Medicare, which provides health coverage for elderly and disabled Americans, is the nation’s largest purchaser of almost everything medical. Over more than a decade, the program has launched several experiments with competitive bidding for durable medical equipment. The bidding program is designed to decrease the prices Medicare pays for these products while raising or maintaining quality. Many of the biggest expansions will happen over the next few years.
While hardly anybody objects to the program in principle, many, including a large group of academic experts on auctions and bidding, have criticized its particular construction. They argue that the process violates the rules of good competitive bidding auction design and hence is unlikely to produce its promised savings and may sacrifice quality of care.
A real-world example of the flaws in the competitive bidding process is the lost savings from sound durable medical products such as negative pressure wound therapy (NPWT)—the first category of complex products likely to be subjected to the full gamut of bids. Using negative pressure wound therapy as a test case, an American Consumer Institute study found that negative pressure wound therapy pumps produce “$7 of benefits for every $1 of costs, with the current nationwide benefit for NPWT to be $7.1 billion with the potential benefit of 14.8 if NPWT were more widely used.”
By limiting the availability and use of these and other products through the disruptive auction process, the Centers for Medicare and Medicaid Services (CMS) could block billions in potential savings on medical costs.
The following articles discuss the competitive bidding program and its effects on the negative pressure wound therapy (NPWT) market.
CMS Bidding System Will Increase Medical Costs: A Cost/Benefit Analysis
http://www.heartland.org/healthpolicy-news.org/article/30107
This report from the American Consumer Institute uses a cost/benefit approach to provide evidence on the impact that the current bidding process will have on medical patients and society.
Comparison of Prices for Negative Pressure Wound Therapy Pumps
http://www.heartland.org/firepolicy-news.org/article/30108
The Office of the Inspector General compares the prices that suppliers paid for new pump models to Medicare’s purchase price. The OIG recommends in this study that CMS consider including the pumps in the second round of the DMEPOS Competitive Bidding Acquisition Program.
Letter from 167 Concerned Auction Experts on Medicare Competitive Bidding Program
http://www.cramton.umd.edu/papers2010-2014/comments-of-concerned-auction-experts-on-medicare-bidding.pdf
This letter from various auction experts discusses several flaws in the competitive bidding program that need to be fixed before it can achieve the objectives of low cost and high quality.
Medicare and Competitive Bidding for Complex Therapeutic Devices
http://www.healthpolicy-news.org/article/29329
This Policy Brief from The Heartland Institute describes the system of competitive bidding for medical devices and its effects on the availability and price of those products.
CRS: Medicare Durable Medical Equipment: The Competitive Bidding Program
http://www.healthpolicy-news.org/article/29562
The Congressional Research Service documents the legislative history of the Medicare DMEPOS Competitive Acquisition Program. The report summarizes suppliers’ implementation concerns and outlines various responses to those concerns: administrative responses, GAO analysis of implementation issues, and subsequent legislation to amend the program.
GAO: Competitive Bidding for Medical Equipment and Supplies Could Reduce Program Payments, but Adequate Oversight Is Critical
http://www.healthpolicy-news.org/article/29563
This report from the Government Accountability Office studies competitive bidding for medical devices, finding that competitive bidding can create savings for the Medicare program but requires significant oversight to ensure the quality of the medical products.
National Association for Home Care & Hospice: Reject Competitive Bidding for Home Medical Equipment
http://www.nahc.org/NAHC/legreg/LobbyDay/03/hmebidding.pdf
The National Association for Home Care & Hospice criticizes the competitive bidding program in this press release, arguing that the process is anti-competitive, retards medical product innovation, and limits access to medically necessary products and services.
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