As Medicare expands a controversial "competitive" bidding program for home medical equipment and services, economists, consumer groups, and members of Congress have gone on record to oppose that program citing reduced patient access to care, flaws in the program design, and impact on local jobs.
"There's a reason why more than 30 patient advocacy groups, 244 economists and auction experts, and 145 members of Congress oppose this program: it undermines quality of care and it increases costs," said Tyler J. Wilson, president of the American Association for Homecare. "Because of this bidding program, beneficiaries will spend more time in expensive institutions, rather than in the far more cost-effective setting for care – their own homes."
New restrictions and unsustainable prices based on this controversial bidding system took effect on January 1, 2011, in nine of the largest metropolitan areas including Charlotte, Cincinnati, Cleveland, Dallas-Ft. Worth, Kansas City, Miami, Orlando, Pittsburgh, and Riverside, Calif. Another 91 areas throughout the U.S. will be subjected to the bidding program starting later in 2011. The bidding system affects providers and users of home medical equipment and services such as oxygen therapy, respiratory devices, hospital beds, wheelchairs, and other medically required equipment and supplies needed by seniors and people with disabilities in the Medicare system.
Proponents of the bidding system have conveyed misleading information that exaggerates the benefits and ignores the severe shortcomings of the program.
MYTH #1: Medicare overpays for home medical equipment and services, and the bidding system improves the method for setting reimbursement rates for that equipment and service.
REALITY: Proponents of the bidding system use out-of-date reimbursement rates and false comparisons of retail costs versus Medicare costs to argue their case. For many years, CMS has set reimbursement rates for home medical equipment through a fee schedule. Over the past decade, those reimbursement rates have dropped nearly 50 percent because of cuts mandated by Congress or imposed by CMS.
The costs of delivering, setting up, maintaining, and servicing medically required equipment in the home are obviously greater than the cost of merely acquiring the equipment. But Medicare does not recognize the costs of these services. So comparing the cost of the equipment to the larger cost of furnishing the full array of required equipment, supplies, and services is false and misleading.
Moreover, 167 experts, including two Nobel laureates and numerous economics professors from leading universities, have warned Congress that this bidding system will fail. The experts, who do not otherwise oppose competitive bidding to set Medicare prices, point out that the system has four fatal flaws:
- The bidders are not bound by their bids, which undermines the credibility of the process.
- Pricing rules encourage "low-ball bids" that will not allow for a sustainable process or a healthy pool of equipment suppliers.
- The bid design provides "strong incentives to distort bids away from costs."
- There is a lack of transparency in the bid program that is "unacceptable in a government auction and is in sharp contrast to well-run government auctions."
These concerns have been shared with the federal Centers for Medicare and Medicaid Services (CMS), which designed the bidding system. But the agency has dismissed the concerns.
A September 30, 2010, New York Times' "Freakonomics" article by two of the 167 economists addresses the bidding issue. Yale University economist Ian Ayres and University of Maryland economist Peter Cramton, conclude: "The mystery is why the government has failed over a period of more than ten years to engage auction experts in the design and testing of the Medicare auction. ... We suspect the problem is that CMS initially did not realize that auction expertise was required, and once they spent millions of dollars developing the failed approach, they stuck with it rather than admit that mistakes were made."
MYTH #2: The bidding program will make healthcare more cost-effective.
REALITY: The home is already a highly cost-effective setting for post-acute and long-term care. For many years, home medical equipment providers competed in Medicare on the basis of quality and service to facilitate the hospital discharge process and enable patients to receive cost-effective, high-quality care at home. As more people receive quality equipment and services at home, patients and taxpayers will spend less for hospital stays, emergency room visits, and nursing homes. Home medical equipment is an important part of the solution to the nation's healthcare funding crisis. Home medical equipment represents approximately 1.5 percent of total Medicare spending. So while this bidding program would make even more severe cuts to reimbursement rates for home medical equipment, that will ultimately result in much higher spending in Medicare and Medicaid for hospital and nursing home stays and for physician and emergency treatments.