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Experts Say Medicare's Bidding System for Medical Equipment Will Fail
Date:9/30/2010

WASHINGTON, Sept. 30 /PRNewswire-USNewswire/ -- Medicare's bidding program for durable medical equipment will fail, say 166 leading experts on auctions and competitive bidding systems.  

New restrictions and steeply reduced prices based on the controversial bidding system are scheduled to take effect on January 1, 2011 in nine of the largest metropolitan areas including Charlotte, Cincinnati, Cleveland, Dallas-Ft. Worth, Kansas City, Miami, Orlando, Pittsburgh, and Riverside, Calif.

The 166 critics, who include two Nobel laureates and numerous economics professors from leading universities, signed a letter criticizing the bid program. Their letter was delivered this week to Rep. Pete Stark (D-Calif.), who chairs the House Ways and Means subcommittee on health. Chairman Stark forwarded the letter to Donald Berwick, administrator of the Centers for Medicare and Medicaid Services (CMS).  To view the letter, go to www.aahomecare.org.

The experts, who do not oppose the concept of using a competitive bidding system to set Medicare prices, point out that the bidding program designed by CMS has several flaws that will prevent it from achieving the objectives of low cost and high quality:

  • The bidders are not bound by their bids, which undermines the credibility of the process.
  • Pricing rules encourage "low-ball bids" that will not allow for a sustainable process or a healthy pool of equipment suppliers.
  • The bid design provides "strong incentives to distort bids away from costs."
  • There is a lack of transparency in the CMS program that is "unacceptable in a government auction and is in sharp contrast to well-run government auctions."

The experts' letter concludes, "This collection of problems suggests that the program over time may degenerate into a 'race to the bottom' in which suppliers become increasingly unreliable
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SOURCE American Association for Homecare
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