Economist on competitive bidding: It's a terrible program

Sunday, August 16, 2009

ARLINGTON, Va. - When it comes to competitive bidding for DME, Robert Morris University economist Brian O'Roark hasn't changed his tune: He didn't like the program when he first heard of it more than a year ago, and he doesn't like it now.

"What we are looking at here is a plan that doesn't seem to be thought out very well," said O'Roark, who participated in an AAHomecare telephone press conference on competitive bidding last week.

O'Roark is the author of "Analysis of the Economic Impact of Competitive Bidding on the DME Market: A One Year Update." He summarized the report during the press conference.

AAHomecare CEO Tyler Wilson, who introduced O'Roark, said the association wants to see the program abolished.

"At a minimum, CMS has to look at all the flaws in the program, which they have yet to do, before moving forward almost on autopilot as they are today," Wilson said.

Prior to Congress delaying Round 1 last summer, of the more than 4,000 providers in the initial 10 bidding areas, only 376 were deemed to have met the bidding program requirements, according to AAHomecare.

The association slams the program for depressing competition and limiting patient choice and access.

O'Roark agrees. In this study, he states:

- If Round 1 of competitive bidding had continued, winning HMEs (in a effort to offset steep declines in reimbursement) would have had no choice but to cut service, lengthen patient response times and give up providing some equipment altogether.

- Reduced access and declining quality of care under competitive bidding will force patients into institutionalized care. This will lead to higher long-term costs for Medicare--not lower as CMS suggests.

- In a normal market, when service and quality of care decline, new homecare providers would enter the market to fill the void. Competitive bidding makes this impossible, because it eliminates existing competitors and stops new firms from opening.

- In any other market, an attempt to restrict supply would be soundly defeated under the anti-trust laws of the United States.

AAHomecare's Wilson called competitive bidding a "deeply flawed " program.

Medicare's spending on DME is growing at just 0.75% annually, Wilson said, citing National Heath Expenditures data from CMS. That compares to a more than 6% growth rate for Medicare overall. Spending for DME represents about 1.6% of total Medicare spending, he said.

"Home medical equipment and services is not the problem with our healthcare system by any stretch," Wilson said. "It is part of the solution."