September 09,2004

Grassley Urges Medicare Officials to Study Recommendations on Competitive Bidding

WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, today saidhe hopes Medicare officials will study new recommendations as they work to introduce competitivebidding for medical equipment such as power wheelchairs. Grassley had concerns about imposingcompetitive bidding for durable medical equipment because of the potential impact on smallbusinesses and the fear that access to quality suppliers could be undermined in rural states like Iowa.As a new report points out, competitive bidding could lead to new abuses of the system.

“Careful monitoring of the new competitive bidding program will be necessary to ensure thatMedicare is paying appropriately for durable medical equipment and to protect beneficiary accessto quality items,” Grassley said. “Inflated payments have resulted in billions of taxpayer dollarsbeing squandered for overpriced medical equipment. This only serves to undermine taxpayerconfidence in the Medicare program and to further jeopardize the program’s future ability to pay forthe needs of a growing Medicare population. It’s important to strike the right balance betweenreining in excessive payments and making sure beneficiaries get what they need.”

Grassley was a key architect of the Medicare Prescription Drug, Improvement andModernization Act of 2003. He co-requested a Government Accountability Office (GAO) report,“Medicare: Past Experiences Can Guide Future Competitive Bidding for Medical Equipment andSupplies” (GAO-04-768), released this week.

GAO, which is Congress’ independent oversight agency, examined a prior competitivebidding demonstration project involving Medicare and assessed several issues that the Centers forMedicare and Medicaid Services (CMS) should consider as it moves toward implementing mandatedcompetitive bidding for the purchase of certain types of durable medical equipment, supplies, off-theshelf orthotics, and other items.

Under traditional reimbursement methods, CMS sets a fixed reimbursement rate for certainclasses of medical equipment. However, the GAO and the Department of Health and HumanServices’ Office of Inspector General (OIG) have done numerous studies highlighting excessivepayments made for certain medical equipment and supplies provided to Medicare recipients.Grassley cited the OIG’s April testimony before the Senate Finance Committee, disclosingreimbursements to suppliers of more than $5,000 for power wheelchairs that otherwise arecommonly available for purchase from manufacturers or distributors for a median price of $1,550.During its testimony, CMS acknowledged that it has “payment prices that were too high.”

As a result of provisions outlined in the Medicare Prescription Drug, Improvement andModernization Act of 2003, CMS will be phasing in a competitive bidding process for certainmedical equipment and supplies. There is a three-year freeze on payment amounts for durablemedical equipment, orthotics, and prosthetics, with competitive bidding starting in 2007. TheMedicare law requires competitive bidding in the 10 largest metropolitan areas for some ofMedicare’s more expensive categories of equipment and supplies. That limited competitive biddingeffort is to be followed by an additional 70 areas within two years. The application of competitivebidding for the rest of the country is to be in place by 2011.

During the Medicare bill’s consideration, Grassley advocated for a longer, easier transitioninto competitive bidding, which is why a three-year freeze was implemented. In order to make surecompetitive bidding does not adversely affect small and rural providers, Grassley said, Medicareofficials should study the GAO’s findings.

The GAO report emphas the need for CMS to include careful oversight to preventsuppliers from substituting lower-priced items and to encourage the use of quality measures to ensurequality items and services are provided to Medicare beneficiaries.

“It’s important to continue to promote accountability in the durable medical equipmentindustry while stressing the need for access to the quality items and services that Medicarebeneficiaries rely on today,” Grassley said.

The GAO report is available for downloading at