ATLANTA
Just as stakeholders prepared to set off for the American
Association for Homecare's Washington Legislative Conference March
4-6, they acquired new ammunition when an economic study on
competitive bidding — titled “Will Competitive Bidding
Decrease Medicare Prices?” — came to light.
Authored by Brett Katzman, PhD, associate professor of economics
at Kennesaw State University near Atlanta, and Kerry Anne McGeary,
PhD, associate professor of economics at Drexel University in
Philadelphia, the peer-reviewed study takes an in-depth look at the
1999 competitive bidding demonstration projects in Polk County,
Fla., and San Antonio.
It concludes that CMS' format for competitive bidding is fatally
flawed and, in many instances, results in higher prices and poorer
quality of service.
“The problem with the CMS process is that the bid scoring
and price formulation procedures are inconsistent with the bidding
behavior CMS wishes to induce,” the authors conclude.
“That is, overly complex rules for choosing winners and
setting prices distort the incentives that bidders face and may
actually result in increased prices for some consumers.”
Published in the Southern Economic Journal, the study
notes that, while no data on service quality was available,
“there is anecdotal evidence of diminished quality that comes
from CMS itself.” CMS felt compelled to initiate quality
check site visits for all winners and hired an independent
contractor to conduct quality assurance surveys, according to the
study.
The new study “dovetails exactly” with a Robert
Morris University study commissioned by the Pennsylvania
Association of Medical Suppliers, said John Shirvinsky, executive
director of the state association.
Released in February, the Robert Morris study blasts the
underpinnings of the current competitive bidding program, saying
its implementation will result in “substantial market
failure,” at least 21,000 lost jobs and prices that spiral up
instead of down.
The Robert Morris study, said Shirvinsky, “did a great job
on what problems are going to result from competitive bidding. And
lo and behold, here comes this [other] study that no one knows
about, and it substantiates virtually every point that the Robert
Morris study made.
“Obviously, there is no relation between the two
[studies],” Shirvinsky said, pointing out that the
Katzman-McGeary study “was four years in the making, and it
is in a peer-reviewed journal. It took a year to get published. But
it unveils some serious flaws in the Medicare HME competitive
bidding program that have been pretty much glossed over by CMS.
“This new study is earth-shattering for our
industry,” he continued. “It lends credence to every
gut-checking reaction we have had on what this program will do and
what it won't do. [Competitive bidding] is a sham. And it is a
disgrace that [CMS is] trying to force this on the Medicare
beneficiaries.”
Stakeholders said the studies provide significant data
supporting the delay of DMEPOS bidding pending an analysis of both
the process and its results.
“This certainly helps the cause,” said Don Clayback,
vice president, government relations for Lubbock, Texas-based The
MED Group, adding it is particularly notable that the two studies
are by “outside sources that have looked at this from a
business-economic standpoint. At a minimum, you would hope that it
would create some doubt in Congress' mind so that some … will
take a look.”
