California Pays Steep Prices for Wheelchairs
His new wheels suit Mark Beckwith just fine.
The motor purrs, the computerized steering turns on a dime, the front-wheel drive eats up bumps and the seat tilts at a touch.
The sticker price was $36,933 -- more than that of a C-Class Mercedes-Benz.
But this is no German luxury car. It’s a wheelchair made in Sweden, customized in the United States -- and paid for by California’s health program for the poor.
“Thirty-seven thousand dollars may seem expensive,” said Beckwith, a lifelong muscular dystrophy victim with little use of his limbs. “But this chair is the difference between me being active and productive and lying in bed watching Jerry and Oprah.”
In the last five years, the cost of supplying wheelchairs to disabled, elderly and needy Californians has more than doubled. Last year alone, the California Medical Assistance Program, or Medi-Cal, bought 16,723 chairs for $66.1 million.
Increased demand helped push wheelchair spending upward, and so did technological advances that made chairs more sophisticated and pricey.
But state officials have made only sporadic and largely futile efforts to control what they spend on the most expensive piece of medical equipment Medi-Cal buys. They have repeatedly bent to political pressures and jettisoned their own cost containment rules and initiatives.
While the federal government and smaller programs in other states cut better deals, the $29-billion Medi-Cal system failed to use its enormous buying power to bring down wheelchair spending. Industry experts say California may be the only big state to consistently pay manufacturers’ suggested retail prices for chairs that cost from hundreds of dollars to tens of thousands each.
Beyond the purchase price, Medi-Cal also failed to effectively regulate the number and types of chairs supplied to recipients. The program has not updated its list of authorized chairs and prices for 17 years.
Wheelchairs represent freedom to the thousands of people who need them. But they also illustrate the sometimes wrenching collision between the government’s mission to help vulnerable people and its obligation to balance the budget and weigh competing priorities.
When California enjoyed relatively sound finances, the clash was less consequential. Attempts to rein in Medi-Cal spending on wheelchairs were beaten back by a coalition of wheelchair users and dealers and, in a booming economy, they faced far less competition for state dollars.
Now, with the state in the throes of a $38-billion budget crisis, efforts to tighten spending take on new urgency. But as Medi-Cal officials try once again to reduce wheelchair costs, they face an entrenched system and a vocal lobby of advocates who assert that changes could threaten the mobility and independence of the disabled.
State health officials acknowledge that the program has been paying too much for wheelchairs for too long.
In other areas of health care, “Medi-Cal never pays retail and shouldn’t here,” said Stan Rosenstein, deputy state health director for medical services.
Administrators for the California Department of Health Services, which oversees Medi-Cal, hope to cut costs by contracting directly with wheelchair manufacturers and negotiating rebates while paying lower markups to retailers. Gov. Gray Davis has proposed the more drastic step of eliminating wheelchairs for thousands of adults living on their own or at home, which officials concede would be very difficult for people who cannot afford to buy their own chairs.
“There will be a battle over those kinds of cuts,” said Assemblywoman Barbara Matthews (D-Tracy), who asked for a state audit last year that found inadequate oversight of wheelchair costs. “We don’t want to cut benefits but want to make sure people are not taking advantage of a system that is too loose. “
Legislative committees and disabled-rights advocates are already trying to restore the governor’s proposed wheelchair trims.
Medi-Cal, with 6.5 million beneficiaries, is the nation’s largest Medicaid program. The system’s fee-for-service plan uses a blend of state and federal dollars to reimburse health-care providers for treatment, products and equipment, including wheelchairs.
California and Florida are the “700-pound gorillas” in the wheelchair industry because of their large aging populations, said Dave Williams, director of government relations for Invacare, a leading wheelchair manufacturer worldwide. But he said Medi-Cal may be the only mainland U.S. state program that has been paying straight retail prices. “It is a relatively unique position they’re in,” he added.
Medicaid in Florida -- which has more than 2 million beneficiaries and is a third as large as California’s program -- pays dealers 13% less for wheelchairs than suggested retail price. The program spent a fifth as much as Medi-Cal -- $13.4 million in fiscal year 2001-02, including rentals.
In the private sector, better deals also are common. Kaiser Permanente, the nation’s largest not-for-profit health-care plan with 6 million members in California, contracts with a single medical equipment vendor and pays about 25% less than the retail price.
The wheelchair industry’s political clout at Medi-Cal does not turn on economic might or campaign contributions. Instead, it is based on a marriage of mutual interest with wheelchair users.
The disabled depend on their local dealers to supply them with an essential tool for living and to run interference with Medi-Cal to get it. The dealers, many of whom rely heavily on Medi-Cal business, need to maintain a loyal clientele. Both constituencies view any state actions that cut into the profits of dealers as threats to wheelchair access. And they band together to fight them:
* During the budget crisis of 1991-92, Medi-Cal tried to save millions of dollars through a 22% cut in what it would pay wheelchair dealers. Scores of protest letters were sent to health officials. On Dec. 11, 1991, a rolling wheelchair picket line encircled state health department headquarters; then wheelchair users, dealers, manufacturers and supporters packed a departmental hearing. According to a transcript, they argued that reducing reimbursements would drive some providers away from Medi-Cal, cutting the number of outlets, and that depriving people of wheelchairs would force some into costly institutional care.
“You’re going to take our legs away,” declared one impassioned speaker.
“It would be better to take guns and shoot these people,” said another.
There were threats of litigation and more protests.
State health officials blinked. An internal memo shows that the proposed cuts were shelved -- and that the outcry was the primary reason.
* In 1998, witnesses testified at a legislative hearing that Medi-Cal’s cost-review procedures were so cumbersome they created months-long delays in getting chairs to the disabled, stranding some on gurneys.
Feeling the heat, Medi-Cal officials directed their field staff “effective immediately” to speed approvals by ignoring the program’s own cost-control rules. The request “shall be approved, without regard to medical necessity for the specific type of wheelchair and components being requested,” said an April 20, 1998, memo from headquarters.
Legislative committees do not have the authority to order action, so why did the health department back off?
“They control our budget,” said state health official Rosenstein. “They have a major hammer. It was bloody.”
* In 1999, state health officials tried to adopt federal wheelchair reimbursement levels, which were much lower than the prices Medi-Cal was paying. Again, there were protests from users and dealers, and the state backed away.
Whenever the debate heats up in Sacramento, the repercussions travel down Interstate 80 to Berkeley, a fountainhead of the disabled-rights movement.
Blane and Mark Beckwith live in a brown-shingled house with their parents. Because muscular dystrophy struck them both as babies, their lives literally revolve around their wheelchairs. The chairs carry them to the bank, the movies, the doctor. Mark uses his chair to walk his dogs.
The brothers do organizing in Northern California for American Disabled for Attendant Programs Today, or ADAPT, a nationwide disability-rights group.
“I’ve been arrested several times over the years in protests,” said Blane, 47, an aspiring writer and community college student who once blocked the path of a bus to protest for wheelchair access. “If the budget cuts come through, Gov. Davis is putting us in the position where we have to do something.”
Mark is a 45-year-old former computer company employee with a forceful manner. When there were hang-ups in getting approval for his Chairman 2K Corpus model of a Permobil wheelchair, he called Medi-Cal and got action.
He loves the chair, especially the power seat, which reclines, tilts and elevates to help prevent pressure sores and to assist his breathing and posture.
“The recliner can raise the chair seat 8 inches, so if I’m in a theater behind a lady with big hair [or] at the ballpark behind a big guy, I can raise it,” he said. “It works great.”
Officials at Permobil, a privately held Swedish company, decline to say what the wheelchair costs to make or what the dealer markups are. But they say their prices are fair.
Management Called Lax
As recently as December, a state audit criticized lax management in the purchases of the chairs and other medical equipment such as walkers, oxygen supplies and beds.
From 1998 to 2001, the audit found, Medi-Cal equipment costs climbed 70%, to $124 million. And much of the increase came from wheelchairs.
Statistics obtained by The Times show that spending on chairs and accessories rose from $27 million in 1998 to $66.1 million last year. Officials attribute the increase in part to patients’ longer life expectancy and medical advances that have improved the chances of surviving illness and injury.
But something else was going on too. Models that were not on Medi-Cal’s standard list of wheelchairs accounted for three-fourths of the increased spending. Of the 16,723 chairs purchased last year, 10,367 were so-called “unlisted chairs” that cost $52.8 million and constituted 80% of all wheelchair spending.
These custom chairs have become a larger part of the total cost for two related reasons:
Administrators had not updated Medi-Cal’s authorized list of chairs and prices since 1985, because they said they did not have adequate funds or staff.
And technological change had left the program in the dust.
Pricey lightweight manual wheelchairs and motorized models like those used by actor Christopher Reeve and physicist Stephen Hawking have become more commonplace, along with expensive computerized components that allow chairs to be operated by fingertip, chin, tongue, even a breath.
The mounting number of requests for chairs not on the price list is handled through a cumbersome, time-consuming and costly process that leaves few people happy. Some wheelchair stores have hired people specifically to deal with the paperwork.
But dealers found they could eventually receive the manufacturer’s suggested retail price for chairs that sometimes cost less than half that. One custom chair, auditors said, had a markup of 230%.
“The department needs more controls to prevent situations like we saw with wheelchairs,” state Auditor Elaine Howle said in an interview. “We are basically paying what the provider is charging, rather than saying: This is what we are willing to pay.”
Paralyzed in Shooting
By the time Lisa La Pierre ordered a new chair in July 1999, the word was out at Medi-Cal: Don’t unnecessarily delay approvals for wheelchairs.
Five years earlier, the USC pre-law student had been shot in the neck by a teenager wielding a “gang gun” that had been passed around for several shootings, two fatal.
After eight months of rehabilitation, La Pierre was rolled into her mother’s tidy home in Lomita, paralyzed from the neck down. The young woman had been outfitted with a motorized wheelchair, but the controls were balky and felt unsafe. Sometimes the seat would recline on its own.
So she had the motor unhooked, which required her attendants to push the heavy chair around the house and the shopping mall.
For a few frustrating years, La Pierre and her mother say, they worked the phones, seeking a suitable replacement from dealers. Some did not think the expensive chair she wanted could be covered by Medi-Cal.
Finally, she was referred to Lewis Wheelchair Repair and Sales in Long Beach.
Then La Pierre and her dealer plunged into Medi-Cal’s complex authorization system.
Like anyone seeking a wheelchair, she required a prescription attesting to her medical need and an evaluation from a therapist or technician stating that the wheelchair and accessories she wanted were appropriate.
By July 1, 1999, the paperwork and a formal treatment authorization request had been sent to the Medi-Cal field office in San Francisco, where a reviewer determined whether the chair and accessories should be covered.
About six weeks later, the dealer had authorization to order a Ranger X Invacare chair with a Labac recliner. The chair was delivered Sept. 29, 1999 -- three months after the process started.
“If you needed a wheelchair and you are in a lot of pain, three months is an eternity,” said Dennis McReynolds, the billing specialist for Lewis Wheelchair. “To Lisa, it probably seemed a year or better.” But compared to other wheelchair requests to Medi-Cal, he said, “She went through very rapidly.”
The price was $22,106.
La Pierre’s health care was primarily covered by Medicare, the federal program for the elderly and disabled, with the balance picked up by Medi-Cal. McReynolds said it took almost three years -- an exceptionally long time -- to collect Medi-Cal’s 30% share.
The bills had been submitted to Medi-Cal’s consultant, Electronic Data Systems in Rancho Cordova. And the back and forth of denials, appeals and mix-ups over certain billing items produced a file 1 1/2inches thick at Lewis Wheelchair.
So how much markup -- the difference between dealer cost and sale price -- is there on a wheelchair like La Pierre’s?
“Quite a bit,” said McReynolds. “Maybe $12,000 to $14,000 on that chair.” Bob Achermann, executive director of the 130-member California Assn. of Medical Product Suppliers, acknowledged that the markup for wheelchairs is generally greater than for other medical equipment.
But he said Medi-Cal does not pay for vital services rendered by wheelchair dealers. For example, dealers send out therapists and technicians to tailor the chair to the patient.
“When you look at cost, it includes everything,” said Achermann, who is a paid lobbyist for the dealers group. “The provider is not paid for delivery at home and for warranty work, and it can be a lot.”
Does it present a potential conflict that physical therapists who help select wheelchair models and accessories often are paid by the retailer?
Achermann said that the therapists are highly professional and that Medi-Cal’s review would weed out excessive spending. “We do hear Medi-Cal will not authorize this or that,” he said.
However, state auditors concluded that Medi-Cal field staff have not been enforcing rules such as one requiring dealers to document that the wheelchair was the lowest-priced item meeting the beneficiary’s needs.
Kaiser Permanente uses its own therapists to help evaluate wheelchair needs, partly to guard against ordering unnecessary equipment from the vendor.
Fraud Costly, Office Says
Some experts estimate that fraud eats up about 10% of health-care spending nationwide, and the California attorney general’s office has declared Medi-Cal fraud to be a multibillion-dollar problem.
Wheelchairs have been among the targets, authorities say. Last year a Sacramento dealer was accused of stealing more than $200,000 from Medi-Cal and Medicare by double-billing the agencies and charging for power chairs while, in fact, providing patients with less expensive three- and four-wheel motorized scooters. This year a San Diego medical supply company was sued for allegedly billing Medicare and Medi-Cal $1 million for about 300 wheelchairs for patients who did not need them.
Both federal cases are pending.
State health officials say some wheelchair providers have exploited loopholes: They charged Medi-Cal full price for chairs purchased for next to nothing at garage sales or through newspaper ads. Or they resold Medi-Cal chairs that patients did not want.
To restrict dealer profits, the state issued a new regulation in March. It limits dealers to billing Medi-Cal for the customary retail price or up to twice what the chair cost to acquire, whichever is less.
“We significantly changed the dynamics for the fraudsters,” said J. Alan Cates, chief of the health department’s fraud prevention unit.
Legitimate wheelchair dealers, however, oppose the regulation in part because they say it cuts too deeply into their profits.
Although “100% [markup] sounds like a lot,” Achermann said dealers’ net profits range roughly from 5% to 12%. “Our biggest fear with the chairs is [the regulation] will force people to use junk which is not as reliable or sturdy,” he said. Those chairs will be replaced more often, he maintained, and will cause orthopedic problems and skin ulcers in patients.
A decade ago, with medical equipment costs rapidly rising, the Legislature instructed the health department to explore contracting directly with suppliers and manufacturers.
“It is important that the state of California recognize the awesome buying power they represent to suppliers and manufacturers,” said a 1993 report the department commissioned.
But state auditors last year found that California continued to pay retail and, contrary to the consultant’s recommendation, new wheelchair models were not added to the state’s price list.
Last fiscal year the department’s budget included money to hire 15 staff members to update prices for medical equipment. And officials hope to save up to $19 million by contracting with manufacturers while exercising tighter control over the markup collected by retailers.
“We are not starting with wheelchairs,” Rosenstein said. “We are starting with oxygen [supplies] first, because wheelchairs are the most controversial. So we want to get some experience before we go after the hard one.”