Healthcare Business News

CMS sees savings in new DME prices; others see trouble

By Jessica Zigmond
Posted: January 30, 2013 - 7:15 pm ET

The CMS revealed new prices for durable medical equipment and supplies under an expanded competitive-bidding program that the agency says will save billions but that industry experts say could mean headaches for beneficiaries.

Those prices apply to Round 2 of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies, or DMEPOS, competitive-bidding program, which will expand to 91 major metropolitan areas on July 1 and add new product categories and a mail-order competition for diabetic testing supplies.

The bidding program—established by the Medicare Modernization Act in 2003—was created to set more accurate payment rates for equipment and supplies. Medicare previously paid for the products using a fee schedule based on historic supplier charges dating back to the 1980s. Industry groups such as the American Association for Home Care have persistently criticized the program's design.

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The first round kicked off in January 2011 and ended last year. In the new phase scheduled to begin this summer, the CMS estimates Medicare will pay, on average, about 45% less than its current fee schedule amounts for eight product categories that include oxygen equipment, standard wheelchairs, walkers and hospital beds. All told, the CMS Office of the Actuary estimates that the program will save the Medicare Part B Trust Fund $25.7 billion and beneficiaries $17.1 billion between 2013-2022.

Also in July, Medicare will start to reimburse a single payment amount for diabetic testing supplies, whether those supplies are purchased through a mail order supplier or a retail supplier. The agency estimates that beneficiaries will save an average of 72% on these supplies as a result of a new mail-order competitive-bidding program.

As an example of these savings, Laurence Wilson, director of the chronic care policy group at CMS, explained that Medicare suppliers are currently paid amounts through the fee schedule that average $77.90 per month for mail-order diabetic testing supplies, of which the beneficiary pays about 20%, or about $15.58 per month. In the new bidding program, the average Medicare monthly payment will drop to $22.47, meaning beneficiaries will pay about $4.49.

But Eric Zimmerman, a partner with McDermott, Will and Emery who represents the Diabetes Access to Care Coalition—a group of patient advocates, providers, suppliers and manufacturers of diabetes testing supplies—said he saw problems for beneficiaries in the first round, and the expanded program could worsen the problem.

“We have seen some troubling results coming out of the first round of competitive bidding with beneficiaries unable to get the diabetes test systems that they're familiar with and want,” Zimmerman said. “Quite a good number who purchased their strips from mail order suppliers left mail order to buy their preferred brands from retail suppliers,” he continued. “Now that Congress has extended a single payment amount to retail suppliers, we are concerned retail suppliers will be under the same economic pressure, and beneficiaries will have a very difficult time finding test systems they need.”

Meanwhile, Jonathan Blum, deputy administrator and director of the Center for Medicare at CMS, said he expects changes to be minimal for beneficiaries in this latest round. And while some beneficiaries might have to change suppliers for certain equipment, they will see big benefits in lower premiums and co-payments, he said.

Medicare has been overpaying for diabetes testing supplies for too long, Blum said, leading to concerns of overutilization. “Why has the public stood for this amount of overpayment?” Blum said. “We have now seen what the market price is, and it's significantly lower than the fee schedule.”

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