Medicare DME bidding program set to relaunch in 2010

Washington -- The Obama administration is proceeding with a Medicare durable medical equipment competitive bidding program it inherited from the previous administration. Absent another legislative intervention, the program will start again in 2010.

Earlier this year, the White House delayed the effective date of a rule outlining final details for competitive bidding in order to review late changes approved by the Bush administration. But the Centers for Medicare & Medicaid Services announced that the new April 18 effective date would not be delayed any further, prompting criticism from the American Assn. for Homecare and other organizations representing suppliers.

"We are very disappointed that CMS has moved forward with this program without allowing more opportunity to examine it," said Walter Gorski, vice president of government affairs for the association. "As designed, the program will eliminate approximately 90% of suppliers in any marketplace. We believe that is unacceptable, especially when all efforts by the [Obama] administration and Congress are aimed at job promotion and creation."

The competitive bidding program was originally launched July 1, 2008, in an effort to lower DME costs, enhance quality and prevent fraud. Beneficiaries in selected areas who needed certain equipment were required to obtain it from suppliers chosen by the government through a bidding process. But the initiative was halted after two weeks when lawmakers agreed to an 18-month moratorium under the Medicare Improvements for Patients and Providers Act.

If Congress had not stopped the program, it would have limited Medicare coverage of selected equipment in 10 metropolitan areas to suppliers that submitted winning bids. CMS since has made minor changes to the program required by the legislation, including preparing to conduct a second competition to select suppliers.

Despite the final rule, CMS said it will have no immediate effect on how Medicare patients obtain durable medical equipment, prosthetics, orthotics and supplies. Beneficiaries may still use current suppliers.

Gorski said CMS will hold a meeting of its Program Advisory and Oversight Committee in the near future to discuss when suppliers and beneficiaries can expect changes. CMS also will issue further guidance with the timeline and details for the contract re-bid in advance of a January 2010 target relaunch date.

In the meantime, the homecare association said it would continue to lobby Congress to halt to the competitive bidding program, which suppliers maintain lowers the quality of care and reduces access to care. Because it selectively contracts with a small group of suppliers based largely on who has the lowest bid, it will force out firms that use high-quality equipment or provide critical patient services, the organization has stated.

The association and 27 regional and state homecare associations sent a letter to CMS and the White House in a last-ditch effort to have the administration rescind the bidding rule.

The suppliers also rallied several lawmakers to their cause. A bipartisan group of 84 House members, led by Rep. Betty Sutton (D, Ohio), sent a letter to the administration urging the revocation of the competitive bidding program, which the group said is deeply flawed. "Of the more than 4,000 providers in the initial bidding areas, only 376 were deemed to have met the bidding program requirements," Sutton said. "This is not a solution to Medicare reform and would only reduce quality and access to care for seniors and people with disabilities."

The homecare association said medical equipment and related care is already a cost-effective program and comprises the slowest-growing portion of Medicare spending, increasing only 0.75% per year.

Gorski said suppliers will continue to work with Congress on legislation to repeal the program, and they are hopeful that its language will be included in any health system reform bill that might be introduced this year. "We remain cautiously optimistic that we can show this program will not yield the results anticipated."

But when competitive bidding launched last summer, the Bush administration and some lawmakers said Medicare substantially overpays DME suppliers and that medical equipment billing fraud is rampant, making the program a necessity.