A new report said that proposed reforms to the Medicare bidding process for prosthetic devices and other durable medical equipment don’t go far enough to fix the fundamental flaws in the process. The brief was released by the Center for Medical Economics and Innovation at the Pacific Research Institute (PRI), a nonpartisan free market think tank.
“Medicare’s current broken bidding process drives up taxpayer costs, promotes the use of lower-quality equipment that doesn’t serve patients well, and results in shortages of wheelchairs, CPAP machines, and prosthetics,” said Wayne Winegarden, PhD, the Center’s director and the brief’s author.
Reforms to the Medicare competitive bidding process that began in 2011 set the durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) compensation for all selected bidders based on the median of all winning bids. However, suppliers have no contractual obligation to provide the equipment and supplies at that price. For example, if a bid is accepted at $400 per device but providers can’t provide it at that price, they will either lose money or not provide it, which triggers shortages.
The report said that the broken bidding process is also biased toward awarding contracts that deliver lower cost, lower quality medical equipment that can worsen health outcomes for patients, and using the median bid encourages gamesmanship of firms offering lowball bids to hurt their competition.
After the publication of PRI’s 2018 brief, the Centers for Medicare & Medicaid Services paused future rounds of DMEPOS bidding as it worked to reform the process. However, CMS’ proposal—using the 75th percentile bid, where 25 percent of bidders will offer a price higher than what the federal government will pay—would still produce the same problems as the current system, the latest report said.
“It’s long past time for the federal government to reform the process so providers are paid appropriate prices while being held accountable to produce the equipment as promised—and patients have access to high-quality durable medical equipment,” said Winegarden.
The brief makes the case that if the goal is to improve patient outcomes while generating Medicare savings, a better bidding process would take a holistic approach, considering the additional healthcare costs that arise when patients use lower cost, lower quality equipment and experience poorer health outcomes. A single-price bidding structure, the typical process the government uses to purchase supplies, would better compensate providers based on a price just high enough to ensure sufficient supplies are available.
To read the report, visit “Reforming CMS’ Competitive Bidding Process to Improve Quality and Sustainability: An Update.”
