Cramton Floats ‘Repeal and Replace’ Option for Competitive Bidding

Editor’s Note:  A copy of Dr. Cramton’s slides discussing his repeal and reform proposal is attached below.

From: Home Care Magazine

COLLEGE PARK, Md. — Peter Cramton, the University of Maryland economics professor at the vanguard in condemning CMS’ competitive bidding design, is pursuing a new avenue to get the current program shelved.

As HME advocates push for legislators to sign on to H.R. 1041, the bill that would repeal the bidding system, Cramton is working on legislative language that would spell out how an efficient and effective DMEPOS bidding program would work.

It’s the auction specialist’s latest effort to get the CMS program shut down and redesigned. Last fall, he sent a letter to Congress signed by 166 fellow economists detailing the program’s flaws; in April, he held a mock auction that drew both officials from CMS and stakeholders in the HME community.

Last week, he appeared at two Capitol Hill briefings to educate House and Senate staffers on the problems with Round 1, which was implemented in January, and the “train wreck” that is coming.

“The bottom line, from my perspective, is that we have to have draft legislation for an efficient auction. The repeal by itself is an incomplete strategy,” Cramton said. “That is what I am endorsing, and that is going to be what makes the legislative strategy coherent.”

Introduced in March by Reps. Jason Altmire, D-Pa., and Glenn “GT” Thompson, R-Pa., H.R. 1041 had garnered 112 cosponsors as of June 1, about a dozen more since the congressional briefings. While the number of cosponsors on the House bill continues to rise, there has been concern in some industry quarters that a Senate companion bill might not happen.

Wayne Stanfield, president of the National Association of Independent Medical Equipment Suppliers, is not hopeful, he told members in the group’s newsletter. “Suppliers should not hold out any hope that any repeal or delay will happen,” he wrote in a commentary.

“Since 2003, this program has been coming and nothing the industry has done so far has done anything to stop it or change it, though we did pay dearly to delay it 18 months,” he continued, referring to the 9.5 percent DME cut the industry took in 2009 to “pay for” the delay.

“Anyone who thinks that we can alter the course of this program had better step forward now and take the lead of the industry. Lord knows we need the help.”

The biggest stumbling block to a Senate bill, some insiders say, is concern over its financial ramifications. The Congressional Budget Office has estimated competitive bidding could save Medicare $20 billion over 10 years; H.R. 1041’s offset for its repeal calls for use of $20 billion in undesignated discretionary funds, meaning that the HME community has “no skin in the game,” as one stakeholder said.

Even if the House passes H.R. 1041 because members recognize the program as devastating to both business and beneficiaries, “the Senate won’t touch it because of budget concerns,” Cramton predicted.

By pairing the repeal with a plan for a well-run auction — Cramton said it must be one piece of legislation — the resulting CBO score should ensure Senate buy in, he said.

“Repeal and replace: Instead of coming back with a bad score, it comes back with a good score,” Cramton said. “That’s the beauty of it. That’s something they can adopt.”

Cramton understands he might be rowing against the tide with his plan. Industry providers have been largely opposed to competitive bidding in any form.

“There certainly are some issues with their degree of comfort with auctions altogether,” Cramton acknowledged, but he said a well-run auction pays off for everyone — providers, beneficiaries and CMS. “You eliminate the badly flawed auction, you save the home medical equipment industry, you save the Medicare beneficiaries and more important from the standpoint of the taxpayer, you save the budget,” he said. “I think providers should get on board with it.”

The auction legislation would also create some oversight of CMS. In the current design, the agency has worked with little if any transparency, Cramton said, allowing it to manipulate prices and refuse information to everyone from the PAOC to Congress.  Under a correctly designed program, an independent market monitor would be privy to all information and would report directly to the Health and Human Services secretary rather than to CMS.

The agency would administer the program, “but their discretion would be eliminated,” Cramton continued. “[The new program] would be transparent. They wouldn’t have the ability to do whatever they want.”

On the plus side for CMS, Cramton said, “Now they are forced to implement an efficient auction, which means that things work; they aren’t addressing thousands of complaints, racing around putting out fires.

“When you really screw something up, it requires a lot of work and it is also not very pleasant,” he added.

The economist said his recommendation is for the current program to be immediately halted, then “what I recommend is that we spend the rest of this year and all of next year working out the details with the industry and the beneficiaries, and perhaps CMS would be involved, too. Then the first auction  … would be only part of the country — say, one third.”

The program would be implemented in phases so that “by 2015, we would have the whole country involved,” he said.

Cramton said he hopes to have the legislative language completed soon; the next action would be to find a sponsor. Whether the redesign specifications would simply be added to H.R. 1041 or a completely new bill crafted would have to be decided, he said.

The point is, said Cramton, CMS needs to “start all over again, but this time, do it right with clear direction from Congress.”

Cramton Repeal and Reform Proposal