Washington

In a Sept. 24 letter to the chairman of the U.S. House of Representatives' Energy and Commerce Committee, the Congressional Budget Office defended its competitive-bidding predictions.

The letter, which the CBO made public at the end of October, responds to a July 22 PriceWaterhouseCoopers report — sponsored by the Coalition for Access to Medical Services Equipment and Technology — that called the CBO's 10-year prediction of $7.7 billion in savings “overstated.” PwC calculated savings of only $1 billion for the same time period.

Both entities based their estimates on a provision of H.R. 4954 that calls for nationwide competitive bidding for certain durable medical equipment and orthotics. However, the CBO's prediction did not take into account the uncertainties inherent in the bill, PwC said. For example, the CBO did not consider the administrative costs of implementing such a program, the changes in Medicare Part B premiums or the wide latitude that the provision gives the Secretary of the Health and Human Services Department to implement competitive bidding as he chooses, PwC explained.

Addressing these concerns one by one, the CBO's letter asserted the viability of the $7.7 billion estimate. The letter defended the estimate's baseline price projection; refuted PwC's claim that only 50 percent of DME spending would be eligible for competitive bidding; asserted that inhalation drugs would account for a higher proportion of affected spending under H.R. 4954 than in the demonstration counties; and said that the savings rates would remain relatively constant during the 10-year time period in question.

The CBO admitted that its estimate did not consider administrative costs. However, the CBO insisted that these costs would account for only a small portion of the difference between the two estimates.

Finally, the CBO insisted that Medicare quickly could resolve any access- or quality-related problems that might arise.

“We saw no indication in [Medicare's first annual report to Congress regarding the competitive bidding demonstration projects] and in our discussions with officials at [Medicare] that there were significant problems with access or quality under competitive bidding,” the letter said. “We assumed that similar problems would occur with the implementation of a nationwide program, but that these problems would be resolved as they have been in the demonstration.”

More information about the CBO's rebuttal is available at http://www.cbo.gov/showdoc.cfm?index=3947&sequence=0.

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