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Myths and Realities About Medicare's Competitive Bidding Program for Home Medical Equipment and Services
Date:8/19/2011

the bidding system have conveyed misleading information that exaggerates the benefits and ignores the severe shortcomings of the program.

MYTH #1: Medicare overpays for home medical equipment and services, and the bidding system improves the method for setting reimbursement rates for that equipment and service.

REALITY:  Proponents of the bidding system use out-of-date reimbursement rates and false comparisons of retail costs versus Medicare costs to argue their case.  For many years, CMS has set reimbursement rates for home medical equipment through a fee schedule. Over the past decade, those reimbursement rates have dropped nearly 50 percent because of cuts mandated by Congress or imposed by CMS.  

The costs of delivering, setting up, maintaining, and servicing medically required equipment in the home are obviously greater than the cost of merely acquiring the equipment. But Medicare does not recognize the costs of these services. So comparing the cost of the equipment to the larger cost of furnishing the full array of required equipment, supplies, and services is false and misleading.  

Moreover, 167 experts, including two Nobel laureates and numerous economics professors from leading universities, have warned Congress that this bidding system will fail.  The experts, who do not otherwise oppose competitive bidding to set Medicare prices, point out that the system has four fatal flaws:

  • 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 tran
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SOURCE American Association for Homecare
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