Medicare’s cost saving program could squeeze wheelchair, oxygen dealers out of business, they say

From: Cleveland Plain Dealer

By Stephen Koff, Plain Dealer Washington Bureau Chief

WASHINGTON, D.C. – A Medicare program that cut costs dramatically in Cleveland and a few other areas will expand to Akron, Youngstown, Columbus and dozens of other areas nationwide this summer, providing massive savings — $25 billion for the government and $17 billion for beneficiaries between now and 2022, federal officials say.

But the suffering that may result could be just as monumental, say businesses that supply power wheelchairs and scooters, walkers, oxygen concentrators, diabetes testing strips and similar home medical equipment. Just as it did in Cleveland in 2011, the government is going to pay a lot less for home equipment in 91 additional metropolitan areas starting July 1.

Federal officials boast of the huge savings taxpayers will see. Yet critics in the industry say the swath of territory under these new price controls will be so vast that it will be impossible for some medical supply companies to absorb the losses. Some could go out of business, they say.

If that happens, seniors, most of whom rely on Medicare to pay their healthcare bills, could find it harder to get medical equipment when they need it, according to those on the business side. This could not only frustrate customers but also cause delays in hospital discharges until the equipment — a hospital bed or oxygen concentrator — can be delivered to their homes from what will be a smaller base of providers.

“The sheer magnitude of the cuts is going to be enormous,” said Cara Bachenheimer, a top lobbyist for Invacare, the Elyria-based wheelchair and equipment manufacturer.

It is possible that all these worries are overblown. Companies that make or sell wheelchairs and portable oxygen tanks and concentrators have sounded the same alarm for several years. Congress over the last decade has passed a number of bills premised on the belief that since the government pays billions to private industry for health care, creating a profitable sector for Medicare suppliers, the industry should tighten its belt, too, when government needs to save. Medical equipment dealers may sell to an array of customers, yet they get 40 percent of their revenue from Medicare, according to Invacare interviews in 2011.

Bidding to save money

One way for Medicare to save money is to force dealers to compete for the best prices. The federal Centers for Medicare and Medicaid Services, or CMS, which oversees the government insurance program for seniors, says evidence to date is that competitive bidding creates winners all around. The savings in Cleveland, Cincinnati and the seven other first-round bidding areas in 2011 added up to $202 million, CMS says. Prices on durable medical equipment in these markets fell by an average of 35 percent, not counting savings on administration.

CMS says the savings will be even greater — averaging 45 percent — when the program expands to the 91 new areas this year. In Ohio, these new areas include Akron, Toledo, Youngstown, Columbus and Dayton, and other areas will include New York City and Los Angeles.

Even more dramatic are the savings on diabetic testing supplies — scheduled to fall nationwide by 72 percent when the new prices take effect. While this particular price cut was initially intended just for large mail-order diabetic test-strip suppliers, Congress on Jan. 1 ordered all others, including local pharmacies across the country, to meet the new, lower prices.

Backed by government audits and investigations, CMS officials said that taxpayers paid way too much for home-use equipment. Since patients in Medicare’s fee-for-service program have a 20 percent cost share, this hurt seniors, too.

So Congress ordered CMS to phase in a competitive bidding system, initially in 2008, to drive down prices. The program stumbled initially, with errors in the bidding and award process, but now is gearing up for a major expansion, with a goal of reaching nearly the entire country by 2016.

“The reality is that the program is working well and saving consumers and taxpayers millions while preserving access to quality items from qualified suppliers,” CMS said in a statement this week to The Plain Dealer. “We are closely monitoring the program and have had very few beneficiary complaints.”

In 2011, when delays ended and the program began in full in Cleveland, Cincinnati and seven other areas, CMS got only 151 complaints from dissatisfied beneficiaries, it says. And only six of them came in during that year’s last quarter, an indication of how well things were going, according to congressional testimony last September from Lawrence Wilson, director of the CMS chronic care policy group. That’s 151 complaints altogether out of 2.3 million fee-for-service beneficiaries in those nine areas, he said. Besides Cleveland and Cincinnati, the other areas were Charlotte, N.C.; Dallas-Fort Worth; Kansas City; Miami-Fort Lauderdale; Orlando; Pittsburgh and Riverside-San Bernardino, Calif.

More importantly, said Jonathan Blum, director of the Center for Medicare, “we have seen no clinical impacts to those beneficiaries within those nine markets.” On a Jan. 30 call with reporters, Blum said, “We have seen no changes in hospital use, physician use, skilled nursing use, home health use. It gives us great confidence that the program works with all taxpayers, and most important, for the beneficiaries on the Medicare fee-for-service program.”

But the coming expansion is of such a magnitude that even some patient advocates are concerned. Diabetes testing supplies, for example, were not included in the first round. Now they will be included nationwide. Diabetics who must test their blood glucose levels daily, often multiple times a day, could have fewer choices of where to buy testing strips.

The reason? The price drop of 72 percent is too low for some providers to stay in that business, they say.

“We are going to stop serving diabetic patients on Medicare. The pricing is below our cost,” said Joel Marx, chairman of Cleveland-based Medical Service Co. “The diabetic market has just been decimated.”

That doesn’t mean patients will forgo their daily self-testing, considering the presence of large national companies. CMS is offering contracts to 15 national mail-order test strip suppliers, in fact, at the new lower rate. But the needs of every patient are different, and getting the right supplies at the right time might be more challenging, patient advocates say.

“We’re frightened for our patients at this point,” said Martha Rinker, chief advocacy officer for the American Association of Diabetic Educators, whose members work with patients to keep their disease under control.

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