Medicare Beneficiaries At Risk Says AAHomecare

Faulty Bidding Process For Durable Medical Equipment Will Impact Providers As Well

WASHINGTON, Feb. 15, 2013 /PRNewswire-USNewswire/ -- Near Cincinnati, Ohio, a Medicare patient named Trisha lived in fear for more than a year because her new oxygen provider through Medicare never came to check on her or the equipment. Nearby, an elderly couple, Paul and Mary, were also concerned about the quality of care from their Medicare-dictated oxygen provider.

The Centers for Medicare & Medicaid Services (CMS) insists that beneficiaries aren't being hurt by the defective bidding program that will sideline thousands of home medical equipment providers, while leaving others questioning whether they can stay in business.  But Trisha, Paul, and Mary are just three of the many beneficiaries adversely affected by this unfair bidding program that allows Medicare to arbitrarily set prices at rates so low that services and products for beneficiaries are being compromised.     

"When I can't breathe it is like someone has their hands around my throat and they are cutting off my airway," Trisha says. "I can't tell you…how scary it is to sit on the side of the bed wondering if you will be able to draw your next breath."

Yet, Trisha felt this anxiety over and over. Once her community came under the Medicare bidding program for oxygen therapy a year ago, her dependable provider was forbidden to do further business with Medicare and was replaced by a different company, one that delivered equipment, never checked on the patient, and ignored her pleas for assistance. 

Across the country, other victims of the Medicare procurement system for home medical equipment are quietly suffering, too nervous to speak out or question Medicare. The organization, People for Quality Care, has collected horror stories from Medicare beneficiaries—the people CMS says don't exist. Many of their stories can be found here: http://www.peopleforqualitycare.org/Resources/Personal-Stories.php.

Leading economists and auction experts openly declare that the bidding program established by CMS is a sham. Why hasn't Congress done something about it? Are lawmakers blinded by the smokescreens that CMS keeps erecting?

The Medicare bidding program uses economic coercion to force homecare providers to submit unsustainable bids in order to win contracts. Because Medicare is the largest third-party purchaser of home medical care, its market power effectively compels providers to bid at unsustainable reimbursement rates to ensure the opportunity to continue serving Medicare beneficiaries. Thus far, 244 economists, more than two dozen consumer and disability groups, 186 members of Congress, and the National Federation of Independent Business have opposed the current bidding program.  

On January 30, CMS alleged that the Medicare program will save an average of 45 percent on certain medical equipment by extending the bidding program to 91 new areas. Those so-called savings are created by a sharp decline in utilization of home medical equipment, such as oxygen therapy, power wheelchairs, and hospital beds. What CMS doesn't say is that the government's own data shows that emergency room visits, longer hospital stays, and more confinements in costly nursing homes occur when Medicare beneficiaries aren't using certain home medical equipment. So this is a shell game—CMS can claim declines in expenditures on durable medical equipment (DME), while Medicare costs in other categories skyrocket.

Dr. Brett Katzman, Interim Chair of the Department of Economics, Finance & Quantitative Analysis at Kennesaw State University, gives this blunt analysis of the CMS bidding program:

While the CMS competitive bidding system does involve bidding, it is far from competitive. Yes, there are winners and losers, but winners are chosen based on their willingness to game the system rather than their cost competitiveness. The problem is that the CMS system entices providers to "low-ball" bid whereas a true competitive bidding system would reward providers for being cost efficient.

CMS touts large price reductions as a result of its competitive bidding process. But the fact is that low prices should not be the objective. Rather, the goal should be getting the price "right": at the point where supply meets demand. The CMS process fails this test in two respects. First, supply is not truly reflected in the CMS system because providers are not bidding costs—something directly caused by the CMS median price and non-binding bid rules. Second, rather than pinpointing the level of demand necessary to help seniors, CMS instead plays a shell game with demand levels, arbitrarily raising them until the auction produces a price that "looks good" (but not one that is anywhere close to "right").

The bottom line is that competition is not setting the new prices lauded by CMS. The new prices are just as much administratively set as the old fee schedule; they are just being set more deceptively. The fact is that administrative pricing rarely gets the price "right" and just as the fee schedule prices were too high, the CMS prices are simply too low.

And although prices that are too high are bad because they cause over-use and large Medicare expenditures, prices that are too low are even more dangerous. Dramatically lower prices might give something about which CMS can brag, but any introductory economics student can tell you that a price below the "right" level will cause shortages. Then again, I guess that shortages of life-saving equipment will lead to fewer seniors on the Medicare rolls—something that will reduce expenditures further and give CMS something more to brag about.

What Dr. Katzman describes is being played out in actual communities from coast to coast.  The procurement system is broken; communities are experiencing the impact of suicide bids and arbitrary prices. Good businesses are being forced to close. Worst yet, this malfunctioning system is awarding contracts to serve the most vulnerable people in our society—the elderly and people living with disabilities. Are lawmakers confident that their constituents are receiving quality service and products?

Reports pour in from around the country. Providers of CPAP ventilators have won bids in the oxygen categories, but they have never before provided portable oxygen systems. A four-employee provider wins oxygen bids in two locations. A small, single store provider has been offered hundreds of contracts in dozens of locations. And a 30-year veteran provider who made aggressive bids wins no contracts.

"It's hard to believe Congress and the White House are allowing this to happen," said Joel D. Marx, Chairman of Medical Service Company in Cleveland, Ohio, and Chairman of the American Association for Homecare. "Business owners who have served Medicare patients for years have either not won any bids, won bids they can't possibly execute at such low prices, or are turning down the contracts being offered by CMS. The bureaucrats are out of control. We can say goodbye to Medicare as we once knew it. There is no health safety-net."     

Tyler Wilson, AAHomecare president, says the procurement system must be fixed.

"Beneficiaries, despite what CMS says, are suffering because of this bad public policy," emphasized Wilson. "Good businesses are going under. Jobs are needlessly being lost in communities. Congress must put a stop to this and adopt an alternative process."

DME Matters is published periodically to inform Congress, the administration, policymakers, consumer organizations, and the media about the dangers of Medicare's bidding program for home medical equipment. To learn more about the effort to end this dangerous and defective procurement process, visit www.aahomecare.org or contact Julie Driver at 202-372-0749 or [email protected].

SOURCE American Association for Homecare