Medicare competitive bidding program could save $25.7B over 10 years
A new study published in Health Affairs found that Medicare’s competitive bidding program is expected to save CMS $25.7 billion on durable medical equipment over 10 years. The program is expected to save about as much as what large commercial insurers save by negotiating with suppliers.
The study discovered that the early stages of the Medicare Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Competitive Bidding Program resulted on average of 35% lower prices than the CMS’ 2010 fee schedule, which is how CMS determined payment for durable medical equipment before the bidding program.
The authors found “competitive bidding for durable medical equipment and similar items may be an effective mechanism for achieving savings in Medicare.”
Medicare spent more than $11.3 billion on durable medical equipment in 2010, the year before the bidding program started. It went national this year after beginning in nine metropolitan areas.
The study authors compared prices from the first round of the Medicare competitive bidding program to prices paid by national commercial insurers. The study reviewed seven prices, including six rental prices of six products and a new purchase price for one of the six products.
“Our results suggest that the initial years of the program produced prices comparable to those obtained, on average, by large commercial insurers — sophisticated purchasers that presumably were able to negotiate prices with suppliers of durable medical equipment and similar items,” said the study authors.
The authors said the savings were “impressive,” but warned that they were compared to the Medicare fee schedule, "which (was) known to be high."
Despite those savings, the CMS announced earlier this year that it is temporarily delaying the next steps of the DMEPOS program, which were expected for 2019, following complaints from program critics. That includes HHS Secretary Tom Price, who was a vocal opponent of the program when he was a member of Congress.
Opponents of the bidding program, such as the Council for Quality Respiratory Care, say suppliers submit “unrealistically low bids, knowing that if they are selected, and the ultimate bid price is too low to cover their expenses, they can simply refuse to enter into a bidding contract.”
The Moran Company issued a white paper on the topic in September 2016. The report questioned the “sustainability of the prices, the ability of suppliers to remain in the market and beneficiary access to needed DMEPOS products and services.”
DMEPOS is now in a holding pattern with Price leading the HHS. However, the $25.7 billion in savings over 10 years will likely interest a future HHS secretary when it comes time to look for ways to cut Medicare spending.