Every presidential budget since Ronald Reagan was in office has contained a proposal to use some form of “competitive bidding” to reduce Medicare spending on durable medical equipment. Despite these persistent recommendations, all that has occurred during the past 20 years has been demonstration projects involving a few products distributed by a handful of providers in two counties.

Nonetheless, the mere mention of competitive bidding by the President sends the stock prices of publicly held manufacturers and providers plummeting. Small, private providers shake in fear that they'll be eliminated by “low-ball” bids from larger competitors. And the entire HME industry becomes preoccupied with developing strategies to eliminate competitive bidding from the lexicon of budget drafters.

But what if it turns out that competitive bidding isn't a dragon we need to slay? Instead, maybe we should be reading between the lines.

Competitive bidding keeps coming back like a bad penny because the Medicare program is under tremendous pressure to reduce spending. It does not take a rocket scientist to determine that the “baby boomer” generation is only a few years away and that as this generation becomes eligible for Medicare coverage, the cost of the program will soon outstrip available resources. Therefore, both legislators and bureaucrats must find creative ways to reduce costs.

The problem, however, is that Washington and Baltimore are filled with a whole lot of uncreative people. After learning that military contractors were charging several hundred dollars for a toilet seat, the U.S. Department of Defense instituted a competitive bidding program that saves the government millions of dollars. From that single experience, bureaucrats in every government agency have become enamored with the idea that some form of competitive bidding is needed to reduce costs regardless of the program.

Meanwhile, agency staff have been looking for a way to reduce Medicare spending on DME and turned to the only solution they knew: competitive bidding. However, this solution from Health Care Financing Administration bureaucrats (now Centers for Medicaid and Medicare Services) actually created a government-sponsored price-setting program and mislabeled it “competitive bidding.”

Even last year's University of Wisconsin's cost analysis of the two demonstration programs could not determine if their methodology was cost-effective. Moreover, the study could not conclude if competitive bidding positively or negatively affected the clinical outcomes. No new data has surfaced since the Wisconsin report was published in January 2001.

And yet, CMS and the Office of Management and Budget — ignoring their own contractors' reports — are declaring the demonstration projects a huge success, and now publicly say that the projects have saved the Medicare program more than $7 million. Neither of these conclusions has any basis in fact.

The 2003 budget takes competitive bidding to new heights of delusion and hypocrisy. Without any proof that competitive bidding either saves money or is clinically appropriate, the budget proposes creating a nationwide competitive bidding program for home care beds and home oxygen services that is estimated to save 17 percent for the Medicare program. However, the budget is silent on what it will cost to implement this scatter-brained idea and ignores the reality that implementation would take a minimum of five years using the current model.

So, why is competitive bidding included in President Bush's budget? Because the administration had to propose a predetermined reduction in Medicare spending for DME. It is safe to say that there are few, if any, competent individuals at either CMS or OMB who actually believe that competitive bidding will become a reality in 2003.

Competitive bidding was included in the budget as a signal to the industry — and to Congress — that reductions to Medicare DME spending are needed.

The problem is that most of the energy and talent in our industry is focusing on competitive bidding and ignoring the reality that the government is only looking for a contribution from us to the Medicare cost-savings effort.

Rather than running around fighting a stalking horse named competitive bidding, HME industry leaders should be meeting with U.S. Department of Health and Human Services Secretary Tommy Thompson and CMS Administrator Tom Scully to find ways to save the Medicare program money.

The industry must come to this meeting prepared to give something back to the Medicare program so we are viewed as legitimate partners in the effort to keep the program solvent. Otherwise, we will lack credibility and be summarily dismissed if we approach Scully and Thompson with the attitude that “we can't accept competitive bidding and we won't accept any other form of reductions.”

This cloud may have a silver lining, despite the negative short-term impact of including a competitive bidding proposal in the President's budget. If the HME industry can get its act together, develop a workable alternative to competitive bidding and work with Congress and CMS staff to refine the alternative proposal, the industry may just find that it is finally accepted as a legitimate player in health care funding and policy debates.

Unless we think creatively ourselves, our industry will be stuck with competitive bidding or some more onerous way of securing our “contribution” to the effort to keep the Medicare trust fund solvent.

The big question is whether or not the HME industry is mature enough to see the opportunity and act on it. If it is, we may see competitive bidding for HME go the way of the $600 toilet seat.

Dave Williams is a 12-year veteran of the HME services industry and has worked on public policy issues at the local, state and federal levels of government for more than 25 years. He is currently employed as the Director of Government Relations for Elyria, Ohio-based Invacare Corporation.