What was Medicare Competitive Bidding Meant to do?

Reform Medical Bidding Process to Protect Seniors

Special Report on Healthcare – The Hill
By Congresswoman Renee Ellmers
Wednesday, February 12, 2014

What was Medicare’s competitive bidding process meant to do?

Simply put, it was designed to provide competition and lower prices for our disabled citizens and seniors. But
for years, this well-intended process has been overrun with errors and fraud.

When competitive bidding was first debated on Capitol Hill, there was widespread agreement among lawmakers
and policymakers that Medicare needed a more cost-effective method of determining prices for home medical
equipment such as oxygen therapy, wheelchairs, hospital beds and diabetic testing materials.

Yet, since its inception in 2011, the program began drawing concerns from consumer groups, Medicare beneficiaries,
and businesses large and small. Their concerns were based on the fact that this program is jeopardizing
the health of Medicare patients and forcing equipment suppliers to close or lay off workers.

Shortly after the program was first implemented, Congress legislatively delayed it for 18 months due to critical
flaws in the bidding process, which produced fewer competitors, fewer homecare services, and a substantial decrease
in the quality of care for seniors and the disabled. Since the delay, no significant improvements have been
made to the program or the bidding process.

These problems have hit my own constituents in North Carolina, where patients and businesses have been negatively
affected following the program’s launch in four locations throughout the state.

Businesses like Family Medical Supply in the Triangle area of North Carolina are being forced to close stores
and lay off workers. In Gastonia, Joseph Reutter of BSI Medical Supply worried about how he would tell his
employees that he couldn’t afford to keep them. And in New Bern, Medicare patients like 73-year-old Joseph
Metts went through a lengthy ordeal trying to get the right diabetic testing supplies.

This is happening in states and communities throughout the country. Medicare beneficiaries are facing delays in
getting equipment or repairs — or not getting them at all. Since July, more than 2,600 patients have contacted a
consumer watchdog organization with complaints about poor service or not receiving the equipment that has
been prescribed by their physician.

Back in September 2012, I held a hearing before the House Small Business Committee to find out whether the
program should be expanded from 9 to 91 metropolitan areas. According to our witness testimony, the answer
was a resounding “no.” At the hearing, we learned that the program is fundamentally flawed and violates basic
auction principles.

The hearing included as a witness Laurence Wilson, director of the Chronic Care Group with the Center for
Medicare and Medicaid Services (CMS), who runs the Medicare Competitive Bidding Program.

He testified that the bidding program “it is not an auction.” I agree with Mr. Wilson on that point. However,
without an auction, this program would violate current law.

In 2003, Congress passed legislation that required the CMS to conduct a competitive bidding program for durable
medical equipment. Yet competitive bids and auctions are the same thing. Thus, Mr. Wilson is saying that
the CMS is not abiding by the law.

In reality, the so-called “competitive bidding” process is actually price setting by the government. The CMS has
implemented a convoluted bureaucracy that assigns prices for products and services somewhere between the
lowest and highest bids. One of the major flaws is that the bids are nonbinding, allowing bidders to enter lowball
bids and then walk away if they win the contracts.

Last summer, price cuts averaged 45 percent for home medical equipment, amounting in some cases to reimbursements
that are lower than the provider costs for obtaining the equipment. And the entire process is cloaked
in secrecy because the CMS has never fully disclosed the formula for determining these prices.

This is where the Obama administration did a true disservice to the country. Despite repeated requests from industries
and outside experts that it be re-evaluated to address serious problems, the CMS expanded the program
from 9 to 91 new jurisdictions in July.

Even more remarkable is the fact that the CMS believes the system is working. I am here to say it is not.
While the CMS contends it is saving millions of dollars, my question is: At what cost? Some of these so-called
savings merely shift costs to other Medicare categories. And while the bidding process is sharply reducing the
availability of home medical equipment, patients are requiring more emergency room visits, increased hospitalizations
and longer hospital stays. People are not receiving the care they need.

I strongly believe in the competitive forces of the private market, but the process by which the competition is
conducted must be fair — and truly competitive.

It’s time for Congress to step in and fix this problem.

Ellmers has represented North Carolina’s 2nd Congressional District since 2011. She sits on the Energy and
Commerce Committee.

# # #
Congresswoman Renee Ellmers serves on the House Energy and Commerce Committee and is
Chairwoman of the Republican Women’s Policy Committee.
She represents the Second District of North Carolina which includes all of Fort Bragg.
For more information, please visit Congresswoman Ellmers’ website at www.ellmers.house.gov or call (202)
225-4531.

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