A Letter from 1999 dealing with mail order hearing aids that remains relevant today with regard to internet sales of hearing instruments

March 16, 1999

Dear Mrs. Smith:

I am writing concerning your opinion on several issues as they pertain to hearing aid dispensers in the State of XXXXX, particularly the so-called "Lemon Law", S.B. 401, which came into effect during the 1997 legislative session.

Herein, I will attempt to offer what represents a fair consensus of the hearing health professions and hearing instrument industry; and from this will suggest remedies, which may be advantageous to both hearing impaired consumers and professionals.

It may also be pertinent here to mention my interest and relevance to these issues. Although I am currently employed as vice president of marketing and professional education at the only national hearing aid manufacturer in the State of XXXXX, for more than two decades I've served as a professional educator, published author, and hearing health researcher. I've published 13 books and manuals, numerous chapters and more than 650 articles. My work often takes me across interdisciplinary lines from hearing aids, audiology, and otolaryngology to cochlear implants, consumer advocacy, and regulatory agencies. I am often called upon to provide research and opinion for a number of attorneys general, state licensing boards, legislative committees, and the media. In 1993, Dr. David Kessler, former FDA commissioner, formally invited me to advise the FDA Advisory Panels on matters of federal regulation in hearing aids. As the lead writer on the international committee, which produces licensing exams I am intimately familiar with standards of competency and scopes of practice issues. I am also profoundly deaf and utilize a cochlear implant, hearing aid, and assistive devices to communicate. That makes me a consumer, also, adding to the perspective in which I view the pertinent issues. Forgive the listing of the above, but I felt it important that you know of the broad perspective from which I am addressing these matters.

An Historical Backdrop

In the aftermath of the FDA hearings----deemed by some as a failure due to apparent inaction, but actually was a reaffirmation of the efficacy of current consumer-sensitive regulations---- came a number of voluntary initiatives by the industry to do an even better job at assuring the public delivery of product and services, including more uniform standards of training and professionalism. In the spirit of these advancements, however, some states went a bit overboard and actually raised consumer costs while simultaneously limiting access and competition. Nevada, undoubtedly, was one of those states. As a result, this State has: 1) misclassified hearing instruments as if they were merely unrestricted retail product by taxing them and attendant diagnostic and rehabilitative services at the prohibitive rate of 7%, costing hearing impaired consumers hundreds of extra dollars in every hearing aid fitting, 2) added onerous regulation and costs to hearing instruments by inclusion in its open-ended "lemon law", and 3) ignored the threat to the public health by allowing mail order hearing aid sales, which potentially accounts for as much as 50% of all hearing aids sold in this State. Suffice it to say, these all add up to significantly increased costs for consumers and professionals alike.

Lemon Law and Medical Prosthesis

Prominent in the mix of the above developments---but of which has yet to be fully exposed as the unfair consumer protection it is---is the so-called "lemon law" (S.B. 401). Somehow, in the midst of the ADA-inspired fervor, hearing instruments appear to be the only restricted medical devices to be singled out and lumped together with unrestricted, mass-produced devices such as motorized wheelchairs et al, as if they share an appropriate commonality in law. Admittedly, there needed to be more consumer protections for some of the items the law covers. But adding hearing instruments in the mix obviously poses a number of paradoxical challenges beyond the sophisticated understanding of the authors of the bill. Hearing aids should never have been included in the law for a number of reasons, to wit:

1. Hearing aids under FDA federal regulation are classified as Class I Medical Devices, much like dentures, contact lenses, and limb prostheses. They are made to order, under variable individualized parameters, and are exposed to vagaries of care unlike the other items in the law. There is no set "outcome" or level of functionality that can be defined in fixed terms. They are meant to enhance the communicative ability of their users under physical limitations as varied as the outcomes of medical care in general, but with few of the inherent risk factors.
2. Depending on who's survey you use, less than 10% of all hearing aid "repairs" sent to the factory are actually "repairs". The vast majority are simply maintenance problems (wax in the receiver, for instance), electroacoustic changes due to unpredictable loudness growth, cochlear artifacts, signal-to-noise anomalies, and/or feedback because of weight/physical changes of the user. Some consumers may erroneously consider these as repair problems, but they are a result of what naturally happens when electronics, dental-grade acrylics, sensitive epithelium, and cerumenous secretions co-exist. Add to the mix, patients dropping, stepping on, forcing controls, breaking battery doors, plugging with hairspray, oils, shaving cream and cosmetics, and attempting to remove same with needles, straight pins, and toothpicks. The fact is, only a very tiny proportion of trips to the factory are a result of factory defects. Already, in other states, we have numerous examples of consumer abuse of lemon laws, where they are used as litigious clubs over the heads of dispensers and manufacturers alike. It is only a matter of time before it becomes such in Nevada.
3. Particularly sticky is the application of the law to extended warranties. These coverages were primarily designed to provide a low-cost, carefree way in which consumers could be assured long-term peace of mind. Instead, under current law, it simply makes risk exposure untenable for manufacturers and dispensers alike. I can safely predict, in the absences of substantially clarifying opinion from your office, that we will see either an end to extended warranties in Nevada or their close-cousin, an escalation of consumer cost to absorb the adverse risk exposure.
4. Without exception, warranties of hearing instruments are limited warranties and actually cover only defects of manufacture. However, by tradition, factories have typically covered virtually every aspect of failure or maintenance during the warranty period. The lemon law does not differentiate between "repair" and "maintenance", which leaves open the question of what constitutes "incidence" and what constitutes "non-conformity". By leaving these questions open to abuse, the consumer will ultimately lose, because factories will have no choice but to stop honoring at no charge a vast number of non-defect services---in fear of them counting as repairs, and hence numbering their days as viable retail products. The same goes for dispensers and the myriad of free services they customarily offer.
5. Only a portion of the price of hearing instruments is for the instrument itself. As in all fields of prosthetics, whether it is one requiring surgery (such as the cochlear implant), or a non-mechanical prostheses (such as dentures), or those requiring laborious diagnostics and counseling (such as hearing instruments), the retail price does not reflect the stand-alone value of the product. This means that when a refund is given, many hours of investment in mandated services are refunded as well---at a complete loss to professionals. Of course, future patients pay for that loss in higher prices, or, worse, lose convenient access to care, quality of technology, or all three. There is no other health profession that is required to follow such unsound financial policies. What makes it fair to single out those who serve a demographically poorer population?
6. Strangely, neither the law nor its application makes any attempt to cover the hundreds or thousands of hearing aids sold by mail order in the State. Consuemrs open their monthly power bill and out pops a full-color brochure on a product that completely bypasses the regulated delivery system, which can potentially pose damage to the ear of the user. We've seen no effort in the State to protect consumers of these more dangerous products, or to challenge the fraudulent language of its advertising claims, as has been done by many other AG offices throughout the U.S.

Therefore, I request your opinion on the following issues that are important to professionals and hearing impaired consumers in the State:

1. To reclassify hearing instruments in line with federal regulation---which treats them as restricted medical prosthetic, not "assistive devices"---and render them untaxable at the retail level. This will immediately lower the cost of hearing instruments to hearing impaired Nevadans by 7%. If handled in this way we may avoid the enormously high cost to the state in trying to remove the sales taxes by legislative and balloting procedures.
2. To either modify the current lemon law to exclude hearing instruments OR modify the law to conform to the changes recommended by the American Academy of Audiology (AAA), the International Hearing Society (IHS), and the Hearing Industries Association (HIA). (See exhibit B for a copy of the HIA talking points).
3. To address the mail order issue by contacting other AG offices which currently have actions and/or claims against mail order hearing aid firms. (Florida is prominent among those.)

Now, you may be wondering where I feel the Attorney General's Office fits into all of this. We respect the intent of the legislature when putting together regulatory law over such a diverse array of issues and professions. Legislators and their staff are often at the mercy of lobbyists and special interests to gain an understanding of the issues of a given field, especially one as relatively obscure and paradoxical as hearing aid practice. But, as you know, much is left to chance in the research arena. I would venture to say that it is a rare legislator that knows the difference between an audiologist, a hearing instrument specialist, or even an otolaryngologist---yet they passed a law regulating various segments of those professions. State legislators are rarely versed in the finer points of FDA and FTC regulation of medical devices, especially that which is applicable to hearing instruments, or the innumerable lesions, causes and outcomes of hearing loss, or what truly impacts cost of care for hearing impaired consumers. They are probably unaware, for instance, that hearing impaired individuals---as a demographic population---suffer the lowest productivity and income levels, are less insured, and make many more visits to healthcare professionals than the normal hearing population.

That is why, over the years, we've had to rely upon Attorney General opinions in many states to help smooth out some of the unintended consequences of legislative law. Too often a politically-charged state legislature oversteps reason and inadvertently sets into motion that which harms the ones they are attempting to help. A good example of that are the more than 800 state and federal regulations surrounding private health insurance, which only drive up the cost to consumers by more than 35%, according to a Rand Corporation study. The same has happened to this state's legislature treatment of hearing aids regarding lemon law and retail taxation, as if they are ordinary consumer products. In this way, AG offices tend to straighten out that which was made crooked through unintended consequences of law.

So, I ask for your opinion on the above-stated concerns, and offer my services where I may be helpful. Please, do not hesitate to call upon me to assist in these or other issues. I'll be happy to avail myself for a face-to-face meeting if you'd like, as I am acutely aware of the limitations of going through TDD Relay to communicate.

I thank you kindly in advance for your time and attention to these matters.

Respectfully Yours,

Dr. Max S. Chartrand Ph.D.