Nessel urges Congress to fix prices of medical equipment amid COVID-19

Beth LeBlanc
The Detroit News

Michigan Attorney General Dana Nessel is asking Congress to fix the prices of medical equipment during the COVID-19 pandemic.

A shortage of ventilators and personal protective equipment has resulted in public and private competitive bidding wars that have pitted hospitals and government agencies against each other, Nessel’s office wrote in a Wednesday statement announcing the letter signed by a dozen other Democratic attorneys general. 

“This country needs a united effort to keep the health care industry from unjustly profiting while the American people suffer,” Nessel said. “In normal times, supply and demand drive prices. But in a public health emergency when lives are at stake, government intervention is sometimes needed, and I urge Congress to act.”

Beaumont Health CEO John Fox on Tuesday cited equipment costs as one of the items causing hospitals to hemorrhage cash, but said a lack of surgical revenue was the biggest single cause. Gov. Gretchen Whitmer has banned most elective surgeries except for abortion as part of her executive orders to fight the coronavirus.

Michigan's largest hospital system, Beaumont Health announced Tuesday that it would lay off about 2,475 employees and permanently eliminate 450 positions due the economic impact of COVID-19. Fox said he would take a 70% pay cut of his roughly $1.8 million annual salary.

Michigan Attorney General Dana Nessel, with Secretary of State Jocelyn Benson

“The price of PPE has gone up dramatically so what we used to pay a dollar for a gown maybe six weeks ago is now six dollars a gown and we’re trying to get it from all different sources,” he said. “The supply chain was definitely not ready for a pandemic and that’s impacted us significantly.”

Fox said he hoped the federal government will consider creating a "superfund" to help the hospitals affected by the COVID-19 pandemic.

"Only the federal government has the Mastercard with no credit limit on it … that can basically help small business, keep the hospital business from collapsing,” he said.

The Wednesday letter signed by 13 Democratic attorneys general leaves it to Congress to determine the measures need to implement price controls for supplies and equipment. The recommendation is unlikely to go anywhere because Democrats control the House and Republicans lead the Senate, and they have had difficulty reaching agreements on emergency financial measures during the pandemic.

“Congress should intervene and enact legislation — similar to the Emergency Price Control Act of 1942 enacted ruing World War II — fixing the prices of medical supplies and equipment that hospitals and emergency treatment centers of this country so desperately need in fighting the war against this ‘invisible enemy,’” the coalition’s letter states.

Price fixing has a centuries-old track record of "utterly failing at its intended objective," said economist Patrick Anderson of the East Lansing-based Anderson Economic Group.

He cited attempts to fix the price of gas, oil and airline tickets that, when lifted, actually allowed for lower prices. And regulated utilities, Anderson said, "are not a model for the most efficient and fair pricing."

"I believe it will be very difficult to persuade the federal government that they should jump in and start fixing prices on medical equipment at a time when they’re actually pushing people to make more of it," Anderson said.

While governors across the nation push for more personal protection equipment, hospitals have resorted to reusing supplies, exploring ultra-violet sterilization tools or using handmade equipment or construction masks, the attorney generals' letter said. 

“This simultaneous, uncoordinated assault upon the healthcare market is resulting in artificial inflation and a misallocation of resources,” the letter said. 

Whitmer and Detroit Mayor Mike Duggan have expressed frustrations with the lack of supplies and the competition it forces between states. The state regulates the prices of utilities — which are considered near monopolies — that provide energy sources such as natural gas and electricity. 

“But the states’ authority to enact price control measures in the context of this global public health crisis is not an effective tool to meet the problem at hand,” the letter said. “If a state enacted and attempted to enforce price control measures against a national supplier, that supplier would simply not do business with that state.”