Hearing Aid Cartel Corrupts Build Back Better

In draft legislation, Medicare Won't Pay for Over the Counter Hearing Aids and exempts hearing aids from competitive bidding requirements.

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In my last piece on the hearing aid cartel, “Silencing the Competition,’ I noted that the firms that control the hearing aid industry keep prices high, with margins of up to 80% on what are consumer electronic devices. They have vertically integrated into audiology networks, they keep prices secret, and they use patent pools to exclude possible new entrants. But the key to this dominance is political power; Starkey, which is one of the cartel members, spends millions on political influence.

Their goal isn’t just to stop over the counter hearing aids from undercutting their pricing power, but also to control the new Medicare benefit for hearing loss that Bernie Sanders has put into the Biden legislation. To that end, the Hearing Network Alliance, which is one of the front groups, has made a number of key recommendations to Congress. The easiest one to explain is that Starkey wants to block Medicare from paying for over the counter hearing aids.

And sure enough, the legislation released by the House last week includes such a limitation.

The cartel also wants hearing aids exempted from competitive bidding requirements. This is both part of Starkey’s Listen Carefully campaign, and the Hearing Network Alliance request to Congress. Here’s the Hearing Network Alliance.

And sure enough, here’s the legislation.

There’s a lot more in this story, but I wanted to get this part of it out quickly. If this bill passes in its existing form, what will happen is the total corporatization of the hearing loss correction market. There won’t be entrants who can come into the space anymore, because without Medicare access there’s no point. Meanwhile, independent audiologists will probably end up being harmed, and the cartel will solidify its dominance over the hearing aid market.

This story of the corrupting of government spending by monopolists is well-understood by the American public in another context - the military industrial complex. A similar dynamic of aiding monopolists with taxpayer money is occurring here. Expanding Medicare or other forms of social spending without taking on the monopoly providers of service is just another way of undercutting faith in government.

UPDATE: Someone raised a reasonable point, that the Medicare coverage is only for severe hearing loss and the FDA rules already prohibit OTC hearing aids for severe hearing loss. Still, I don’t think it makes sense. This just creates the incentive for audiologists to diagnose more people with severe hearing loss so they can be covered by Medicare (and so that the cartel pays them their commission!)