Stupid budget tricks

This week we've been reading and discussing Chapter 4 on Budgeting and PAYGO.

Arbitrary and simple-minded budget rules can sometimes lead to foolish attempts to save money that ultimately cost the government more money.

Penny wise and pound foolish on kidneys and antirejection drugs

Medicare pays for kidney transplants (which are both better and cheaper than the dialysis it replaces and that Medicare also pays for). But Medicare pays for only three years of anti-rejection drugs, which transplant recipients must take as long as they still have a transplanted kidney.

It doesn't make any sense, not even financial sense. Here's a nicely reported story by Kevin Sack from the NY Times: U.S. Cost-Saving Policy Forces New Kidney Transplant

"The story of Ms. Whitaker’s two organ donations — the first from her mother and the second from her boyfriend — sheds light on a Medicare policy that is widely regarded as pound-foolish. Although the government regularly pays $100,000 or more for kidney transplants, it stops paying for anti-rejection drugs after only 36 months."...

"Most of the cost of [her] dialysis and the transplant, totaling hundreds of thousands of dollars, was absorbed by the federal Medicare program, which provides broad coverage for those with end-stage renal disease.
Despite that heavy investment, federal law limits Medicare reimbursement for the immunosuppressant drugs that transplant recipients must take for life, at costs of $1,000 to $3,000 a month."...

"By late 2003, her transplanted kidney had failed, and she returned to dialysis, covered by the government at $9,300 a month, more than three times the cost of the pills. Then 15 months ago, Medicare paid for her second transplant — total charges, $125,000 — and the 36-month clock began ticking again.
“If they had just paid for the pills, I’d still have my kidney,” said Ms. Whitaker, who shares an apartment in the La Jolla neighborhood with her boyfriend, Joseph D. Jamieson. “I’d be healthy, working and paying taxes.” "...

"Bills have been introduced in Congress since 2000 to lift the 36-month limit and extend coverage of immunosuppressant drugs indefinitely. They have never made it to a vote, largely because of the projected upfront cost; the Congressional Budget Office estimates that unlimited coverage would add $100 million a year to the $23 billion Medicare kidney program.
But the cost-benefit analysis would seem obvious. The most recent report from the United States Renal Data System found that Medicare spends an average of $17,000 a year on care for kidney transplant recipients, most of it for anti-rejection drugs. That compares with $71,000 a year for dialysis patients and $106,000 for a transplant (including the first year of monitoring)...."

"A provision to cover the drugs is in the sweeping House health care bill, which has cleared three committees. It is uncertain whether the Senate Finance Committee will include it in its bill.
Since 1973, end-stage renal disease has been the only condition specifically covered by Medicare regardless of age. In 1988, coverage was extended for 12 months to anti-rejection drugs, which had recently been developed. Congress gradually lengthened the cutoff to 36 months, and then in 2000 made the benefit unlimited for those who are at least 65 or disabled. The rationale for leaving out younger transplant recipients was simply that the money was not there, Congressional aides said. "