Medicare: Issues for Manufacturer-Level Bidding for Durable Medical Equipment

Book excerpt: In 2009, Medicare spent approx. $8.1 billion on durable medical equipment (DME), prosthetics, orthotics, and related supplies for 10.6 million beneficiaries. DME includes items such as wheelchairs, hospital beds, and walkers. Medicare beneficiaries typically obtain DME items from suppliers, who submit claims for payment for these items to Medicare on behalf of beneficiaries. The Centers for Medicare & Medicaid Services (CMS), an agency within the Dept. of Health and Human Services (HHS), has responsibility for administering the Medicare program. Medicare and its beneficiaries -- through their out-of-pocket costs -- have sometimes paid higher than market rates for various medical equipment and supplies. To achieve Medicare savings for DME and to address DME fraud concerns, Congress required CMS to phase in a competitive bidding program (CBP) for DME suppliers in selected competitive bidding areas (CBA). In CBP, suppliers submit bid prices in the amounts they are willing to accept as payment to provide DME items to Medicare beneficiaries. CMS then enters into contracts with select DME suppliers to provide DME items at the prices determined by CBP. In contrast to CBP's supplier-level approach, some health care purchasers use a manufacturer-level approach to buy DME items directly from DME manufacturers to obtain savings by leveraging their purchasing power. CMS has not been required to develop a manufacturer-level approach. This report provides information on health care purchasers that currently use a manufacturer-level approach and on issues that would need to be addressed if CMS implemented such an approach. It describes (1) efforts used by some non- Medicare purchasers to reduce DME spending by contracting with DME manufacturers or using purchasing intermediaries, and (2) issues that CMS might face if required to implement a DME manufacturer-level approach with broad authority to do so. Figures and tables. This is a print on demand report.