Competitive Bidding Prices coming to Medicaid?

A Recent OIG report suggests Texas Medicaid DMEPOS costs may be exceeding medicare costs in Competitive Bidding Areas.


States establish their Medicaid payment amounts for all services—including items in the category of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS)—working within Federal parameters to limit costs while ensuring access. The President’s Federal Fiscal Year (FFY) 2014 budget proposal also emphasized cost containment by Medicaid programs, proposing “limiting Federal reimbursement for a State’s Medicaid spending on certain DME services to what Medicare would have paid in the same State for the same services.”


OIG examined the FFY 2011 fee-for-service payment amounts for 32 DMEPOS items covered under both the Texas Medicaid program and the Medicare DMEPOS Competitive Bidding Program to compare payment amounts across the two programs in the Dallas/Fort Worth area. For each item for which the Texas Medicaid fee-schedule amount exceeded the Medicare payment amount, OIG used the Medicaid claims volume to estimate the potential savings that could have been achieved using the Medicare payment amount instead. OIG then calculated the overall potential savings by summing the potential savings per item.


OIG found that in FFY 2011, the Texas Medicaid fee-schedule amounts for 30 of the 32 DMEPOS items exceeded the payment amounts under the Medicare DMEPOS Competitive Bidding Program. During this period, Texas Medicaid spent approximately $12 million on these 32 items in the Dallas/Fort Worth area. If it had used the payment amounts from the Medicare Competitive Bidding Program, Medicaid could have saved approximately $2 million (State and Federal shares combined) in the Dallas/Fort Worth area.

OIG’s claim that these findings provide a tangible example of potential State and Federal savings for Medicaid programs if the programs were to use the Medicare Competitive Bidding Program payment amounts for DMEPOS items. In July 2013, the Medicare DMEPOS Competitive Bidding Program expanded to cover a total of 100 metropolitan areas nationwide. If the State Medicaid programs were to use the Medicare Competitive Bidding Program amounts—rather than the State Medicaid fee-schedule amounts—the States and the Federal Government could achieve savings.

This report does not contain recommendations. See report –

Industry Opposes Applying CB Pricing to Medicaid

Applying competitive bidding pricing has been proposed by the Obama Administration to Congressional budgeters for the past three years as a way to reduce Medicaid expenditures. The American Association for Homecare and PAMS have opposed this proposal because it has two fundamental flaws. First, it is unclear if the competitive bidding program is sustainable over the longer term. Independent studies called for by Congress to evaluate the program’s effectiveness have not been completed. Therefore, applying these Medicare payment rates before these studies are complete would be premature and potentially harmful to the elderly and persons with disabilities.

Secondly, Medicaid programs are structured very differently from Medicare. Many states discount their payment rates by a certain percentage off the Medicare rate. For example, a state Medicaid program may pay 80 percent of the Medicare payment rate for items and services. In addition, other states waive the 20 percent beneficiary co-payment because Medicaid patients cannot afford co-payments. Still other states combine these two provisions (i.e., the 20 percent reduction off the Medicare payment rate and waive the 20 percent beneficiary copayment amount). Therefore, if this provision were enacted by Congress, many state Medicaid payment rates would be up to 40 percent below the Medicare payment rates established by competitive bidding. Homecare providers will simply not be able to furnish items and services at such payment rates and be unable to accept and treat Medicaid patients if this proposal is adopted.

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