Medicare 'Competitive' Bidding Program for Home Medical Equipment Is Plagued by Myths; Economists Warn that the Bid System Will Fail

/PRNewswire/ -- While Medicare paints a glowing picture of the controversial "competitive" bidding program for home medical equipment and services (HME), economists and consumer groups have lined up to oppose the flawed system.

New restrictions and unsustainable prices based on this controversial bidding system are scheduled to take effect on January 1, 2011 in nine of the largest metropolitan areas including Charlotte, Cincinnati, Cleveland, Dallas-Ft. Worth, Kansas City, Miami, Orlando, Pittsburgh, and Riverside, Calif. Another 91 areas throughout the U.S. will be subjected to the bidding program starting later in 2011. The bidding system affects providers and users of home 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.

Proponents of the bidding system have conveyed misleading information that exaggerate the benefits and ignore the severe shortcomings of the program.

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. The experts, who do not otherwise oppose competitive bidding to set Medicare prices, 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."


These concerns are not new. They have been shared with the federal Centers for Medicare and Medicaid Services (CMS), which designed the bidding system. But the agency has dismissed those concerns.

The 166 economists sent letters outlining the flaws in the bidding system to Senators Max Baucus (D-Mont.) and Charles Grassley (R-Iowa) and to Representatives Jason Altmire (D-Pa.) and Ralph Hall (R-Tex.) on October 15, 2010, and sent a letter to Rep. Pete Stark (D-Calif.) on September 26. See http://www.cramton.umd.edu/auction-papers.htm.

A September 30, 2010 New York Times' "Freakonomics" article by two of the 166 economists addresses the bidding issue. Yale University economist Ian Ayres and University of Maryland economist Peter Cramton, conclude: "The mystery is why the government has failed over a period of more than ten years to engage auction experts in the design and testing of the Medicare auctions…. We suspect the problem is that CMS initially did not realize that auction expertise was required, and once they spent millions of dollars developing the failed approach, they stuck with it rather than admit that mistakes were made." See: http://freakonomics.blogs.nytimes.com/2010/09/30/fix-medicares-bizarre-auction-program/

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 home medical equipment 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 healthcare more cost-effective.

REALITY: The home is already the most cost-effective setting for post-acute care. For many years, home medical equipment providers have competed in Medicare on the basis of quality and service to facilitate in the hospital discharge process and enable patients to receive cost-effective, high-quality post-acute care at home. As more people receive quality equipment and services at home, patients and taxpayers will spend less on hospital stays, emergency room visits, and nursing home admissions. Home medical equipment is an important part of the solution to the nation's healthcare funding crisis. Home medical equipment represents less than two percent of total Medicare spending. So while this bidding program would make even more severe cuts to reimbursement rates for home medical equipment, 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 home medical equipment 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. In fact, the exact opposite is true, according to the 166 market experts who warned Congress in their October 15 letters that the CMS bidding program "will lead to a 'race to the bottom' fostering fraud and corruption."

When explaining on October 14, 2010 why it has missed the deadline for announcing the bid winners, CMS raised concerns about fraud associated with the bidding program. Yet the agency said it will implement the new system on January 1, 2011. The economists' October 15 letter states, "This haste to implement results that raised many red flags with respect to program integrity seems contrary to the public interest and common sense."

The real solution to keeping criminals out of Medicare is better screening, real-time claims audits, and better enforcement mechanisms for Medicare. Two years ago, the American Association for Homecare proposed to Congress an aggressive, 13-point legislative action plan to combat fraud, and many of those provisions have been included in legislation passed in Congress. Moreover, two important anti-fraud requirements – accreditation and surety bonds – took effect more than one year ago, in October 2009.

MYTH #5: Only the home medical equipment 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. Those groups include the ALS Association, the American Association for Respiratory Care, the American Association of People with Disabilities, COPD/ALERT, the International Ventilator Users Network, the Muscular Dystrophy Association, the National Emphysema/COPD Association, the National Spinal Cord Injury Association, and Post-Polio Health International, among others.

These consumer groups support H.R. 3790, a bill in the U.S. House of Representatives that would eliminate the bidding program in a fiscally responsible manner. That legislation would lower reimbursement rates for durable medical equipment but would allow providers to continue competing to serve Medicare beneficiaries on the basis of service and quality. The bipartisan bill has 257 cosponsors, including more than half of the Democrats and more than half of the Republicans in the House.

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Healthcare Bills Will Hamper Medicare Services for Seniors and the Disabled

/PRNewswire/ -- The following is news about the Medicare power mobility benefit from Support Mobility Now Volume 1 Issue 2:

Significant changes are needed in healthcare reform legislation to prevent senior citizens and the disabled from facing a difficult time obtaining homecare products through Medicare. The current legislation would likely prevent or delay many Medicare beneficiaries from receiving critical medical equipment that helps sustain their lives and allows them to live independently in their homes for longer periods of time.

Unfortunately, in piecing this historic legislation together, lawmakers may have overlooked the fact that some of the changes for medical equipment providers would adversely impact their ability to deliver timely and quality service to Medicare beneficiaries.

To be sure, America's healthcare system must be improved. But there should also be a responsibility to ensure that the changes don't place additional burdens upon Medicare beneficiaries, who are already some of the most vulnerable men and women in our society.

Medicare's power mobility benefit would be hit especially hard.

Currently, Medicare allows a beneficiary to purchase power wheelchair in the first month it is prescribed or rent the equipment for 13 months. The legislation eliminates a beneficiary's early purchase option. Seniors and people living with disabilities, who qualify for power wheelchairs, usually suffer from long-term, chronic conditions so they overwhelming chose the early purchase. Without the first month purchases, providers say they won't have the cash flow to pay the wheelchair manufacturers or provide other services required. Many equipment suppliers anticipate that they may go out of business or no longer offer power wheelchairs, a development that would make it more difficult for beneficiaries to find providers in their area.

Some in Congress recognize the potential danger from ending the early purchase.

Pennsylvania Sen. Arlen Specter proposed an amendment to preserve the first-month purchase option while obligating suppliers to pay back Medicare when equipment isn't used full term. The Congress, however, quickly showed how much financial concerns are out weighing practical ones: The Specter amendment essentially died when the Congressional Budget Office (CBO) contended that only $200 million would be saved over 10 years with his proposal, while lawmakers sought $800 million in savings. The industry maintains that the CBO was wrong, and that much more than $200 million would be saved with Specter's amendment.

Aware that the Congress is fixated on finding savings to pay for healthcare reform, providers are willing to accept further, yet agonizing, reductions in the reimbursement rates for power wheelchairs in exchange for keeping the purchase option and sustaining a process that would at least allow companies to stay in business.

The Senate legislation also accelerates the implementation of the competitive bidding program for Durable Medical Equipment (DME), which includes oxygen, power wheelchairs and other homecare products. Competitive bidding for these products was first implemented last year, but the program was flawed to the point that patients' lives were endangered because of confusion and delays in getting life-sustaining equipment to beneficiaries, hospitals and other institutions. Congress stepped in, and temporarily halted the program in July 2008. The Centers for Medicare and Medicaid Services (CMS) has re-launched the bidding program, but providers say that many of the original problems have not been corrected. The healthcare reform legislation makes matters worse by ordering a rapid expansion of the competitive bidding process before stakeholders can gauge whether the program can avoid putting some of the most vulnerable people in our society at risk.

Once again, some lawmakers recognize that the rush to pay for healthcare reform legislation could have a devastating impact on their constituents. Competitive bidding is projected to save millions of dollars. But Florida Rep. Kendrick Meek is more concerned about his constituents: he has sponsored legislation in the House that would end the competitive bidding experiment and obtain savings for the government by cutting the reimbursement rate for homecare products by 0.25% from 2010 to 2012 and an additional 0.5% in 2015. Moreover, the industry wants to work with CMS to establish a system that allows providers to deliver quality service and products to Medicare beneficiaries at a fair price to the government.

Comprehensive healthcare reform is long overdue, but we must ask our Representatives and Senators in Congress whether the cost of enacting this legislation should include placing new burdens on seniors and people with disabilities. One would hope that this population would benefit from reform, and not be its victims. It's clear that the current legislation delivers critical blows to the companies committed to providing medical equipment to Medicare beneficiaries.

What's unclear is whether enough lawmakers in Congress will recognize the consequences for their constituents back home when there are significant delays in providing medical equipment for Medicare beneficiaries, or only a few companies left to supply the products. There are ways to fix healthcare reform legislation so that the seniors, who built and protected our nation, can live with dignity and independence in their homes during their twilight years.

Let's hope Congress understands how much this means to them.

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Congress Must Recognize Homecare as Cost-Effective Part of Health Care Reform

/PRNewswire/ -- In their effort to find savings in the healthcare system, the Obama administration and Members of Congress have been eyeing Medicare's home medical equipment (HME) sector for cuts. This sector provides medical oxygen, respiratory therapy, hospital beds, wheelchairs, walkers and other equipment and services that allow people to get the care they need at home instead of in a hospital or nursing home.

Already in 2009, Medicare payments for the most commonly prescribed home medical equipment categories have been cut by 9.5 percent. Medical oxygen reimbursement has been cut by 27 percent so far this year. Another measure aimed at cutting HME costs further is so-called "competitive" bidding.

"The American Association for Homecare urges Congress to recognize that home care is a cost-effective alternative to more expensive forms of care, and should therefore be a critical component -- not a casualty -- of American health care reform. Current and proposed cuts to Medicare's home medical equipment sector are not an effective way to reduce overall Medicare spending. These cuts are likely to increase Medicare costs over time by forcing more seniors into nursing homes and hospitals, blocking preventative care, and causing more frequent visits to emergency rooms.

"Quality home medical equipment and services facilitate hospital discharges, reduce hospital readmissions and emergency room visits, and help to keep seniors and people with disabilities out of more expensive institutional settings. As Congress debates health care reforms, it is important that it keeps these facts in mind and recognizes home care as a partner in improving the quality of American health care and reducing overall health care costs.

"Most home medical equipment costs just dollars a day. The cost of providing the equipment and service for home oxygen, for example, is less than $7 per day under Medicare. Compare that to the average daily cost of about $200 for a nursing facility and more than $5,000 per day for a hospital stay under Medicare.

"According to a recent study in the New England Journal of Medicine, up to one-fifth of all Medicare patients are readmitted to hospitals within one month of being discharged. These unplanned visits cost Medicare an estimated $17 billion in 2004. One reason for the high readmission rates is the lack of continued interaction and guidance once patients are dismissed. Home medical equipment providers help to fill this gap by smoothing the transition from hospital to home with the equipment and services patients need.

"This year, Medicare payments for the most commonly prescribed home medical equipment categories have been cut by 9.5 percent, including complex rehabilitative power wheelchairs. Medical oxygen reimbursement has also been cut by 27 percent so far this year. Home oxygen is a critical, life-sustaining medical treatment prescribed to nearly 1.5 million Medicare patients each year who suffer from respiratory illnesses such as chronic obstructive pulmonary disease.

"Another measure aimed at cutting HME costs further has been labeled 'competitive' acquisition. A regulation enacted in the final hours of the Bush administration would selectively contract with a small number of home care providers based on a race to bid the lowest payment. Even among those who agree to new bid-determined payment rates, Medicare only allows a select few to provide the items, which will have the long-term result of reducing the number of companies competing to offer home care products.

"These cuts in reimbursement are having a negative impact on the quality of equipment and the level of services that providers are able to furnish to consumers who have severe disabilities and who are in greatest need of mobility products and services.

"Home medical equipment and service is already the most cost-effective slowest-growing portion of Medicare spending, increasing only 0.75 percent per year, according to the latest National Health Expenditures data from Medicare. That compares to more than 6 percent annual growth for Medicare spending overall. Moreover, home medical equipment represents only 1.6 percent of the Medicare budget.

"As Congress deliberates cuts to Medicare, they would do well to recognize that cuts to home medical equipment will increase long-term Medicare costs. The home medical equipment sector should be seen as a key element in reducing overall Medicare costs."

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