Draft Letters to Legislators

Patient Choice, Quality and Service Will be Harmed by Competitive Bidding for Medical Equipment and Technology (Talking Points)

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Patient Choice, Quality and Service Will be Harmed by Competitive Bidding for Medical Equipment and Technology

• Consumer advocacy groups and trade associations have united to oppose a provision of the Medicare Modernization and Prescription Drug Act (H.R. 4954) recently passed by the House of Representatives that would impose "competitive bidding" on all Medicare beneficiaries who require durable medical equipment (DME) technology, some orthotics, and supplies and related clinical care. The Coalition for Access to Medical Services, Equipment and Technology (CAMSET) is concerned that the dramatic expansion of competitive bidding from two ongoing demonstration projects to a national policy is premature and threatens to undermine quality of care, restrict patients' choice of suppliers and service providers, stifle the development of new technology, and drive suppliers out of operation.
   
• Competitive bidding allows Medicare to award contracts for particular items or services to suppliers that submit low bids. Congress authorized five demonstration projects in the Balanced Budget Act of 1997, and the Centers for Medicare and Medicaid Services (CMS) has initiated two demonstrations in Florida and Texas. The proposal contained in H. R. 4954 would impose a radical change in reimbursement policy without reliable data on the impact of the new system on access and quality.
   
• CMS' own analysis of the first round of the demonstration in Polk County, Florida - the only round that has been completed - states that "it is premature to declare that competitive bidding is either an appropriate or an inappropriate reimbursement mechanism" for durable medical equipment. Similarly, in its testimony before the Senate Appropriations Committee on June 12, 2002, the GAO stated, "The recent demonstrations that set payments for items through competitive bidding were instructive, but the positive results achieved may be neither applicable nor practical on a wider scale for many products." Clearly, much more work needs to be done before competitive bidding is expanded.
   
• We urge Congress to address the following problems before implementing competitive bidding nationwide:
   
• Competitive bidding can limit access to medically necessary products and services.
   
• In order to ensure delivery of safe, effective, high-quality care, suppliers provide many essential services with the delivery of DME, technology, some orthotics, and supplies, like respiratory therapists and 24-hour on-call assistance and access to specialists in re/hab technology. They also offer beneficiaries a broad selection of items from which to choose. Medicare does not currently mandate these services or a choice of products, but competition preserves access to them. Under competitive bidding, suppliers may be able to lower their bids by reducing or eliminating innovative product lines or more intensive beneficiary services in order to win Medicare contracts.
   
• For example, the CMS analysis of the Polk County demonstration has raised a question about whether some suppliers might be substituting lower cost incontinence supplies for the more expensive brands, thus restricting beneficiary access to the higher quality supplies. Even for products that appear to be interchangeable commodities, such as incontinence supplies, personal preference is extremely important to the individual beneficiary. Competitive bidding can have a detrimental effect on the quality, comfort, convenience and continuity of care because it limits a patient's choice of products and forces patients with needs for multiple products to obtain them from many different suppliers.
   
• Competitive bidding imposes significant restrictions on choice of suppliers. Even in cases where suppliers continue providing services along with medical equipment, many Medicare patients and physicians will no longer be able to obtain these services from the supplier of their choice. Many Medicare consumers have a longstanding relationship with their supplier that is often the key to compliance with their therapeutic regimen. Competitive bidding would force all Medicare beneficiaries to obtain their medical equipment and technology from a supplier chosen by the federal government to serve the "competitive acquisition area" where they reside.
   
• Competitive bidding will retard medical innovation. Suppliers that win bids based on the costs of current medical technology and services will be unwilling to adopt new technologies that improve clinical outcomes or quality of life but raise up-front costs. Suppliers may turn to cheaper products, further reducing a manufacturer's incentives to develop new technologies. Already manufacturers report reluctance of suppliers to invest in new technologies because of the prospect of competitive bidding, which offers rewards to those supplying the most inexpensive DME, technology, orthotics, and supplies instead of rewarding those that offer higher quality and service.
   
• Competitive bidding is anti-competitive and will wipe out many small businesses. Medicare "competitive bidding" is a misnomer. Medicare competitive bidding will, in fact, reduce competition, destroying many small businesses that are valuable assets to their communities. 
   
• Because the competitive bidding process awards contracts only to those suppliers that are able to offer a qualifying price, many businesses will be excluded from this marketplace. The elimination of businesses will mean there will be fewer bidders when it is time to update or renew the bidding process. Bid prices are likely to rise and patient choice is likely to diminish as more suppliers are eliminated. Indeed, in one of the ongoing demonstration projects, after two rounds of bidding, one national company has 70% of the Medicare market for oxygen.
   
• Competitive bidding is costly and creates complexity and confusion. The competitive bidding provision that passed in the House calls for the establishment of what could be hundreds or thousands of "competitive acquisition areas" (except in rural areas) and authorizes the Secretary of HHS to subject an unlimited number of items and services to the competitive bidding process. Multinational Business Services, Inc. (MBS) studied the House plan and concluded that its implementation would require CMS to increase its workforce by more than 1600 employees, increasing its size by more than one-third.
   
• Although national competitive bidding is projected by the Congressional Budget Office (CBO) to yield savings of more than $7 billion over ten years, those savings estimates do not account for expanding the bureaucracy in the demonstration to large metropolitan areas. Moreover, the projected savings are extrapolated from a very limited sample of products in a very small marketplace. PricewaterhouseCoopers states that, under other assumptions equally as reasonable as CBO's, the program would save only about $1 billion over this ten-year period.