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Congress votes for higher Medicare costs when voting down competition

Congress is bowing to pressure (read: financial contributions) from medical equipment makers that stand to lose money if Medicare expands its competitive bidding program.

The NY Times reports today that the House approved legislation Tuesday that would delay the launch of the competitive bidding program for 18 months — all to appease a few companies that are scared of staying viable in, gasp, a competitive market.

The results of the pilot bidding program show this is good policy that will save Medicare and individuals money. The Times reports:


"When Medicare awarded competitively bid contracts to some 325
companies to serve the 10 metropolitan areas, it reduced equipment
prices by 26 percent on what it would have paid for the same equipment
under the current fee schedule. That means that if the contracts were
allowed to proceed, beneficiaries would save 26 percent on their
co-payments. Medicare would save $125 million the first year and as
much as $1 billion a year if the program went nationwide."

Yet, good policy may lose this battle.

As NY Times columnist David Leonhardt and an accompanying editorial aptly point out, this small battle is ominously prophetic of the impending battles over health care reform.

"By standing in the way of this competition, Congress is really standing up for higher health care costs," Leonhardt wrote.

It will be interesting to see which Congressmen and women vote against competitive bidding now and then assail the rising costs of health care from the podium this fall.

For the cynical out there, this is a reminder of what you already know.

As industry veteran Brian Klepper told me yesterday, "Only innocents and little children think health care reform is going to happen through policy. It’s not going to happen because half of all the money is unnecessary and because Congress is on the take."

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  1. Press Release
    George Will Column Is Misguided in Touting “Competitive Bidding” as a Medicare Solution
    Controversial Bidding Program Is Actually Anti-Competitive and Lowers Quality of Care and Access to Care for Seniors and Disabled
    ARLINGTON, VA, January, 8, 2009 – A congressionally mandated “competitive bidding” initiative for home medical equipment – already the slowest-rising cost in Medicare – intended to reduce homecare costs will only succeed in reducing the quality of, and access to, care for patients and will drive up costs elsewhere in Medicare. Washington Post columnist George F. Will’s recent column on healthcare overlooks the inherent flaws in the bidding program, and fails to recognize that homecare providers already offer what Health and Human Services Secretary Mike Leavitt has called a “radically more efficient” and cost-effective setting for healthcare than institutional care.
    “There is nothing competitive about what will result from this misconceived program,” said Tyler J. Wilson, president of the American Association for Homecare. “There will be fewer competitors, fewer homecare services, and lowest-common-denominator healthcare for older Americans and people with disabilities who require medical care at home.”
    “This bidding initiative will end up selecting a small group of providers that will be forced to deliver the cheapest, lowest quality equipment and cut back on critical services including emergency repair, middle of the night oxygen service, and home visits to address serious patient issues. It is as disaster for senior citizens and disabled patients, especially those who live in rural areas since those areas are already expensive to serve,” added Wilson.
    The program would allow the government to selectively contract with only a small group of providers. By focusing solely on the lowest-cost, the program would force out providers who utilize high-quality equipment or provide critical services to patients related to the use of that equipment. Under this program, seniors and other homecare patients will face:
    – Longer, more costly hospital stays since hospitals could no longer choose to use a single homecare provider to equip patients returning home, but instead would have to contact as many as 10 different providers for basic items needed by patients.
    – Lower-quality durable medical equipment made overseas.
    – Fewer home visits in rural areas where providers can travel an hour plus to reach the patient.
    – Less access to 24-hour equipment service for patients who depend on oxygen to breathe. Without this service, patients will dial 911 when problems arise.
    – Reduced access to commonly prescribed products. For example, the bidding initiative discourages use of the most commonly prescribed testing strips for diabetes patients.
    – Reduced access to diabetes patient call centers, which answer key medical questions.
    – Fewer resources to properly set up and adjust wheelchairs, walkers, and hospital beds.
    – Restricted ability to properly repair home medical equipment items in a timely manner.
    Cutbacks in homecare services will increase hospital stays, thereby increasing costs to Medicare and taxpayers. Wilson said, “Homecare represents a clinically proven, cost-effective option that is part of the solution to the nation’s healthcare crisis.”
    The latest federal data shows that spending on home medical equipment is again the slowest-growing sector in Medicare, with homecare proving to be one of the smallest sectors, constituting $7 billion out of the $431 billion Medicare budget. The latest figures in the National Health Expenditures report published in Health Affairs this month show Medicare spending for home medical equipment increased only 0.9 percent over the previous year for which data is available (2006), while Medicare spending generally increased by a full 6.1 percent.
    A program that selectively contracts with a small group of providers to care for seniors based primarily on price is fundamentally flawed. Not only does the program sacrifice quality of, and access to, care for patients, it has the opposite affect intended: It clears the marketplace of competition by reducing the number of eligible providers. During a trial period of enactment in 2008, of the more than 4,000 providers in the initial bidding areas, only 376 were deemed to have met the bidding program requirements, which were not clearly defined. So 90 percent of the marketplace was closed out of the bidding program, proving that the program depresses competition and limits patient access and choice.
    In a recent Washington Post column, George Will overlooked the larger questions about whether a program that aims for the cheapest cost of care with no regard to patient outcomes is the ideal basis for policy to care for older Americans and people with disabilities. A program designed to cut the number of providers would inevitably reduce the ability of Medicare to serve the growing numbers of seniors and other patients who require medical care at home, especially in rural regions. The program constructed by Medicare ignores the services required to provide home medical equipment and therapies and treats home care as if it were a commodity, instead of recognizing it for what it is – a life necessity.

  2. This post simply mirrors the bad information the NY Times ran. Nowhere does it mention that fact that taxpayers will save more than a billion dollars because the industry agreed to a large reimbursement cut to pay for the delay required to fix the bidding system, which is rife with flaws and which decimates the ranks of good, accredited providers who have served their communities for decades. Rick’s comments are also off base. The accreditation requirement designed to stem fraud remains in effect, and the industry has been aggressive about insisting on better efforts to root out fraud. Competitive bidding is a pricing mechanism — it’s not the same as the accreditation requirement, which the new Medicare bill, MIPPA, strengthens. Also Rick’s comments about fraud in DME is devoid of context. Congress and the Administration estimate there is $70 billion in fraud in Medicare every year. Fraud and incorrect billing in DME is estimated to be $700 million — far too much, but it represents one percent of the total fraud in Medicare. So where is the other 99 percent of fraud occuring? Why isn’t anyone talking about that? Are reporters lazy? Uninformed? Is the government trying to distract taxpayers from the far larger fraud problems in Medicare? Isn’t that the real story here?

  3. I happen to know that thanks to the “Competitive Bidding” program merely opens the door to substandard care for the people that need it the most. Since July 1st there have been several patients that have been hospitalized due to their inability to receive proper treatment because this program takes the power of choice away from the patients. The companies that won these bids are smaller companies that will be unable to meet the demands of the thousands of recipients. When they overturned the Competitive Bidding it was in the best interest of Medicare recipients. Would you send your parents or grandparents to a hospital simply because it was the cheapest?

  4. I am a DME dealer in Tampa, fl. If you look at the bidding for Orlando and Miami in round 1 it stinks with bad judgment. A dealer in Ohio won an oxygen contract in Orlando and doesn’t even have a presence in Florida. Some awards for complex rehab ( complicated wheelchairs )were awarded to companies that have never done this type of work before. Is that who you want supplying products to patients? I believe as most in congress are saying that it is a good idea but poorly implemented. This idea came from the VA. Unfortunately the VA abandonded it a couple of years ago because it didn’t work.
    Also, think about a few years down the road. What happens to all the companies that are forced out of business. With no business they will close down and all the will be left are the 4 or 5 dealers that won bids. How is that a good situation?

  5. GMS is a little right, but not much.
    This legislation would have rooted out enormous amounts of fraud and waste from the DME and home-health sectors. And make no mistake, those two sectors are currently the most vulnerable to fraud under current purchasing structures. The newspapers in every market around the country are filled with stories of the latest prosecution of a DME or home health provider who was caught scamming the system, often to the tune of 6 and 7 figures, and the assessment of those whose job it is to target fraud is that we are only scratching the surface. The Competitive Acquisition Program was necessary and would have worked.
    I agree fully with Matthew and Brian. True, productive change will likely not come from the legislative process because the fix is in. It will come from a major court decision in a class action that may not even have been filed yet. Look to the tobacco lawsuits for your model of how we are going to make change in our healthcare system.

  6. Just because CMS decided to play a propaganda game and call this program “Competitive Bidding” does not mean it represented or created a competitive marketplace. It stands to drive out quality, reduce access, and marginalize the homecare sector, which should be incentivized in light of the reduced costs associated with homecare relative to the alternatives. What looks like a concession actually gives another 9.5% cut to a sector that has been decimated by cuts over the past 10 years…a look at pharma, hospital, and physician payments relative to homecare would be in order if you wish to craft a balanced piece that is reflective of true costs and benefits within the current healthcare system.

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