VGM Study: Hobson-Tanner Won’t Alter NCB Savings

WATERLOO,
Iowa–If the Hobson-Tanner bill takes effect, it would not
significantly change the savings the government can expect from
national competitive bidding, according to a study commissioned by
The VGM Group.

Economist
Kenneth Brown, Ph.D., a University of Northern Iowa associate
professor, conducted the study on the possible impact of the bill,
H.R. 3559, which aims to protect small suppliers under the Medicare
DME bidding program.

“H.R. 3559,
which would allow small businesses to participate in the market
without submitting winning bids, will have little or no impact on
the recent cost savings estimate for competitive bidding for DME,”
said Brown. “Overall, I believe this provision will be beneficial
to the overall DME market, particularly in terms of product and
service quality, without adversely impacting the savings from the
competitive bidding program.”

John
Gallagher, VGM’s vice president of government relations, called
Brown’s report a strong statement in support of the Hobson-Tanner
measure and a companion bill that is expected to be introduced in
the Senate. “Dr. Brown takes away one of the leading arguments
against 3559 by concluding that the cost of allowing any qualifying
willing provider is very small and should not be a deterrent to
passage,” Gallagher said.

According to
Brown, because the bill would allow qualified small providers to
continue to serve Medicare beneficiaries if they submit bids that
are less than the existing fee schedule, it would reduce the number
of providers trying to submit winning bids. However, the number of
remaining bidders would still be significant enough to result in
the lower pricing sought by Congress and CMS.

Brown’s
report also said the Hobson-Tanner legislation would provide a
built-in incentive for providers to exceed minimum standards to
maintain market share. Under the current competitive bidding model,
he noted, beneficiary choice is limited, thereby reducing
quality.

In his
report to VGM, Brown also evaluated the current projections for CMS
savings under the DME-related provisions of the Medicare
Modernization Act, the 2003 law that created competitive bidding
and other reimbursement cuts. Of the original $9.9 billion in
savings the CBO envisioned with payment reductions for DME, 70
percent of that total has already been achieved via a freeze on the
annual inflationary update and cuts related to the Federal Employee
Health Benefit Plans, Brown noted. Only 30 percent of the
prospective savings is still available to achieve, he
said.

“One must
wonder if the costs of implementing [competitive bidding] and the
costs to the industry, especially the small business, justify its
implementation,” Brown added.

In a
previous study released last year, Brown concluded that after
administrative costs, CMS would only save thousands through
competitive bidding instead of the millions it had
projected.

According
to Mike Mallaro, VGM’s CFO and president of its Last Chance for
Patient Choice advocacy effort, Brown “reached a clear and
definitive conclusion that this bill has little or no impact on
government savings and it results in better product and service
quality. VGM has believed all along that the best HME market is one
where providers compete daily on quality and service and all
willing, qualified providers are allowed to serve people in need of
medical equipment.”