Study: Medicare Competitive Bidding Process Should Be Reformed to Improve Health Outcomes, Ensure Patient Access to Medically-Necessary Equipment

SAN FRANCISCO, July 19, 2018 /PRNewswire/ -- A new study released today by the Pacific Research Institute finds that Medicare patient health is being negatively impacted by an inefficient competitive bidding process that leads to low provider payments and lack of access to necessary medical equipment and supplies.

Click here to download a copy of the study.

"The current Medicare bidding process, while well-intentioned, hurts patients by denying them access to medically-necessary supplies and equipment," said Dr. Wayne Winegarden, author of Reforming CMS' Competitive Bidding Process to Improve Quality and Sustainability. "The process has led to diabetes patients not receiving testing supplies and COPD patients not receiving home oxygen when needed. We must reform this system so providers are fairly paid, and patients can access the equipment and supplies needed to live long, healthy lives."

In 2011, the Center for Medicare and Medicaid Services replaced the fee schedule to pay suppliers of durable medical equipment like wheelchairs, prosthetics, and orthotics, and supplies for diabetes testing and other illnesses, to Medicare patients with a competitive bidding process. 

However, the new process has led to a new set of problems, including low-ball bids, bid skewing, lack of sufficient supply, and reduced quality. 

Payment amounts are now derived from the median of all winning bids for an item. A 2016 survey found that suppliers were being reimbursed at 88 percent of overall costs, making this process unsustainable. There is also no requirement that a winning vendor must fulfill its commitment. Instead, they have the right to review the median bid and decide whether to participate. This has led to reduced supply.

Winegarden notes the example of diabetes patients, who rely upon the right testing supplies and equipment to manage their disease. He reported a survey showing that, under the competitive bidding program, Medicare suppliers were not offering most of the products that Medicare.gov said would be available. Lack of access to the right testing equipment and supplies puts their health at risk.

There is also a problem with lack of available of home oxygen equipment under the competitive bidding program, which can negatively impact the health of patients with chronic obstructive pulmonary disease (COPD). Winegarden cited a survey that found that those who start oxygen treatments within two months of diagnosis have health care costs that are 20 percent lower than those who start treatment later. 

Winegarden recommends that further reforms be adopted to ensure an efficient competitive bidding process by setting payments at the market clearing price ? or the lowest possible price that ensure adequate supplies are available. He also recommends that the bid process be made more honest by encouraging vendors to submit bids that reflect their actual cost structures.

Dr. Wayne Winegarden is a Senior Fellow in Business and Economics at Pacific Research Institute. He is also the Principal of Capitol Economic Advisors and a Managing Editor for EconoSTATS. 

The Pacific Research Institute (www.pacificresearch.org) champions freedom, opportunity, and personal responsibility by advancing free-market policy ideas. Follow PRI on Facebook, Twitter, and LinkedIn.

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SOURCE Pacific Research Institute