Medicare Changes Sweep the Nation while the Majority of Consumers Remain Uninformed

May 2007

As of April 2, 2007, the Kansas City Metropolitan Statistical Area (MSA), was chosen by CMS (Centers for Medicare and Medicaid Services) to be one of the first ten MSAs for the initial round of competitive bidding. The provision for competitive bidding for Home Medical Equipment (HME) was nestled deep within the Medicare Modernization Act enacted in 2003. Its goal is to eliminate fraud and lower the cost for HME provided to Medicare beneficiaries. A closer examination of the resulting implementation suggests the legislation will subsequently deny Medicare beneficiaries the freedom of choice, poorer product quality and service, and the loss of jobs in the community.

The concept of “competitive bidding” is simple. CMS will establish MSAs and then create a list of equipment for providers to bid in these MSAs. By doing so, CMS hopes to find the lowest market price for the items Medicare is currently paying for as a “fee for service” item. For instance, the Kansas City Metro Area would consist of 15 counties ranging from just south of St. Joseph to just north of Wichita, and east of Lawrence, KS to Concordia, MO. This area is approximately 9,000 square miles. In this MSA, CMS will determine how many medical equipment providers are necessary to guarantee service and then pick the lowest bidders of this project.

Competitive bidding is not free market competition. Like all businesses, some medical equipment providers are better than others. Consumers have the right to choose with whom they will do business. It is not the government’s responsibility to determine who shall stay in business and who shouldn’t. Let the providers fight it out in the service and product quality front, not by who’s the cheapest. This type of legislation favors large national corporations. Displaced small businesses that are community oriented with local employees will be forced out of business. Consumers will be left with large corporations dictating the prices paid because of their strength in market share, not their strength in service and quality.

Home Medical Equipment is the foundation that allows people to stay at home and live independently. Without their oxygen, wheelchairs, or hospital beds, disabled beneficiaries would not be able to live in a dignified manner at home. HME allows Medicare and ultimately taxpayers to save hundreds of millions of dollars in hospital and nursing home stays. Is cutting costs at this level a fiscally sound decision?

This issue has a major impact on one of the largest growing segments of our population, seniors. So why does this subject seem to be flying under the radar of the news? Is it because the durable medical equipment segment is only $25.5 billion* in a $540 billion** healthcare industry? Will the topic of competitive bidding be more relevant when CMS moves to physician care and the hospitalization arena in order to get the lowest bidder on our doctors and hospital stays?

* Resource: HME News Industry Report, 2005

** Resource: BizStats, Size of US Markets by Industry, 2001

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