Defense Health Agency pays over $400 for $46 baby formula

Many parents know that baby formula can be quite expensive, especially hypoallergenic formula for children with special needs. A single 400 gram can of Neocate Infant DHA/ARA will set you back $46. But if you’re the US military’s TRICARE health plan, that same can could cost $427 or more.

So a Jacksonville, Fla., military mother discovered when reviewing her insurance paperwork and finding a $6,412 charge for 15 cans of the Neocate formula. WTLV First Coast News explained that she only had to pay 20 percent out of pocket, with her cost sharing plan capped at $3,000, but that the high price tag was unexpected.

The Defense Health Agency, which now runs TRICARE, routinely pays such charges. A spokesman explained that there is no set cost for items such as this and that the cost is calculated on a state-by-state basis using claims data. In Florida, that rate is a whopping 27 cents per calorie. At that rate, TRICARE pays $432 for 1,600 calories.

TRICARE’s reimbursement rates differ in each state, and currently no state prices the meal replacement formula products (procedure code B4161) under $200 dollars per can. In Tennessee, the reimbursement rate is $233.60 per can. In Georgia, the rate is $498 per can.

TRICARE officials made the following statement:

“While we cannot discuss any specific cases, TRICARE reimburses Neocate Junior Formula using Medicare’s Durable Medical Equipment, Prosthetic, Orthotics and Supplies reimbursement rates. The DMEPOS fee schedule is the allowable amount. However, in the case of Neocate Junior with the Healthcare Common Procedure Coding System code of B4161, there is no set price. When there is no rate on the Medicare fee schedule, TRICARE contractors establish a state-wide prevailing rate. A prevailing rate is created using claims data, and in this instance the allowable amount TRICARE pays is the lesser of the established prevailing rate, billed rate or the negotiated rate.” — WTLV

This story is absurd and illustrates well the results of letting government get involved in health care.

These absurd rates are known as “reasonable, customary and usual”. They may well be customary and usual, but they are far from reasonable. Only with government involved could a $46 can of formula — less than $40 if bought in quantity — turn into over $400. No private sector health insurance would accept such a ridiculous price unless they were forced to do so, and of course only government could force such a thing.

Military health care in the US, being very close to single payer, is currently worse off than civilian health care. More government control of health insurance and health care, always proposed as the solution to the last government interference in health insurance and health care, has actually been the problem all along. The quality of health care will continue to decline until this is widely enough understood that government stops screwing things up and gets out of the way.

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