Q and A: Cramton goes behind the numbers

BALTIMORE - Prof. Peter Cramton set the competitive bidding debate on fire earlier this month when he reported that the number of claims submitted for home medical equipment in Round 1 areas plunged in 2011. Cramton, an economist with the University of Maryland and an outspoken critic of the program, obtained the data through the Freedom of Information Act (FOIA). He spoke with HME News last week about some of his preliminary conclusions.

HME News: Did you expect to see such a steep decline in claims in Round 1 bid areas?

Peter Cramton: I would have expected some drop, but I am surprised it's as large as it seems to be. The biggest explanation, as we learned from the auction outcome, is that the whole market was radically transformed, with the vast majority of providers being removed from the supplier list.

HME: The data shows that there are claims being made by non-contract suppliers.

Cramton: I suspect that is the grandfathering aspect. For most of the products, there was a period where (the beneficiaries) could continue with their existing supplier. That, to me, is cause for concern because grandfathering will end and when it does end, if they haven't found a new supplier, that's going to be a serious issue.

HME: The data also shows an increase in negative health outcomes in bid areas vs. non-bid areas.

Cramton: The point of that set of figures is to show that the sharp decline in claims, assuming that it isn't all attributable to fraud--and I would be shocked if it was--is likely leading to a decline in utilization. The decline in utilization means there are more non-utilizers, which means there are more bad health outcomes. Those are all indicators that the program, rather than saving the taxpayers money, has a very real but hidden cost, which is that the cost simply falls in a different category within the Medicare system.

HME: Why were complex rehab codes included? They weren't in Round 1.

Cramton: The FOIA request was just for the categories that were included under the program. I think what happened--I am not sure--is that some product codes within the standard and complex wheelchairs categories changed, and so it caused that anomaly.

HME: Do you think CMS could spin this data to prove competitive bidding has resulted in a decline in fraud and abuse?

Cramton: I don't see how they could draw that conclusion. Driving down claims and driving out fraud is largely a separate issue. It's not the auction itself that prevents fraud. I guess what they would argue is, absent competitive bidding, CMS was required to deal with a potentially unlimited number of suppliers that they didn't really have the resources to check who is doing the right thing and who is not. I think it's not so much the number of suppliers but rather the checks that you make to confirm that the services being provided are legitimate.