WASHINGTON — At two Capitol Hill briefings yesterday, economist Peter Cramton once again warned Congress that Medicare's DMEPOS competitive bidding program will fail.
Cramton, a professor at the University of Maryland, has continued as an outspoken critic of the program since his first warning in a letter to Congress last September. Signed by 166 other economists, the letter dissed the program's design and set out what Cramton has described as its "fatal flaws," among them non-binding bids and a system that encourages lowball bids not based on costs.
The sum of the problems, the economists said, "suggests that the program over time may degenerate into a 'race to the bottom' in which suppliers become increasingly unreliable, product and service quality deteriorates, and supply shortages become common."
In a presentation to about 60 House staffers yesterday morning and another to 45 Senate aides in the afternoon, Cramton laid it all out again, this time armed with a PowerPoint to explain the bidding program's poor design.
His first slide read, "Bad news: CMS is doing an atrocious job with the DME auction program."
Cramton said that with the lack of transparency in quantities associated with bids, CMS can essentially manipulate prices to arrive at reimbursement rates it thinks are reasonable. "They have total flexibility to set almost any price they want," he said.
"The current CMS auction approach is a scandal now and ultimately will be a train wreck," Cramton told HomeCare before the briefings. "The only reason we have not seen the train wreck yet is that CMS has almost complete flexibility to set prices in the current system. But make no mistake: These prices are arbitrary and unrelated to providers' costs.
"It is absurd for CMS to claim that 'all is well' given such a process," he continued. "Yet that is what they have done in the nine months since I first looked at the Medicare competitive bidding program."
Cramton was backed at the House briefing by additional speakers, including Barbara Rogers, president and CEO of the National Emphysema/COPD Association and a member of the Program Advisory and Oversight Committee. Rogers, who uses oxygen, a scooter and other DME, told staffers the bidding program has put HME companies out of business, which eliminates choices for Medicare patients.
As for her term on the PAOC, which is supposed to advise CMS on competitive bidding, Rogers said it had been an "exercise of frustration." Both she and speaker Tom Milam, former CEO of mail-order diabetes supply firm AmMed Direct and a PAOC member, said CMS needs to give up more information on the program.
Milam said although the PAOC is charged with advising CMS on the financial standards to which it holds bidders, it has not shared those standards.
Earlier this month, 12 of the 17 PAOC members wrote a letter to CMS' Deputy Administrator Jonathan Blum asking for more information on Round 1. Among other things, the May 6 letter requested the number of contract suppliers that have gone out of business in the nine competitive bidding areas since implementation Jan. 1, information on the mail-order diabetic supplies category and quarterly updates on the percentage of beneficiaries using DME.
Without such data, the PAOC members said, they can't give appropriate advice about the program.
In remarks introducing the House briefing, Rep. Sue Myrick, R-N.C., whose district includes Charlotte, one of the Round 1 CBAs, told the congressional aides that the impact of the program should be examined before it moves to another 91 areas in Round 2.
Cramton told the staffers he continues to work on the issue pro bono because he feels so strongly about the competitive bidding program and its problems, although he does believe that a bidding program could work. In April, he held a mock auction to prove, he said, how a well-designed system could be run.
"I have learned that CMS requires more direction from Congress on the DME program," Cramton told HomeCare. "Congress must insist, through legislation, that CMS conduct efficient auctions consistent with best practice and science. The auctions must be transparent, and an independent market monitor must observe all aspects of the market and report directly to the Secretary of Health and Human Services about potential problems and solutions."
Said Cramton, "The stakes are enormously high. Congress must insist on fundamental reform."
We'll Take the Help, Industry Says
"While Professor Cramton believes a bidding program could be redesigned in a way that would work, his stinging criticism of the CMS implementation of Round 1 provides ample arguments to repeal the program," said Tyler Wilson, president of the American Association for Homecare, who attended the briefing.
H.R. 1041, the industry-backed competitive bidding repeal bill, continues to gather bipartisan support and has picked up 103 cosponsors, but has no companion in the Senate.
Invacare's Cara Bachenheimer, senior vice president of government relations, hopes yesterday's briefing will elevate the issue's profile in that chamber.
With 45 offices represented — almost half of the Senate — she pointed out, "The briefing was very effective.
"Part of our issue in the Senate is that for whatever reason, the level of education about competitive bidding is just not the same as it is for some of the members in the House. If you look at a more global picture of what's going on, we're competing against some pretty big issues like the budget and the debt ceiling, and it's tough to get a word in."
But "with that many people showing up and having someone like Dr. Cramton explain how the bidding structure resulted in a fatally flawed program," Bachenheimer said, "I think that's going to do a lot to move us along in the Senate. With the lack of transparency, he essentially is saying that what CMS has done is constructed another government-administered price program where the bid prices have no relationship to a supplier's costs, and therefore you have a program that has no relationship to market pricing."
While "it's going to be very, very difficult to repeal this program and not replace it with something else," Bachenheimer said, Cramton is a forceful ally in "distilling the details of the program's flaws.
"That doesn't mean we agree on what the next step is," she said. That's something the industry "will have to figure that out sooner rather than later, whether it's the Cramton plan or whether it's something else."
Still, getting to that next step is topmost on the agenda, and the clock is ticking. CMS has said it would announce the products to be included in Round 2 sometime this summer.
"We don't have any new information since the PAOC meeting April 5," Bachenheimer said. "They said it would be this summer, but who knows whether that means June 20 or September 1? We just don't know …
"If they don't see a problem with products that are in Round 1, they are just going to add to the list and not subtract from that list," Bachenheimer said. "The only reason they would subtract is if there is an access problem from CMS' perspective," and so far agency officials are not saying anything of the sort.
"At the PAOC meeting, CMS said everything is wonderful, everything is hunky dory with the program, and they gave no indication that they would be changing anything," Bachenheimer said.
For Cramton's PowerPoint presentation, see his website at http://www.cramton.umd.edu/papers/health-care/.
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