Problems Emerge in Competitive Bidding Pricing Scheme for Home Medical Equipment; Economists Predict the Program Will Fail

As numerous program complications are reported, more than 160 leading economic experts predict that Medicare's competitive bidding program for home medical equipment will fail.

WASHINGTON, Dec. 16, 2010 /PRNewswire-USNewswire/ -- Unsustainable Medicare reimbursement rates for home medical equipment and services (HME) and a sharp reduction in HME providers will occur as a result of Medicare's bidding program going into effect on January 1, 2011 in nine of the largest metropolitan areas in the U.S.

Those areas include Charlotte, Cincinnati, Cleveland, Dallas-Fort Worth, Kansas City, Miami, Orlando, Pittsburgh, and Riverside, California. The bidding process starts in another 91 areas throughout the U.S. in 2011.  The bidding system affects providers and consumers of home or durable 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 Medicare.

In recent weeks since the announcement of the "winning" bidders, a number of problems have already been reported in the initial nine areas, including:

• Winners of contracts that are bankrupt;
• Errors on the Medicare.gov website providing misinformation to beneficiaries;
• Incorrect materials sent to beneficiaries outside of bidding areas instructing them to switch providers;
• Lack of required state licensure among some bid winners; and
• Credit problems among a significant percentage of the bid winners.

The continuing steep reductions in reimbursement rates for providers of home medical equipment and services will make it even harder for the typical community-based, family-owned homecare provider to remain in business providing the level of service and care that allows seniors and people with disabilities to remain safe and independent at home.

This bidding system will ultimately result in a sharp reduction in consumer choices as well as thousands of artificially triggered small business failures and lost jobs.

Economists Warn that the Bidding Program will Fail

Also, 167 leading economists and auction experts, including two Nobel laureates, have warned that Medicare's bidding design for medical equipment will fail.  Over the past two months, the experts have signed letters to congressional leaders criticizing the controversial bidding program.  To view one of the letters, please visit: http://www.cramton.umd.edu/papers2010-2014/comments-of-concerned-auction-experts-on-medicare-bidding-baucus.pdf.

The economic experts, who do not oppose the concept of using a competitive bidding system to set Medicare prices, found that this particular bidding program designed by CMS has alarming flaws that will prevent it from achieving its objectives of low cost and high quality home medical equipment and services for millions of seniors and people with disabilities across the country.

Bidders, the experts noted in their letters, are not bound by their bids, which undermines the credibility of the process. Additionally, the pricing rules encourage "low-ball bids" that will not allow for a sustainable process or healthy pool of equipment suppliers.  Ultimately, the bid design provides "strong incentives to distort bids away from [actual] costs," and lacks transparency that is "unacceptable in a government auction and is in sharp contrast to well-run government auctions."

The economic experts' letter concludes, "This collection of problems suggests that the program over time may degenerate into a 'race to the bottom' in which suppliers become increasingly unreliable, product and service quality deteriorates, and supply shortages become common. Contract enforcement would become increasingly difficult and fraud and abuse would grow… Implementation of the current design will result in a failed government program."

The American Association for Homecare joins more than a dozen national consumer and patient advocacy groups as well as the independent economists and auction market experts in opposing the implementation of the bidding system in Medicare. Those groups include the ALS Association, American Association of People with Disabilities, Muscular Dystrophy Association, National Council on Independent Living, National Spinal Cord Injury Association, and United Spinal Association.

The American Association for Homecare supports H.R. 3790, a bill in the House of Representatives with 259 co-sponsors that would eliminate the bidding program and lower reimbursement rates for durable medical, but allow providers to continue competing to serve Medicare beneficiaries on the basis of service and quality.

To learn more, visit www.aahomecare.org/competitivebidding.

The American Association for Homecare represents durable medical equipment providers, manufacturers, and other organizations in the homecare community. Members serve the medical needs of millions of Americans who require oxygen equipment and therapy, mobility assistive technologies, medical supplies, inhalation drug therapy, home infusion, and other medical equipment and services in their homes. The Association's members operate more than 3,000 homecare locations in all 50 states. Visit www.aahomecare.org/athome.

SOURCE American Association for Homecare

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