New Economic Study Exposes Faults in Controversial Medicare Competitive Bidding Program Scheduled to Start this Fall

A new study released this week by Brian O’Roark, PhD, of Robert Morris University, exposes severe flaws in the Medicare competitive bidding program for durable medical equipment and services. The study found that the federal Centers for Medicare and Medicaid Services drastically misread the marketplace and that the current competitive bidding program reduces overall competition and hurts the quality of patient care.

The study analyzed the results for round one of the bidding program, which took place in ten areas nationwide last year. The bid program, which began on July 1, 2008, was delayed by Congress on July 15, 2008 because of serious flaws in the bidding process. O’Roark’s study revealed several shocking flaws in the competitive bidding program:

• During the bidding implementation, nearly 40 percent of companies awarded durable medical equipment contracts for Pittsburgh patients were located outside of Pennsylvania.

• Had the competitive bidding program continued, homecare providers would have had no choice but to cut service, lengthen patient response times and give up providing some equipment altogether. Contracts were also awarded to unlicensed providers, which would have violated state standards.

• Reduced access and declining quality of care under competitive bidding will force patients into institutionalized care. This will lead to higher long-term costs for Medicare—not lower as CMS suggests.

• One group that would benefit from competitive bidding is private insurance firms. Medicare reimbursement rates are the gold standard and the basis for reimbursement by all other forms of health insurance. An artificial lowering of Medicare rates is immediately followed by a lowering of all others. As price schedules fall, insurance firms’ costs fall with them.

Despite the glaring flaws identified in this study, the competitive bidding program is set to go into effect in late October, 2009.

“There is nothing competitive about this misconceived program,” says Tyler J. Wilson, president of the American Association for Homecare. “This study joins an extensive body of evidence showing that this bidding program will produce fewer competitors, fewer homecare services, and lowest-common-denominator healthcare for older Americans and people with disabilities who require medical care at home.”

The full report and summary of findings are at www.aahomecare.org.