1.1% of total Medicare expenditures, compared to 1.22% in 2015. It is worth noting that in 2006, HME accounted for 1.6% of Medicare spending. While overall Medicare spending continues to climb, including a 3.6% increase vs 2015, HME spending has declined 7.5% between 2012 and 2016.
Not surprising, this trend is clearly a result of the legislative and regulatory changes over the last 10 years, most notably Medicare competitive bidding and audits.
The real disconnect for me is that this is occurring at a time when the HME market demographics are quite strong due to the 78 million “Baby Boomers,” that are retiring at a rate of 10,000 per day. Clearly Medicare and policymakers do not appear to understand the value HME brings to the Medicare program. It would be reasonable to anticipate slightly higher growth in HME due to the cost-effective nature of those products and services when compared to the higher cost of institutional care. Narrowly focusing on cost savings in one segment of Medicare often leads to increased costs in another.
When reflecting on this data two points stand out to me. One, we need to add this to our talking points for use on Capitol Hill so legislators understand the impact competitive bidding and other changes have had on the home medical equipment industry relative to other health care settings to further underscore the need for competitive bid relief and reform. Two, the market dynamics for HME are strong and only getting stronger. The more Medicare beneficiaries there are, the more DME will be needed to satisfy the needs and wants of that growing segment of the population.
I continue to hear that many “Baby Boomers” understand more so than the 23 million “Greatest Generation” that they will be required to pay for more of their health care out of pocket. Many of the “Baby Boomers” are used to getting what they want and will not want to wait for any extended period for Medicare approval, or to go through a lengthy qualification process only to find that they didn’t meet the coverage criteria for an item. They would much rather pay cash and move on with their lives.
It sounds like a real HME opportunity for retail.
Seth Johnson is senior vice president of Government Affairs for Pride Mobility Products Corporation. He currently serves on the executive committee and board of the National Coalition for Assistive and Rehab Technology (NCART), is a past chairman of the AAHomecare Complex Rehab and Mobility Council (CRMC), and is the current vice chair of its Retail work group.