Competitive Bidding: The Debate Continues

By Thomas Connaughton
President and CEO of AAHomecare

Recent Medicare reform legislation, which has been under scrutiny in Congress during the past few months, as part of the prescription drug benefit debate, could include a program which many patients may not know may threaten their access to, and freedom of choice for quality home medical equipment (HME) and services equipment used for the diagnosis and treatment of sleep-disordered breathing. This program is called competitive bidding.

If Congress were to enact a competitive bidding program on a nationwide level, consumers would be the ultimate losers. People with disabilities may have their choice restricted in many ways - access to only the cheapest products available through Medicare, a very limited number of providers, and, potentially diminished services by trained rehab technologists.

On June 28, 2002 the House passed their version of Medicare reform and prescription drug legislation, which included language that would enact a national competitive bidding program for durable medical equipment, orthotics and prosthetics, and lab services. Since new legislation on Medicare was not passed before the August recess, the Senate will continue with debates when they reconvene in September. Although it is difficult to predict at this point whether or not the competitive bidding language will be included in this bill, what is known is that there are many supporters within the Senate, as well as the House, to eliminate the call for nationwide competitive bidding.

Senator Max Cleland (D-GA) for one, committed to opposing competitive bidding at the American Association for Homecare's (AAHomecare) Washington Legislative Conference on June 6. He has backed up that promise by sending a "Dear Colleague" letter to the Senate urging it to oppose competitive bidding, speaking as a member of the disabled community and a member of the Senate Small Business Committee.

National competitive bidding for medical equipment has been supported by the Clinton and Bush Administrations, as well as by some on Capitol Hill, since the idea was introduced in 1999. Many organizations, representing consumers and trade organizations, remain opposed to competitive bidding. As the government looks for ways to save money on Medicare spending, competitive bidding seems like the perfect solution. But in the long run, it will be the beneficiaries who are negatively affected.

Background on Competitive Bidding

The Balanced Budget Act of 1997 (BBA '97) gave CMS authority to implement five competitive bidding demonstration projects to examine the effects of competitive bidding on HME markets in communities of varying sizes. CMS is currently conducting only two limited demonstration projects in Polk County, FL and San Antonio, TX. In Florida, Medicare beneficiaries can obtain home oxygen services, hospital beds, wound care supplies, and incontinence supplies only from Medicare-chosen providers. The Texas demonstration includes home oxygen services, hospital beds, nebulizer drugs, wheelchairs, and orthotics.

Competitive bidding has the potential to create barriers to access for home medical equipment (HME), diminish the quality of medical services beneficiaries receive, and eliminate small businesses. Organizations like AAHomecare believe that Congress should not expand the current HME competitive bidding program, concluding that it is too soon to fully understand the ramifications of the program since the original demonstrations, and their actual savings to Medicare, will not be known until October 2002 - the scheduled completion date of the demonstrations.

The administration has failed to recognize that implementing a competitive bidding program on a national basis is not possible if it truly wants to ensure a choice of providers for beneficiaries. Regions, states, and even counties vary significantly, and it would take a whole new corps of bureaucrats to determine which providers of home medical equipment could serve particular locales under such a system. In addition, competitive bidding systems, if administered as in the pilot programs in Polk County and San Antonio, fail to recognize the importance of services that HME suppliers pride themselves in providing their patients.

The Effects of Implementing Competitive Bidding

• Restricted Access and Choice:
  To implement the competitive bidding demonstrations, Congress waived a beneficiary's right to choose a health care provider or supplier within the Medicare program. The ability to choose a provider or supplier safeguards quality and continuity of care because it allows Medicare patients to establish long-standing relationships with providers and suppliers.
• Loss of Quality and Service:
  In contrast, non-demonstration beneficiaries have access to medically necessary professional services such as respiratory therapists and 24-hour on-call services. Competitive bidding eliminates market pressure to provide this clinical support for critically ill patients. The result is that Medicare beneficiaries in the demonstration areas may receive a lower standard of care.
• "Competitive Bidding" is a Misnomer:
  Although the term "competitive bidding" may sound attractive, the demonstration actually eliminates the free market competition that encourages the provision of high quality medical services to Medicare beneficiaries. The demonstration design greatly reduces the number of HME providers who can serve beneficiaries with specific needs and eclipses the key component of free market competition - consumer choice. Medicare's winning bidders, therefore, are not subject to the market forces of consumerism.
• A New Bureaucracy:
  A program of national competitive bidding for HME would require a new bureaucracy to administer it. To properly administer a national program, CMS must fix structural flaws in the model and incorporate procedural protections and oversight capabilities. The ultimate expense of expanding the limited demonstration model to larger urban areas will eclipse any projected savings.
• Impact on Small Businesses:
  The average HME supplier is a small entrepreneurial operation with fewer than 20 employees and less than $3 million in annual revenue. For the average HME provider, the demonstration projects have amounted to a loss of approximately 27 percent of annual revenue. At least one provider in Polk County has filed for Chapter 11 protection, and many more have been forced to move out of the demonstration area.

Industry associations and several consumer advocacy organizations, have united to oppose competitive bidding by creating the Coalition for Access to Medical Services, Equipment and Technology (CAMSET). Together, the members of CAMSET are voicing their concerns that the expansion of competitive bidding from two ongoing demonstration projects to a national policy. The coalition will be augmenting its grassroots efforts on this issue in order to provide information to key federal legislators. Businesses in, and consumers of, the HME community are encouraged to do everything possible to teach policymakers at all levels.

What To Do

Through phone calls, joint letters, and visits, consumers and the HME industry can urge Congress to carefully examine the impact that the recent demonstrations have had on beneficiary satisfaction or health outcomes and the suitability of implementing a national competitive bidding program. We need to make certain that, in this legislation, the industry takes steps forward and not backwards.

See a Sample Letter To Congress