Harkin fans flames of competitive bidding

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Sunday, June 30, 2002

WASHINGTON - Sen. Tom Harkin (D-Iowa) used an OIG analysis of Medicare and VA pricing for durable medical equipment to fan the flames of a Congressional proposal to launch a national competitive bidding program and to hurry CMS down the road toward the delivery of a final rule on inherent reasonableness.

The OIG "letter report" compared the prices that Medicare and the VA paid for 16 common DMEPOS items, including semi-electric hospital beds, walkers and commodes, and found that Medicare could have saved nearly one billion dollars if CMS paid what the VA paid.

Although that $958 million in potential savings does not take in a host of buried VA costs - and by many accounts is a completely unrealistic assessment - it was the figure quoted in a June 10 USA Today article headlined, "Medicare being 'taken to the cleaners'for supplies."

That kind of savings also prompted the NBC Nightly News to smear DMEPOS fees in a "Fleecing of America" report on the evening of June 10.

Not even CMS holds up VA and Medicare pricing as an apples-to-apples comparison. In 1999, CMS allowed that to make a fair comparison between VA and Medicare pricing, a 67% price markup must be applied to VA wholesale prices. If the VA's wholesale price is adjusted by 67%, the potential savings falls by more than $500 million to $440 million.

AAHomecare, in written testimony delivered to a Senate subcommittee hearing June 12, rejected the 67% markup as arbitrary. "Not only did CMS use stale data (when it derived its 67% differential)," testified AAHomecare, "it did not undertake any analysis of the costs to providers of participating in the Medicare program."

The OIG cannot say whether the CMS markup is valid. "We did not verify or update the CMS markup percentage, nor do we advocate this as the appropriate markup to VA prices," HHS Inspector General Janet Rehnquist told Harkin.

Dave Williams, Invacare's director of government affairs, who also appeared before the committee, asked Harkin to reject the OIG's conclusions. "The OIG has done a disservice to this subcommittee," he said, and more importantly, Medicare providers and beneficiaries by publishing a report that is both inaccurate and invalid.

Defenders of the Medicare fee schedule are also frustrated by the tendency of government agencies and elected officials to ignore the costs associated with billing the Medicare program. The costs of obtaining prescriptions, CMNs, medical records and waiting for payment rarely factor into the comparisons and may account for as much as 30-35% of a provider's cost.

"One of the VAs we deal with, when they give us a PO, there's a credit card number on that. We get paid immediately," said Tom Andrews, director of home care sales for Merriam Graves, which does business with both Medicare and the VA. "We bill other VAs like commercial accounts and get paid within 30 days."

While Bill Thomas leads the charge for a nationwide competitive bidding program in the House, Harkin is leading the charge in the Senate. After the hearing, Williams said he believed a nationwide competitive bidding demonstration, as opposed to the roll-out of a program, is likely to emerge from Harkin's subcommittee. HME

'I think that's going to be the compromise," said Williams. "Let's try nationwide competitive bidding and see what we can save, and see if we can save what the GAO says we can save, and then we'll go from there." HME

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