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This article was originally published in The Gray Sheet

Executive Summary

DME SUPPLIER MEDICARE BIDDING PROPOSAL should be eliminated from the Clinton Administration's economic plan, the National Association of Medical Equipment Suppliers urged March 31 in testimony before Rep. Henry Waxman's (D-Calif.) House Energy and Commerce health subcommittee. Richard Doherty, vice chair of the NAMES board of directors, argued that other government bidding programs have failed, and that implementation of such a plan for durable home medical equipment (HME) would reduce supplier competition and lead to higher prices. Clinton's economic plan, released Feb. 17, proposes granting HHS authority to "initiate competitive bidding programs for [durable medical equipment] supplies where appropriate" ("The Gray Sheet" Feb. 22, p. 1). "All evidence suggests it is virtually impossible to design and administer a competitive bidding process without damaging the market, compromising quality and leading to higher prices in the long run," the HME industry rep claimed. "If a winning bid is awarded solely to one provider, this certainly will drive many small companies out of business; the sole winner in future years thus would have a considerably reduced level of competition." Doherty continued: "Competitive bidding for certain selected HME items under Medicaid has been tried previously and subsequently abandoned in a number of states for a variety of reasons similar to that which Medicare would experience." He added: "There are enormous complexities involved in dividing the entire nation into multiple and reasonable service areas." Comparing the DME bidding proposal to Department of Defense programs, Doherty stated that DoD bidding "has entailed volumes of product specifications, a huge bureaucracy and a glacial pace of operations. As for cost-containment, it is a joke, a scandal, or both, depending on one's point of view." In addition to the competitive bidding proposal, the NAMES representative voiced opposition to two other provisions of the administration's plan that aim to reduce Medicare DME payments. The plan proposes changing the method for calculating DME reimbursement fees and granting HHS greater authority to revise reimbursement levels. Doherty said that Congress should reject the proposal to switch from "weighted mean" fee calculation to "national median" fee calculation. "Again revising a national payment rate at the median for all HME items would mean going back into an old, flawed database -- a proposition Congress already rejected [in the Omnibus Budget Reconciliation Act of 1990] and, we believe, should not revisit." The third provision drawing criticism from NAMES is one that would grant HHS authority to make payment determinations based on "market factors." The provision "would allow [the Health Care Financing Administration] to impose virtually any proposal to reduce funding for HME...without the benefit of debate and discussion in a Congressional forum," Doherty asserted. Doherty added that the $510 mil. in projected HME payment savings as a result of the proposals are "in frightening addition to reimbursement reductions totaling $80 mil. in 1990 and $215 mil. in 1991." The "disproportionate level of cuts...are targeted at an industry that accounts for only $1.8-$2.0 bil. in annual Medicare expenditures, barely 2% of the entire Medicare budget," Doherty proclaimed. NAMES first registered its opposition to the proposed cuts in February when the economic plan was released, claiming that the proposals would be "counterproductive."

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