Free Market Medicare? Competitive Bidding for Durable Medical Equipment

Government spending on wasteful projects is legendary.  There is the Bridge to NowhereStar Wars, and many more.  In Medicare, the government also has a reputation of overpaying for durable medical equipment.  For instance, critics claim that Medicare is both paying too high a price for motorized wheelchairs and buying wheelchairs for people who do not actually need them (9 percent of wheelchair purchases were found to be unnecessary).

To solve the former problem, Medicare is using a novel solution: bring the market to Medicare durable medical equipment purchases.

Beginning this month, the Centers for Medicare and Medicaid Services (CMS) is requiring suppliers to engage in competitive bidding to supply seniors with this equipment in 91 of the nation’s largest markets, including Washington. A two-year pilot project in nine cities, which included hotbeds of durable medical equipment fraud in south Florida and Texas, succeeded in lowering Medicare’s costs by nearly a third.

The DME industry, however, was not supportive of these changes.

The campaign to lower prices and rein in fraud has been in the works for more than a decade. The 2003 Medicare Modernization Act called for competitive bidding, but industry pressure stalled the rollout. The nine-city pilot project that began in 2010 took place only after a delay that led Medicare to impose an across-the-board 9.5 percent cut in prices.

One question is whether a race to the bottom to drive down cost will lead to a decrease in DME quality which will hurt patient care.  Based on initial results, prices have dropped, but quality has remained constant.

The agency’s monitoring detected no increase in the use of emergency rooms, longer hospital stays or use of skilled nursing facilities, which could be triggered by a failure to obtain needed equipment.


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