Obamacare, Medical Device Tax, Hip Implants, and Warsaw, Indiana

WARSAW, Indiana – Michael Shopenn’s artificial hip was made by company based in this remote town, a global center of joint manufacturing,  But he had to fly to Europe to have it installed.

Elizabeth Rosenthal,  “For Medical Tourists, Simple Math: U.S. Estimate for a New Hip: Over $78,000. The Belgium Bill: $13,660, New York Times, August 4, 2013

You can’t read Elizabeth Rosenthal’s report on U.S. hip implants without concluding three things: 1) U.S. health costs  are too high  and need fixing;  2) Obamacare is not going to fix them;  3) The U.S. health care industry is the lifeblood of many U.S. towns and states – the leading employer in Warsaw, Indiana,  Durham, North Carolina,  and states, Indiana, Massachusets, and Minnesota.

1.      The Elizabeth Rosenthal report starts off by comparing hip implant costs for one patient’s operation at the Hospital for Joint Diseases in New York City and another man’s surgery in Belgium,

Hospital Room

U.S., $8,050 (3 nights), Belgium, $3,700 (11 nights)

Implant

U.S., $38, 861, Belgium, $4200

Surgeon’s Fee

U.S., $17,500, Belgium, $1,110

2.      The report goes on to highlight these sharp increase in hip replacements in the U.S since 1997.

n  Ages 18-44, 400,000 replacements,  + 25%

n  Ages 45-64, 300,000, +195%

n  Age 65-84, 200,000, +31%

n  Age 85+, 100,000. +23%

3.       The Affordable Care Act, aka Obamacare, seeks to recoup some of the money spent on hip implants by imposing a 2.3% tax on the profits of medical device manufacturers.   These manufacturers tend to be concentrated in states like Indiana,  Massachusetts, and Minnesota,  where medical innovation is the lifeblood of their economies. Even the most liberal politicians in these states,  have objected to this tax, which is likely to be repealed.    The pols argue the tax would stifle medical innovation and the cost would be borne  by joint replacement patients “whose average age is 67.”  To preserve their profits, the hip implant industry actively lobbies Congress  and cultivates and pays orthopedic surgeons for “doing research” for their implants.

4.      Which brings us to Warsaw, Indiana.    This hamlet of 14.000 in Northern Indiana is headquarters for 3 hip replacement giants -  Zimmer, Biomet, and DePuy.   These companies produce 60% of hip and knee devices used in the U.S. and one-third of the world’s orthopedic sales volume.   Nearly half the jobs in Kosciusko County, home of Warsaw, come from the companies.   The county has the lowest unemployment in Indiana,  and its median family income is $50,000, well above the state’s average.  Small wonder that Medicare cost-cutting efforts have been ineffective politically.  Medicare offers all-inclusive payments to hospitals, but hospitals complain rising hip implant device prices, keep them from lowering prices too much.    Surgeon’s fee have dropped by nearly half, but costs continue well above those in nation’s with national insurance plans.   Meanwhile medical device manufactures spent $30 million lobbying against the medical device tax.  The Senate has moved to repeal the tax, and the House will undoubtedly do the same this fall.

Tweet:   Despite rising U.S. tide of hip implants, Obamacare’s 2.3% medical device tax will be repealed due to effects on innovation and employment.