The Cost Curve Starts to Bend – High Performance Health Care
Health Policy

The Cost Curve Starts to Bend

A recent press release from the Centers for Medicare and Medicaid Services (CMS) indicates that the government is taking steps to slow the growth in health care spending.  This press release shows how competitive bidding by Medicare can directly reduce costs significantly.  Competitive bidding has been resisted for years by Durable Medical Equipment (DME) suppliers, but the savings are too large to continue the current administered pricing system.  The Patient Protection and Affordable Care Act (PPACA) expands this competitive bidding program and also requires that all orders for DME include a face-to-face examination by a physician.

Medicare to Save Average of 32 Percent for Some Medical Equipment and Supplies in Selected Areas
CMS Press Release, July 2, 2010

85617417Medicare beneficiaries in nine areas of the country who use certain medical equipment and supplies will see average savings of about 32 percent off the current cost of those items.  The savings will be realized through the first round of a new Competitive Bidding Program that will be used to determine the price that Medicare pays for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).  The program replaces Medicare’s existing fee schedule amounts with market-based prices.

“When this program begins in January, Medicare beneficiaries in these nine areas will see substantially lower prices than they are paying now,” said CMS Deputy Administrator and Director for the Center for Medicare Jonathan Blum.  “The program also ensures continued access for beneficiaries to high quality products from accredited suppliers that meet stringent quality and financial standards which help to reduce fraud.  The program is expected to save more than $17 billion over ten years.”

 The first round of the program is scheduled to begin on Jan. 1, 2011, for beneficiaries in Charlotte, Cincinnati, Cleveland, Dallas, Kansas City, Miami, Orlando, Pittsburgh and Riverside (more detail on locations below).  Suppliers that wished to participate in the program submitted bids last year.  CMS plans to announce the contract suppliers in September once all contracts have been finalized.

As part of the first round of the Competitive Bidding Program, beneficiaries and Medicare will see significant savings on the cost of some medical equipment and supplies as shown by the examples of savings for three frequently used items (an oxygen concentrator, a semi-electric hospital bed, and a typical monthly supply of 100 diabetic test strips and 100 lancets) below.

Continue reading the press release for more details.

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