Cramton Floats ‘Repeal and Replace’ Option for Competitive Bidding

COLLEGE PARK, Md. — Peter Cramton, the University of
Maryland economics professor at the vanguard in condemning CMS’ competitive bidding design,
is pursuing a new avenue to get the current program shelved.

As HME advocates push for legislators to sign on to H.R. 1041,
the bill that would repeal the bidding system, Cramton is working
on legislative language that would spell out how an efficient and
effective DMEPOS bidding program would work.

It’s the auction specialist’s latest effort to get the CMS
program shut down and redesigned. Last fall, he sent a letter to
Congress signed by 166 fellow economists detailing the
program’s flaws; in April, he held a
mock auction that drew both officials from CMS and stakeholders
in the HME community.

Last week, he appeared
at two Capitol Hill briefings to educate House and Senate
staffers on the problems with Round 1, which was implemented in
January, and the “train wreck” that is coming.

“The bottom line, from my perspective, is that we have to have
draft legislation for an efficient auction. The repeal by itself is
an incomplete strategy,” Cramton said. “That is what I am
endorsing, and that is going to be what makes the legislative
strategy coherent.”

Introduced in March by Reps. Jason Altmire, D-Pa., and Glenn
“GT” Thompson, R-Pa., H.R. 1041 had garnered 112 cosponsors as of
June 1, about a dozen more since the congressional briefings. While
the number of cosponsors on the House bill continues to rise, there
has been concern in some industry quarters that a Senate companion
bill might not happen.

Wayne Stanfield, president of the National Association of
Independent Medical Equipment Suppliers, is not hopeful, he told
members in the group’s newsletter. “Suppliers should not hold out
any hope that any repeal or delay will happen,” he wrote in a
commentary.

“Since 2003, this program has been coming and nothing the
industry has done so far has done anything to stop it or change it,
though we did pay dearly to delay it 18 months,” he continued,
referring to the 9.5 percent DME cut the industry took in 2009 to
“pay for” the delay.

“Anyone who thinks that we can alter the course of this program
had better step forward now and take the lead of the industry. Lord
knows we need the help.”

The biggest stumbling block to a Senate bill, some insiders say,
is concern over its financial ramifications. The Congressional
Budget Office has estimated competitive bidding could save Medicare
$20 billion over 10 years; H.R. 1041’s offset for its repeal calls
for use of $20 billion in undesignated discretionary funds, meaning
that the HME community has “no skin in the game,” as one
stakeholder said.

Even if the House passes H.R. 1041 because members recognize the
program as devastating to both business and beneficiaries, “the
Senate won’t touch it because of budget concerns,” Cramton
predicted.

By pairing the repeal with a plan for a well-run auction —
Cramton said it must be one piece of legislation — the
resulting CBO score should ensure Senate buy in, he said.

“Repeal and replace: Instead of coming back with a bad score, it
comes back with a good score,” Cramton said. “That’s the beauty of
it. That’s something they can adopt.”

Cramton understands he might be rowing against the tide with his
plan. Industry providers have been largely opposed to competitive
bidding in any form.

“There certainly are some issues with their degree of comfort
with auctions altogether,” Cramton acknowledged, but he said a
well-run auction pays off for everyone — providers,
beneficiaries and CMS. “You eliminate the badly flawed auction, you
save the home medical equipment industry, you save the Medicare
beneficiaries and more important from the standpoint of the
taxpayer, you save the budget,” he said. “I think providers should
get on board with it.”

The auction legislation would also create some oversight of CMS.
In the current design, the agency has worked with little if any
transparency, Cramton said, allowing it to manipulate prices and
refuse information to everyone from the PAOC to Congress.
 Under a correctly designed program, an independent market
monitor would be privy to all information and would report directly
to the Health and Human Services secretary rather than to CMS.

The agency would administer the program, “but their discretion
would be eliminated,” Cramton continued. “[The new program] would
be transparent. They wouldn’t have the ability to do whatever they
want.”

On the plus side for CMS, Cramton said, “Now they are forced to
implement an efficient auction, which means that things work; they
aren’t addressing thousands of complaints, racing around putting
out fires.

“When you really screw something up, it requires a lot of work
and it is also not very pleasant,” he added.

The economist said his recommendation is for the current program
to be immediately halted, then “what I recommend is that we spend
the rest of this year and all of next year working out the details
with the industry and the beneficiaries, and perhaps CMS would be
involved, too. Then the first auction  … would be only
part of the country — say, one third.”

The program would be implemented in phases so that “by 2015, we
would have the whole country involved,” he said.

Cramton said he hopes to have the legislative language completed
soon; the next action would be to find a sponsor. Whether the
redesign specifications would simply be added to H.R. 1041 or a
completely new bill crafted would have to be decided, he said.

The point is, said Cramton, CMS needs to “start all over again,
but this time, do it right with clear direction from Congress.”

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