Medicare: Competitive Bidding

At the start of 2011, Medicare began a pilot system of competitive bidding for home health supplies in nine different regions throughout the country. Thus far, the program has received mixed reviews. A recent article in the New York Times touches on both sides of the story. Government officials plan to expand the system due to the $200 million in savings on medical equipment it has produced, despite the fact that many suppliers in the industry are against this action. Individuals who do not support competitive bidding claim that it has negative effects on smaller suppliers and on Medicare beneficiaries themselves.

The premise of the program sounds excellent: providing the same medical equipment to beneficiaries who need the supplies, and for less money without having to cut any other benefits. However, a separate article published on MarketWatch.com paints an entirely different picture. It claims the CMS has used the bidding process to reduce prices to unsustainable levels, which in turn, limits the number of available suppliers, causes winning bidders to lay-off employees in order to keep costs down, and diminishes the quality and accessibility of equipment being produced.

Before expanding the program, government officials must address these issues. If competitive bidding puts too much strain on the home health supply industry as a whole, or if it makes it harder for beneficiaries to get a hold of the products they need and results in lower quality equipment, it does not make sense to expand the program to other areas, no matter how great the savings may be. Perhaps the government is getting ahead of itself with this program and its potential for savings; a report released by the HHS estimates savings of up to $42.8 billion over 10 years¹.

Although it may be a good idea to eliminate these kinks before expanding to other parts of the country, only time will tell how soon competitive bidding will reach new regions. Regardless of when further development may occur, suppliers of home healthcare equipment should certainly start preparing now if they hope to participate successfully within the competitive bidding program.

Written by: Jamie Notaro

Edited by: Ken Chiang

¹ http://www.modernhealthcare.com/article/20120418/NEWS/304189970/dme-bidding-program-yields-savings-hhs