CMS moves to reduce Medicaid spending on medical equipment

The CMS will ask the White House for permission to impose a new data collection requirement on Medicaid agencies that will help it reduce their spending on medical equipment.

In a Federal Register notice scheduled to publish Tuesday, the CMS said the new program would require Medicaid agencies to submit data showing they are not paying a higher rate than Medicare for durable medical equipment.

If the White House approves of the plan, states would send their reimbursement rates for the products to a new CMS online database. The public will have an opportunity to comment on the proposal.

The move is part of the CMS' plan to implement part of the 21st Century Cures Act, which requires the HHS secretary to cap Medicaid reimbursement for durable medical equipment at Medicare payment amounts starting Jan. 1.

The change will mean providers of medical equipment will see additional cuts on top on what they've already seen under Medicare's competitive bidding program. That initiative is projected to save the CMS nearly $26 billion on durable medical equipment over 10 years.

Medicaid agencies tend to pay more for medical equipment than Medicare. For instance, a 2015 HHS OIG report estimated that New York's Medicaid program could have saved $5.9 million on diabetic test strips in one year had it obtained pricing similar to Medicare's pricing through the competitive bidding program.

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.

The program has taken a toll on medical equipment providers and Medicare beneficiaries. The reduction in reimbursement has led to a 41% decrease in the number of medical equipment providers since 2013, according to the American Association for Homecare, which represents manufacturers.

The association also recently surveyed a group of beneficiaries, case managers/discharge planners and medical equipment providers and found that 52.1% of beneficiaries report problems accessing medical equipment and 88.9% of case managers report an inability to obtain the products quickly.

"It's a very challenging time in the medical equipment community and with the new announcement it's about to become more so," said Thomas Ryan, CEO of the American Association for Homecare.

A team from his organization will be meeting with CMS officials Tuesday to convey how reimbursement must improve to ensure continued access to medical equipment.

Others in industry are pleased that the word is getting out that pay needs to improve for medical equipment.

"Reimbursement rates for these products have been set by the highly flawed competitive bidding program and patients are ultimately the ones who suffer because there are fewer and fewer providers remaining to supply this equipment," said Collin Brecher, who oversees government relations for VGM & Associates, a trade group for independent medical equipment providers.