Dive Brief:

• In the first year of reduced Medicare payment rates for durable medical equipment (DME) nationwide, the Government Accounting Office (GAO) found that beneficiaries were still able to get the items they needed, despite concern from industry.
• The average reduction in payment rates was 46% for the five items with the highest expenditures within each DME category.
• The GAO said the number of suppliers selling durable equipment, such as walkers and oxygen, fell when payment rates were reduced in 2016, but the decline was in line with long-term trends.

Dive Insight:

To rein in costs for durable equipment, CMS began competitive bidding in 2011 in parts of the country, replacing the standard payment schedule. In 2016, the agency began reducing fee-for-service payment rates on equipment in non-bid areas nationwide based on information from the bidding program. CMS adjusted rates on 393 different items.

However, the agency in July proposed significant changes to the bidding program for prosthetics, orthotics and supplies as part of a new proposed rule. Current contracts for that equipment will cease at the end of 2018, and beneficiaries can obtain those items from any supplier until new contracts are awarded, which could take as long as two years.

CMS is proposing lead item bidding for durable medical equipment, meaning the agency would accept bids on the main item in a product category and set prices for its accessories based on the historic fee schedule.

In comments submitted on the proposed rule, the American Association for Homecare said the new price methodology should result in reimbursement rates that “better reflect the economic realities of our industry.” Comments are due Sept. 10.

The GAO study noted that several beneficiary advocacy groups and industry trade organizations reported anecdotal examples of reduced access to equipment resulting from the rate cuts. However, based on a review of Medicare claims data, it determined there were no widespread problems with beneficiaries getting the equipment they needed in the year after reduced rates went into effect.

The GAO found that the number of durable equipment suppliers decreased 8% in 2016, consistent with the years before the rate adjustments went into effect.

"GAO’s findings are consistent with CMS’s monitoring results, which indicate that there were no widespread effects on beneficiary access in the year after the adjusted rates went into effect. However, some effects may take longer to appear, underscoring the importance of CMS’s continued monitoring activities," GAO wrote.

CMS previously estimated the rate reductions on durable medical equipment would save the Medicare program about $3.6 billion between 2016 and 2020. It projected the competitive bidding program would save Medicare $19.7 billion between 2013 and 2022.