One of the issues taken up by the Medicare Payment Advisory Commission (MedPAC) last week was the hotly contested bidding program for providers of durable medical equipment, prosthetics, orthotics and supplies, or DME.

The Centers for Medicare & Medicaid Services had commenced implementation of the program in 10 metro areas across the U.S. this summer, but Congress reacted to constituent pressure and legislated a halt to the program in the Medicare reauthorization act (Medical Device Daily, July 11, 2008).

Staff analyst David Glass reported that the program "was only briefly operational in July, it turned out," and said that the Medicare tab for DME was $8.6 billion in fiscal 2007. "It's a very unconsolidated industry," he said, with tens of thousands of suppliers, and research indicates that "Medicare prices are often hundreds of times higher than Internet prices."

Glass said the history of the program suggested that fears of problems associated with the program were largely overblown, pointing out that a similar project that ran from 1999 to 2002 dropped prices by 17% to 22%, with "no significant quality or access problems."

He discussed industry's motives in lobbying on Capitol Hill to kill the program. "Industry expressed great concern about competitive bidding," partly because "the number of losers greatly outweighed the number of winners, and some claimed access would suffer." Glass said that in a few instances, bidders with no experience won bids, sometimes in areas where they had no previous presence.

On the other hand, "bidders had to be accredited," whereas this is not a requirement for current suppliers, he said.

Commission chairman Glenn Hackbarth said MedPAC could choose to "be silent" on the issue, but noted that developing a new position would require "a fairly significant investment of time and effort." MedPAC could recommend other bidding models that "would provoke less resistance.

"Another possible recommendation is no bidding at all," Hackbarth observed, adding that he had heard "some interest in each of the paths," other than silence on the issue.

Nancy Kane of the Harvard School of Public Health (Boston) said of the current demonstration program: "The political strategy of going from 4,500 suppliers to 325 is guaranteed to fail." She posed the question of whether "we need to just set a price" and let things shake out from there.

Some members of the panel wondered whether interest in DME was likely to sustain, given all the controversy and the fact that the current bidding program is the second such program to tank in less than a decade. Francis Crosson, MD, of Kaiser Permanente Medical Group (Oakland, California), hinted at Congressional disinterest in remarking "the consideration of whether we spend time on this is [whether] we have a customer for our work."

Hackbarth said the GOP-led Congress saw bidding as a priority, but acknowledged this might not be the case after the presidential inauguration in January. All the same, he said, "when there is such an egregious problem, to just turn and walk away from it is troubling to me."

Michael Chernew of Harvard Medical School (Boston) also cautioned against throwing in the towel, describing DME bidding as "a sentinel issue." He argued that "if we can't make competitive bidding successful" for DME, other areas will surely fail because they seem likely to present greater hurdles. "The theme behind this transcends DME" and "will come up for prescription drugs" in Medicare's Part D benefit.

—Mark McCarty, Washington Editor

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