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'Competitive bidding' rule for medical goods meets some opposition
Tuesday, February 19, 2008

With a slug of heavy sarcasm, John Tague said he's looking forward to the day when he has to call an 800 number, talk to a computer and wait for days until somebody comes out to repair his motorized wheelchair.

"I can't tell you how excited I am about that," he said.

He's not, of course. But Mr. Tague, policy expert for United Cerebral Palsy of Pittsburgh, said that the imaginary scenario could come to pass if Medicare allows a new "competitive bidding" procedure on durable medical goods -- wheelchairs, beds, oxygen equipment -- to take effect in Pittsburgh and elsewhere this summer.

Medicare says the new procedure, which forces suppliers large and small to bid on the chance to supply equipment to users, could cut the cost of these goods by up to 20 percent (overall, durable medical goods account for 1.4 percent of total Medicare spending).

Losing bidders will be left off the new list of certified suppliers and wouldn't be eligible for Medicare funds. That's different from the current set-up, where any supplier is free to work with Medicare, as long as it meets the Centers for Medicare and Medicaid Services' price restrictions.

Pittsburgh is one of 10 metropolitan areas nationally where the new bidding system is set to take effect. As a result, the Pennsylvania Association of Medical Suppliers is urging Congress to stop the provision from taking effect as scheduled in July.

"Some of the most seriously ill and disabled Medicare patients in greater Pittsburgh are currently targeted as guinea pigs for an ill-considered program," said John Shirvinsky, of the suppliers association.

Where Medicare sees short-term savings, Mr. Shirvinsky sees long-term trouble.

And what he sees is more or less reinforced by a Robert Morris University study on the subject, commissioned by the suppliers group.

"Any short-run cost savings will be more than offset by long-run increases as successful bidders gain market power over time," the report said, increasing demand for these goods as Baby Boomers become seniors even as the number of suppliers shrinks by design.

And, the report said, eliminating suppliers could lead to Mr. Tague's nightmare scenario.

Economist Brian O'Roark, one of the two authors of the study, said the new rules could create an oligopoly, eliminating the competition that is created by consumer choice. And there's also the chance that companies will under-bid -- that is, submit a bid that's lower than reasonable, then make up the difference either by cutting costs and quality, or petitioning for high reimbursements down the road.

That could lead to "potentially collusive behavior," he said.

The bidding program is being administered by PalmettoGBA, a national Medicare contractor.

Bill Toland can be reached at btoland@post-gazette.com or 412-263-2625.
First published on February 19, 2008 at 12:00 am
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