CMS Competitive Bidding Threatens Higher Costs for Non-Medicare Patients/Reduced Beneficiary Access

A letter by over 160 prominent academicians shatters CMS’ claims to have conducted a credible, transparent competitive bidding program for DMEPOS.  Moreover, the letter signed by researchers from MIT, Princeton, Harvard, Stanford, Yale, CalTech, Columbia, the University of Chicago and other major institutions demonstrates that the CMS bidding program may: 1) increase health care costs for people insured by private health plans; and 2) result in insufficient Medicare beneficiary access to needed DME.

Raising Costs to Non-Medicare Patients/Threat to Supply

CMS’ DMPEOS “competitive bidding” progran may increase health care costs to patients outside the Medicare program as private health care plans cross-subsidize the Medicare program while resulting in an insufficient supply of DME equipment for Medicare beneficiaries.

The letter sent to the House Ways and Means Committee explained that CMS’ bidding protocol “further encourages low-ball bids, since a low bid guarantees winning, has a negligible effect on the price and gives the supplier a free option to sign a supply contract. Even if suppliers bid their true costs, up to one-half of the winning suppliers would reject the supply contract and the government would be left with insufficient supply. Others may accept the contract and cross-subsidize public patients with the revenue from private patients, or just take a loss. This pricing rule does not develop a sustainable competitive bidding process or healthy supplier pool.”

Lack of Transparency

Among the failings explained in the  was the bidding program “is a lack of transparency. …  Both quality standards and performance obligations are unclear. This lack of transparency is unacceptable in a government auction….”  It should be noted that CMS’ lack of transparency is at the heart of the  lawsuit against CMS.

The letter concludes that “Implementation of the current design will result in a failed government program.”

We, as a country, cannot afford a failed program to provide life-sustaining equipment to Medicare beneficiaries.  The program must be stopped.

Please see the letter at http://www.cramton.umd.edu/papers2010-2014/comments-of-concerned-auction-experts-on-medicare-bidding.pdf.

Letter to Congress