Medicare payments for penis pumps soar 500 percent, as alleged fraud surfaces

As Medicare payments for penis pumps have soared by more than 500 percent in the past decade, federal fraud investigators have challenged the legitimacy of payments for thousands of the devices.

"We're starting to see a lot of fraud," said Dr. Al Borhan, a Phoenix urologist. "We always have some people who ruin it for someone else."

According to the Center for Medicare and Medicaid Services, annual spending on the pumps has gone up from $7.2 million in 2000 to more than $36 million last year, still a tiny part of the $7.5 billion Medicare spends each year on durable medical equipment and outpatient supplies.

Even so, over the past four years, investigators have challenged more than $8 million in payments made for the devices, which Medicare classifies as male vacuum erection systems, according to statements from federal prosecutors in several states and the Inspector General of the Department of Health and Human Services. Among the suspect claims:

-- Two Florida entrepreneurs who collected more than $28,000 for 75 penis pumps purportedly sold to both male and female Medicare patients. None were ever actually shipped;

-- An Illinois supplier who bought cheap sex-toy grade penis pumps from online dealers and reshipped them to Medicare patients who never asked for them, then billed Medicare at a markup rate nearly 11 times greater than what he first paid;

-- Two Georgia firms the government says used improper Medicare provider numbers to bill the program for more than $3.6 million worth of penis pumps between 2003 and 2009.

Medicare pays for penis pumps as durable medical equipment -- the same as it does for wheelchairs, home oxygen and bedpans -- as long as a physician prescribes the device as "medically necessary" for treatment of erectile dysfunction. Over a decade, the average cost for the pumps has been about $338.

As many as half of American men in their 60s experience ED and the problem worsens with age.

While it was once thought that the underlying cause of ED was psychological rather than physical, Dr. Robert Dean, chief of sexual health therapy at the Walter Reed National Military Medical Center, told a recent gathering of families affected by ED, "We don't think that way anymore. If a man is unable to perform, it is usually due to a physical reason," most commonly vascular disease or diabetes.

There is an assortment of treatments available for erectile dysfunction, from pills and injections to penile implants and vacuum pumps.

But since 2007, men on Medicare can only get help paying for vacuum pumps, or if those prove ineffective, coverage for implanted penile inflation devices.

Medicare prescription drug plans and some private insurers briefly covered ED pills after the first, Viagra, was approved by the FDA in 1998. But so many seniors -- and others -- took up the drugs that elected officials began to view them as "lifestyle" drugs rather than a medical necessity. Fiscal conservatives were troubled about rising costs.

Congress in 2005 ended Medicaid subsidies for ED drugs starting in 2006, and for Medicare patients the following year. Most private insurers followed Medicare's lead.

The move resurrected the vacuum-pump industry, which had been making the pumps as medical devices, as opposed to sex novelties, since scientific studies had proved them effective in the 1980s.

"When the pills first came out, they were very popular, but they are not reimbursed by most insurance or Medicare and they don't work for everyone,'' said Ed Stewart, CEO of Post-T-Vac, one of the oldest manufacturers of the vacuum pumps, founded by his father in 1987 in Dodge City, Kan.

"The fact is that the baby boomers are moving into the high-risk part of their lives for ED and they're looking for options to maintain their sex lives."

Not coincidentally, Medicare claims for the pumps actually declined in 2003 and 2004 when the medications were covered, but have steadily increased every year since. By 2010, Medicare paid for nearly 98,000 of the devices.

Some of those Medicare payments have become the subject of federal audits and civil and criminal court cases.

In the most outrageous case, Gary Winner, owner of a Buffalo Grove, Ill., medical equipment company, was sentenced in February to more than three years in federal prison for shipping penis pumps he obtained from online sex shops for about $26 each to diabetic Medicare patients who never requested them, then billing the insurance plan an average of $284 each for the devices, claiming they treated erectile dysfunction.

Winner's firm, Planned Eldercare, charged more than $370,000 for the pumps, and also bilked Medicare out of another $1.8 million for arthritis products shipped to patients enlisted through an illegal telemarketing

scheme, according to documents filed by federal prosecutors.

Winner repackaged the manual pumps in clear plastic bags with an information sheet claiming they helped "bladder control, urinary flow and prostate comfort,'' according to court papers. He pleaded guilty in November to two counts of health care fraud, the introduction of an adulterated and misbranded medical device into interstate commerce, and money laundering. Winner also agreed to reimburse Medicare more than $2.2 million and pay a fine of $12,500.

At Post-T-Vac, the firm came under scrutiny by the Office of Inspector General in the federal Department of Health and Human Services last year, with auditors reviewing claims from 2008 and 2009 for proper documentation.

In a report released in mid-June, the auditors said of 100 Post-T-Vac claims, 51, totaling $18,007, did not comply with Medicare documentation requirements for durable medical equipment.

For 48 claims, the auditors said the company did not have adequate documentation from shippers to show the pumps were actually delivered to patients.

Based on those findings, the auditors projected that Post-T-Vac had submitted unsupported claims for $4,217,800 worth of vacuum pumps during the two-year period, and recommended that much in "overpayments" should be refunded to Medicare.

Post-T-Vac officials sharply disagreed about the lack of delivery proof.

CEO Stewart said the dispute centers on the company's inability to show delivery receipts for products shipped by UPS four to five years ago -- they're routinely kept on file for only 18 months -- but the firm did show delivery summaries from the shipper documenting each claim.

"We believe we proved proof of delivery using their documentation,'' Stewart said.

Medicare officials are now reviewing the audit before deciding whether to disallow any or all of the payments from 2008-09.

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