CNN | September 2, 2009

WASHINGTON (CNN) -- Power-driven wheelchairs are costing Medicare and its beneficiaries nearly four times what suppliers pay for them, and competitive bidding could have reduced those costs, according to an inspector general's report released Wednesday.

A standard power wheelchair costs the federal health insurance program for seniors an average of $4,018 to lease, compared with $1,048 for suppliers to buy, the Department of Health and Human Services' internal watchdog reported.

"Medicare and its beneficiaries paid suppliers an average of $2,970 beyond the supplier's acquisition cost to perform an average of five services and cover general business costs," the report found.

The difference was not as dramatic for more advanced wheelchairs used for physical rehabilitation patients, but at an average lease of $11,507, those chairs still cost Medicare about twice as much as the $5,880 paid by suppliers, the report found.

More than 173,000 Medicare beneficiaries received power wheelchairs in the first half of 2007, at a cost of about $686 million, the report said. The cost could have been reduced considerably had Congress not delayed a planned system of competitive bidding for what Medicare classifies as "durable medical equipment," such as wheelchairs and oxygen tanks, the report said.

Competitive bidding would have cut Medicare's average cost of a standard power wheelchair by nearly $1,000, the inspector general found.

"Medicare and beneficiary payments under the Competitive Bidding Acquisition Program would have decreased by an average of 26 percent across all included categories of [durable medical equipment], saving up to an estimated $1 billion annually," the report found. "However, Congress delayed the program and exempted complex rehabilitation power wheelchairs from future competitive bidding."

Medicare's annual budget for 2008 was $444 billion. In January, it cut its payments to suppliers by 9.5 percent to make up for what it thought competitive bidding would have saved taxpayers, according to the report.

In July, a CNN investigation found that a patient and taxpayers were billed about $1,200 over four years for a nonmotorized chair, while a nearly identical chair could be bought from the same supplier for $349.

The issue has become controversial as the Obama administration tries to overhaul the U.S. health care system and rein in the cost of Medicare.

Administration officials want to require competitive bids for items such as wheelchairs. But the American Association for Homecare, which represents many in the durable equipment industry, said the bidding program would reduce patient choice, limit access to home medical care and drive up Medicare costs by requiring more hospital stays.