Making Medicare Make Sense

Q: What is the Medicare Competitive Bidding Program and How Will it Affect Me?

A: The Centers for Medicare & Medicaid Services’ (CMS’) Competitive Bidding Program for Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) is an important step towards the Medicare program paying appropriately for medical items and services. The program has and will reduce out-of-pocket expenses for Medicare beneficiaries and has and will save the Medicare Program money while ensuring beneficiaries continue to receive quality products from accredited suppliers.

Medicare generally pays 80% of the fee schedule payment amount for DMEPOS items used in the home, such as oxygen equipment, walkers, wheelchairs, devices used to treat sleep disorders and hospital beds, under Original Medicare Part B and beneficiaries pay the remaining 20%. For most of these items, the fee schedule payment amounts are based on historical charges, adjusted for inflation at times, and not on current market prices. The Office of the Inspector General and the Government Accountability Office conducted numerous studies and found that the prices paid by Medicare for certain DMEPOS items were excessive, sometimes three to four times that of retail prices and the amounts paid by commercial insurers. Clearly, Medicare needs a better way to pay for DMEPOS items.

In 2011, Medicare began the Competitive Bidding Program for certain categories of medical equipment and supplies in nine markets. Suppliers seeking to provide these products must submit bids to do so, as well as be certified for their financial stability, ability to provide quality products, and capability to serve the areas where they want to operate. In 2013, the program will expand from nine to 100 markets or Metropolitan Statistical Areas, (MSAs). In addition, the program will include a mail-order program for diabetic supplies, like test strips, that will be in effect everywhere in the country.

What this means is that, if you live in, or travel to, an area where the program is in operation and you need equipment or supplies included in the program, you will have to get them from a Medicare contracted supplier. Otherwise, Medicare will not pay for them, and you will likely have to pay the full cost out of pocket. The list of suppliers will be available on line, at http://www.medicare.gov or you can call Medicare to get the information, at 1-800-MEDICARE, which is, 1-800-633-4227.

So, for example, when the national mail order program for diabetic supplies goes into effect, on July 1, 2013, Medicare beneficiaries receiving these supplies through the mail will have to obtain the diabetic supplies from one of the Medicare contracted suppliers, or pay for the cost of the supplies out of their own pocket.

Medicare will be doing extensive outreach and education on the expansion of this program before it goes into effect in July 2013.

Q: What are the Results of the First Year of This Program?

A: Medicare is adopting competitive bidding to save you money, as a beneficiary, a taxpayer, or both. In the first year of operation, in just the nine original markets, Medicare saved over $200 million on this equipment. Beneficiaries save money, too, because your co-payment on the cost of the equipment, usually 20%, goes down when the cost that Medicare pays is reduced. The savings in 2011 in the nine metropolitan statistical areas of the first round of this program amounted to more than $100 per person who purchased hospital beds from contracted suppliers, up to $168 on oxygen concentrators, and $140 on diabetic test strips. In addition, because fraudulent suppliers have been attracted to the durable medical equipment business due to historically excessive Medicare payment rates, the program has also reduced unnecessary purchases. We estimate that Medicare beneficiaries will save over $17 billion over the next ten years, and the taxpayers will save another $25 billion, because of the lower prices paid under the new program – so far, an average of 42% reduction from the old system. Best of all, the change to the new program has not had any negative effects on the health of people on Medicare, or their access to the quality supplies and products they need.

If you have any question about Medicare, call 1-800-MEDICARE, which is, 1-800-633-4227. Medicare’s national toll-free helpline is available 24 hours a day, seven days a week, or visit http://www.medicare.gov or log onto http://www.healthcare.gov to read more about the Affordable Care Act. To learn more about the DMEPOS Competitive Bidding Program, visit the DMEPOS Competitive Bidding web page at http://www.cms.gov/DMEPOSCompetitiveBid/.