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Medicare Beneficiaries At Risk Says AAHomecare
Date:2/15/2013

eclines in expenditures on durable medical equipment (DME), while Medicare costs in other categories skyrocket.

Dr. Brett Katzman, Interim Chair of the Department of Economics, Finance & Quantitative Analysis at Kennesaw State University, gives this blunt analysis of the CMS bidding program:

While the CMS competitive bidding system does involve bidding, it is far from competitive. Yes, there are winners and losers, but winners are chosen based on their willingness to game the system rather than their cost competitiveness. The problem is that the CMS system entices providers to "low-ball" bid whereas a true competitive bidding system would reward providers for being cost efficient.

CMS touts large price reductions as a result of its competitive bidding process. But the fact is that low prices should not be the objective. Rather, the goal should be getting the price "right": at the point where supply meets demand. The CMS process fails this test in two respects. First, supply is not truly reflected in the CMS system because providers are not bidding costs—something directly caused by the CMS median price and non-binding bid rules. Second, rather than pinpointing the level of demand necessary to help seniors, CMS instead plays a shell game with demand levels, arbitrarily raising them until the auction produces a price that "looks good" (but not one that is anywhere close to "right").

The bottom line is that competition is not setting the new prices lauded by CMS. The new prices are just as much administratively set as the old fee schedule; they are just being set more deceptively. The fact is that administrative pricing rarely gets the price "right" and just as the fee schedule prices were too high, the CMS prices are simply too low.

And although prices that a
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SOURCE American Association for Homecare
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