Despite Objections, Medicare Competitive Bidding Set to Begin

Competitive bidding among Medicare providers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) is set to begin January 1 in nine regions of the country, despite sharp criticism of the plan by lawmakers, economists, patient advocates and others.

Under the new procedures, DMEPOS providers must go through a competitive bidding process to win the right to serve Medicare recipients. Medicare pays these providers to serve the medical needs of millions of Americans who use medical supplies at home, including oxygen equipment and power wheelchairs.

Medicare officials argue that competitive bidding is necessary to save money and streamline services. Opponents say that, while saving money and streamlining services are laudable goals, this plan could ultimately backfire. They say a lack of proper services and supports may force many people who are now living comfortably on their own into far more expensive institutional care.

Despite these concerns, and despite requests from advocacy groups to delay implementation of the program for at least a year, Medicare is going ahead with plans to introduce the program in nine metro areas starting January 1.

The metro areas are: Charlotte, Cincinnati, Cleveland, Dallas-Fort Worth, Kansas City, Miami, Orlando, Pittsburg and Riverside, Calif. An additional 91 metropolitan areas are scheduled to start competitive bidding later in 2011.

A flawed process

MDA and other groups have been battling competitive acquisition for DMEPOS ever since the plan was first proposed in 2008. Problems that came to light during the testing phase included Medicare beneficiaries being forced to go to multiple, unfamiliar providers for different items and services; nonlocal providers; inexperienced or unlicensed providers; and greater costs to Medicare from more emergency room visits and/or longer hospital stays as beneficiaries lost access to critical services and equipment.

Moreover, dozens of academics and members of Congress have pointed out two major flaws in the way the competitive bidding auction is being conducted. The first flaw is that bidders are not required to sign contracts that reflect their bid, thus encouraging DMEPOS suppliers to submit unrealistic, “low-ball” bids that competitors — and even they themselves — can’t match. Opponents contend that large companies will submit extremely low bids in order to drive smaller competitors out of business, knowing that ultimately, they won’t be forced to provide equipment and services at such low prices.

The second major flaw in the process, critics say, is that Medicare arrives at the price it will pay for a product or service by averaging all the bids it receives, winners and losers alike. Due to the presence of many unrealistically low bids, the final contract price is often lower than the bid submitted by the winning provider. In fact, during tests of the process, half of the bidders who won contracts were offered lower prices than their winning bids.

Critics say these flaws will result in a skewed system that rewards unscrupulous DMEPOS providers, as well as those who skimp on service and quality.

Custom power chairs still exempt

Opponents of competitive bidding have worked for several years on a bill to repeal the entire process, called the Medicare Competitive Bidding Repeal Act  (HR 3790), but it is unlikely to be voted on before this session expires. Although the bill lost several dozen sponsors in the midterm election, about 200 of its sponsors remain in Congress, so it may be reintroduced next year. (MDA’s Advocacy program has actively supported passage of HR 3790.)

Opponents have been successful in getting an exemption from competitive bidding for customized power wheelchairs, since this equipment is highly complex, specialized and dependent upon a personal relationship between provider and user. But other types of complex durable medical equipment, including non-customized power chairs, will now become subject to competitive bidding.

First-month purchase option eliminated

One particularly objectionable component of the plan is the proposal to eliminate the first- month purchase option for non-customized power wheelchairs. Under the new rules, standard power chair users will now have to rent a chair for 13 months before being given the option to buy it. Many providers say they don’t have the inventory or the money to provide power chairs to rent, and they fear they will be driven out of business as a result.

How to get involved

MDA and other advocates are still fighting for an administrative delay of the program, a delay of its more objectionable provisions (such as elimination of the first-month purchase option for standard power chairs), or a postponement of its expansion beyond the initial nine regions.

MDA and other organizations are encouraging supporters to immediately call or write members of Congress and urge a postponement of DMEPOS competitive bidding, or at least a delay of the plan’s more objectionable components. 

Should DMEPOS competitive bidding begin as scheduled on January 1, MDA will then be seeking feedback, both positive and negative, from people in these nine regions about their experiences with the new process. The feedback will help determine MDA’s future advocacy efforts regarding this issue. Members of the MDA community in these regions may share their experiences by sending an e-mail to, or by calling their local office and speaking with the health care service coordinator.

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