Medicare is a very expensive program with rapidly rising costs. Congress has tried any number of methods to control spending, mostly by setting unit prices by fiat. Some of the smaller categories of spending escaped attention for years, but even these are now being addressed. One is durable medical equipment, which has been rife with fraud and abuse, as well as quality issues. In an attempt to limit the number of suppliers and to get the best prices, Congress and CMS initiated a competitive bidding process for DME. The Government Accounting Office gives an assessment of the early results from this effort. (GAO Report) Medicare spent over $8 billion on DME in 2010. After significant wrangling and vociferous opposition from vendors, a test of competitive bidding was to be launched in nine regions for nine product categories in 2011. This was a rebid of the original program launch in 2008. It covers only about 2 million of the over 40 million Medicare beneficiaries. An expansion is scheduled for 2013.
Bids have to be equal to or less than the fee schedule amounts. CMS uses the median of the lowest bids that would create at least five suppliers and sufficient capacity in a region. Why they don’t use the absolute lowest bid and let everyone offer products at that price is a mystery. The contracts last for three years. CMS is trying to balance access with spending. Early results suggest there were plenty of bidders and ample capacity, even though many bidders were disqualified, often for reasons that suggest they may not have been the best suppliers anyway. GAO found that the bidding process had a number of problems and errors and a number of the suppliers don’t have experience with the product category they won or were new to a geographic area. But notwithstanding the issues, beneficiary satisfaction does not appear to have changed and they seem to have as good an access to DME as before. And it appears that CMS has saved around $200 million from the program. There were some decreases in utilization, but this could be result of less fraud and abuse. GAO suggested careful monitoring by CMS. We would suggest that they take the lowest bid in each area and make that the price, and let all vendors willing to accept that price and meeting other requirements be vendors.