CMS officials, White House economic advisers and congressional budget experts plan to meet with a leading critic of the design of the Medicare competitive bidding program for durable medical equipment in a move that Wall Street analysts predict could lead to changes in the second round bidding, according to a Wall Street note on DME supplier Lincare. CMS had planned to release the round one winning bidders early last week but didn’t do so, and the note implies that suppliers may be reluctant to sign contracts because of the program’s design. CMS plans to enlarge the bidding program in the second round in line with a health reform mandate.

Peter Cramton, a University of Maryland economics professor, is scheduled to meet CMS officials on Oct. 18, according to the investor note, and is also slated to meet with White House economic advisers and the Congressional Budget Office. The memo states that there seems to be significant interest in Cramton’s opinion about what he views as the design flaws of the competitive bid program. “The impact of these mtgs could influence the process for Rd 2,” the note states, referring to the second round of bidding.

CMS did not consult market auction consultants for help in designing the program, the investor notes states.

Cramton got involved in the policy debate when former Rep. Nancy Johnson (R-CT), who used to chair the House Ways and Means health subcommittee, asked him to evaluate CMS’ bidding program, the note states. Johnson currently represents diabetes medical equipment suppliers, according to lobbyist reports. Johnson’s firm, Baker Donelson Bearman Caldwell & Berkowitz, paid Cramton for one day’s worth of work, and he was not told whom Johnson was representing. Cramton said he is an independent analyst. He has been working on the policy for two months and has neither requested nor received further compensation beyond the initial fee for the one-day of work, he said.

Cramton then met with staff for current health subcommittee Chair Pete Stark (D-CA), who suggested that Cramton’s opinion alone would not sway Stark. Two days later, Cramton had 170 cosigners, mostly academics, for a letter outlining flaws in the competitive bidding program (see story).

The letter caught Stark’s attention. He forwarded it to CMS and the White House and asked CMS to promptly respond with any program changes it might be considering. Starks’ office did not immediately respond to questions about whether CMS has replied.

Cramton wrote that the bids should be binding. The program as currently designed uses nonbinding bids, which encourages low-ball bids because suppliers know they can turn down contracts at no cost if the Medicare payment level is too low, he said. The program’s pricing rule is flawed, too, according to the letter. The letter takes issue with CMS’ use of composite bids, an average of a bidder’s bids across many products weighted by government-estimated demand, arguing that this approach skews bids away from costs. The fourth problem, according to Cramton, is a lack of transparency. — John Wilkerson (jwilkerson@iwpnews.com)