Busting Competitive Bidding Myths

Medicare’s competitive bidding program for DMEPOS is scheduled to begin Jan. 1, 2011, in nine of the largest metropolitan areas in the country. According to the American Association for Homecare, the controversial program’s proponents “have conveyed misleading information that exaggerate the benefits and ignore [the program’s] severe shortcomings.” Here are AAHomecare’s “mythbusters” about competitive bidding:

MYTH #1: The bidding system improves the method setting reimbursement rates for providers of home medical equipment and services.

REALITY: 166 experts, including two Nobel laureates and numerous economics professors from leading universities, recently warned Congress and regulators that this bidding system will fail. These experts 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.”

MYTH #2: Medicare overpays for home medical equipment, and the bidding system applies market forces to correct that.

REALITY: Proponents of the bidding system have used out-of-date reimbursement rates and false comparisons of retail costs versus Medicare costs to argue their case.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 HME 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.

MYTH #3: The bidding program will make health care more cost-effective.

REALITY: The home is already the most cost-effective setting for post-acute care. So while the bidding program would make even more severe cuts to reimbursement rates for HME, that will ultimately result in much higher spending in Medicare and Medicaid for hospital and nursing home stays and for physician and emergency treatments.

MYTH #4: The bidding program will eliminate fraud in the HME sector.

REALITY: CMS continues to describe the bidding program as an anti-fraud tool. In reality, it is a price-setting mechanism that has nothing to do with fraud prevention. The real solution to keeping criminals out of Medicare is better screening, real-time claims audits, and better enforcement mechanisms for Medicare.

MYTH #5: Only the HME sector opposes the bidding system.

REALITY: In addition to the 166 economists and bidding experts who have expressed grave concerns about the bidding program, many consumer and disability organizations have called for a halt to the bidding system including the ALS Association, the American Association for Respiratory Care, the American Association of People with Disabilities, the Muscular Dystrophy Association and others.

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