Competitive Bidding Curbs Medicare Durable Medical Equipment Costs
The Medicare program saw lower prices for durable medical equipment after two rounds of the Competitive Bidding Program.
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By - A research team from the Health Care Cost Institute (HCCI) found that the Competitive Bidding Program (CBP) lowered Medicare costs on durable medical equipment (DME), bringing spending down to levels experienced by many commercial payers.
The report, published in Health Affairs, found that the average price for seven types of DME decreased by 34.7 percent under the Round 1 of the CBP when compared to pricing methods before 2010.
HCCI wanted to know if Medicare was able to compete with commercial payers when negotiating DME pricing. The team at HCCI analyzed a database containing DME prices for Medicare and commercial payers from 2011 to 2016. This time-period reflects the total duration of the CBP.
Medicare and commercial payers significantly lowered prices on DME compared to average market prices, the study found. Medicare price reductions on DME were about the same as commercial reductions, but some of the prices on certain types of respiratory equipment lowered for Medicare purchasers and increased for commercial payers.
While commercial payers from 2011 to 2016 experienced more price reductions for rentals on CPAP machined classified as E0470 devices, Medicare reductions were not far off. Medicare experienced price reductions of 5.9 percent on the E0470 devices and commercial payers saw price reductions of 6.4 percent.
However, Medicare pricing on a similar group of CPAP devices (E0562) decreased by 9.4 percent while prices on these devices increased for commercial payers by 64.4 percent.
The team believes that the program, as well as the size of Medicare as an insurer, helped to increase competition and negotiating power.
Medicare has several advantages for negotiating prices, the researchers suggested. CMS is likely to be the largest DME buyer, has a reputation as a prompt payer with clean claims for DME, offers a thirty-day payment ceiling to suppliers before interest accrues, and provides successful bidders a three-year contract that is likely longer than contracts by other payers.
Medicare’s success as a buyer of DME can provide lessons for other payers and the healthcare industry on the market and policy implications of competitive bidding.
The team suggested that two of the seven device prices’ lowered because certain high-priced DME suppliers exited the market, which affected DME prices for other payers.
“This suggests, but does not prove, that the competitive bidding program led high-cost suppliers to exit the market, there were reductions in prices by all suppliers, or both,” the team said. “If suppliers exited the market, the remaining suppliers might have had more leverage to command higher prices from commercial insurers.”
Based on the success Medicare had under the CBP, the team concluded that CMS can use these methods to further drive savings within the Medicare program past an expected $25.7 billion from 2013 to 2022 on DME.
“Our analysis compared prices for durable medical equipment and similar items set through CMS’s competitive bidding program and those paid by large commercial insurers. The results suggest that the initial round of the program produced prices comparable to those paid by insurers,” HCCI said.
“Given that the program has continued to evolve, additional evaluations of the program prices, relative to commercial prices, from later program rounds and for more durable medical equipment and similar items will likely be informative.”
