To HCFA, competitive bidding on durable medical equipment has proved so cost-effective for Medicare and its 92,000 beneficiaries in Polk County, Fla., the pilot program is being duplicated in Texas.
To Mary Miller, whose Encore Respiratory of Lake Alfred, Fla., was one of the successful bidders, the test program is an example of the law of unintended consequences.
One of the aims of the demonstration project, which began Oct. 1, 1999, was increasing competition among equipment suppliers, noted Miller, owner and president of Encore.
"But I think a lot of providers feel like with competitive bidding, it's all locked up," she said.
HCFA says bidding has trimmed the bills for durable medical equipment by 17% in the five categories subject to bids: hospital beds, nutrition supplies, oxygen products, surgical dressings and urological supplies. The agency expects savings of 20% in the three Texas counties--Bexar, Comal and Guadalupe--included in the second test. The counties comprise the San Antonio metropolitan area.
For the Texas program, HCFA this month chose 79 suppliers out of 179 bidders in these categories: drugs dispensed by nebulizers, hospital beds, manual wheelchairs, off-the-shelf orthotics and oxygen products. The prices will be in effect from Feb. 1 to Dec. 31, 2002.
Besides the downward pressure bidding puts on prices, suppliers must agree to another provision that should save money for beneficiaries. The measure precludes suppliers from charging more than the fee schedule and making patients pay the difference. Beneficiaries pay 20% of the cost, and Medicare pays the remaining 80%.
The Balanced Budget Act of 1997 authorized HCFA to test competitive bidding but only through Dec. 31, 2002. The test is an answer to criticism of HCFA for relying on billing codes that are too broad and out of date. A 1998 report by the U.S. General Accounting Office found that one code covers more than 200 types of urological catheters that range in price from $1 to $18, but the fee schedule implies a payment of $11 for any of them.
If the competitive-bidding program were expanded, as the Clinton administration has proposed, the savings to Medicare could be huge. In 1998, Medicare spent about $5.2 billion on durable medical equipment, with beneficiary copayments accounting for about $1 billion more. An expansion of competitive bidding was part of a larger Medicare overhaul that has stalled in Congress.
HCFA says competitive bidding should improve quality, too. More than one supplier is chosen for each product category, so demonstrating superior quality can be a way to make more sales.
Encore's Miller said she's not so sure that quality would improve if the program were to expand because the reimbursements are so low.
The one advantage Miller sees for supply companies is that the bidding process narrows the field of competitors.
The Polk County test program runs through Oct. 1, 2001, but HCFA will be taking bids for an added year this summer. Bidding again means "headaches and bottles of Tylenol and sleepless nights," Miller said, but she added: "I have to. I'd have no choice. It's either bid or go out of business."