The Medicare bidding process is hurting patients, according to a new study from the Pacific Research Institute, a public policy think tank based in California.
The Medicare bidding process is aimed at reducing overall spending on durable medical equipment by encouraging suppliers to compete with one another, but the process is inefficient and problematic, according to the study, Reforming CMS’ Competitive Bidding Process to Improve Quality and Sustainability.
“The current Medicare bidding process, while well-intentioned, hurts patients by denying them access to medically-necessary supplies and equipment,” Wayne Winegarden, MD, senior fellow in business and economics at Pacific Research Insititute and author of the study, said in a statement. “The process has led to diabetes patients not receiving testing supplies and COPD patients not receiving home oxygen when needed.”
The process, which was instituted in 2011, results in low provider payments and a lack of access to medical equipment and supplies that negatively impact patient outcomes, the study found. The bidding process replaced a set fee schedule used by CMS to compensate suppliers of durable medical equipment and services to Medicare patients.
Because the fee schedule was “problematic” and inefficient, replacing it with the bidding process appeared to be a “promising reform,” according to the study. However, the new process created an entirely new set of problems that impact patients, the study concluded.
The bidding process has met its goal of reducing costs, with CMS anticipating Medicare will save $25.7 billion from 2013 to 2022, with beneficiaries saving $17.1 billion collectively. The savings are not leading to higher quality care, however.
“There is mounting evidence that due to the inefficiencies associated with the current bidding process, the overall quality of the durable medical equipment used by Medicare patients is declining, to the detriment of patients’ health care quality and rising higher health care costs elsewhere,” Winegarden wrote.
CMS’s use of median of the winning bids as the compensation price is one of two devastating flaws in the bidding structure. Instead, CMS should be using the market clearing bid as the price, which ensure adequate supplies are available, Winegarden noted.
Second, the process allows winning vendors to not fulfill their commitments. After winning a bid, they can view the median price and decide whether or not to participate, though bidder have since had to submit a $50,000 bid surety bond that is lost if a bidder decides not to participate. While added some surety to the process, the bond does not address the issue of the pricing, and is therefore an inefficient solution, Winegarden concluded.
The structure can lead to patient harm when lower cost/lower quality medical equipment, which may be deemed inappropriate for many patients, is biased to win bids. In some cases, such as with diabetes patients, some equipment hasn’t been available at all. Similar findings have been concluded about the availability of oxygen tanks for patients.
“Thus, the ineffective bidding process is jeopardizing overall healthcare quality,” the study read.
Furthermore, lower spending on durable medical equipment purchases in the short term has been offset by higher spending elsewhere in the healthcare system.
With these issues in mind, Winegarden argued the bidding process should be reformed, replacing the methodology for pricing to ensure availability of supplies.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."