Competitive bidding nets up to $26 billion in savings on medical equipment
Story updated Aug. 11, 2017.
Medicare's competitive bidding program is projected to save the CMS nearly $26 billion on durable medical equipment over a 10-year span, but similar savings could be obtained through large commercial insurers' negotiations with suppliers, a new study found.
Prices secured through the early stages of the bidding program were, on average, 35% lower than the prices in the CMS's 2010 fee schedule that were based on historic supplier charges, the study published in Health Affairs found. The CMS anticipates that will translate to $25.7 billion in federal savings from 2013 through 2022, while Medicare beneficiaries will collectively save an additional $17.1 billion. Yet, researchers found that the CMS obtained prices comparable to what the market would bear after studying pricing trends in seven types of medical equipment from 2011 to 2014.
While the researchers found that the prices were comparable, the bidding program did achieve an average of 8.1% lower prices than commercial negotiations.
Supporters say the Medicare Durable Medical Equipment, Prosthetics, Orthotics and Supplies Competitive Bidding Program could continue to save the government billions. Advocacy groups including AARP said they haven't seen the bidding program negatively impact access, which has been a point of contention. The Government Accountability Office agreed.
In March, the CMS halted plans to expand the program come 2019 after critics contended that the program encourages bidders to offer only the lowest-cost products rather than what's most needed. They also argued that the process lacks transparency and does not adequately assess the financial strength of companies that receive contracts.
"The American Association for Homecare will work to make sure that the industry's concerns about the bidding program—an initiative that is putting long-time HME companies out of business, reducing beneficiary access, and resulting in reimbursement rates below provider costs—are effectively presented to the CMS," the group said in a statement.
The controversial bidding program, which went into effect in 2011, 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, which were notoriously high. The price for each product is set at the median bid of the contracted suppliers.
HHS Secretary Tom Price has voiced his long-held concerns with the CMS' competitive bidding process, describing it as "hardly competitive." As a congressman, Price introduced a bill in 2015 that aimed to amend the bidding process, address concerns about rural access and establish an auction process based on "market prices" rather than the median price.
Some researchers and policy experts argue that program would become unsustainable as unsuccessful bidders would leave the market, resulting in fewer suppliers and ultimately reducing beneficiaries' access.
"If the concerns about the program's long-term sustainability can be resolved, competitive bidding for durable medical equipment and similar items may be an effective mechanism for achieving savings in Medicare," co-author David Newman of the Health Care Cost Institute wrote in the study published in Health Affairs.
An edited version of this story can also be found in Modern Healthcare's Aug. 14 print edition.
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