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Date: Thursday, May 29, 1998 FOR IMMEDIATE RELEASE Contact: HCFA Press Office (202) 690-6145
The Medicare program announced today that it is launching a pilot project in Polk County, Fla., designed to help beneficiaries pay more reasonable prices for medical equipment and supplies.
The project, planned to take effect next spring, will help Medicare beneficiaries get the benefits of competition which can lower prices for some medical items and reduce copayments. They can also look forward to improved medical equipment and services because suppliers must meet new quality standards. In addition, the project will help safeguard against Medicare waste, fraud and abuse.
"Marketplace competition should save Medicare money and reduce out-of-pocket costs for beneficiaries," said Nancy-Ann DeParle, administrator of the Health Care Financing Administration, the agency that runs Medicare. "This project will increase the quality of services delivered to our beneficiaries and help in our fight against fraud and abuse. In the short run, it should help many beneficiaries in Polk County. In the long run, we hope to be able to use this experience to expand competitive bidding to other parts of the country."
Starting this fall, suppliers serving Polk County -- including Lakeland and Winter Haven -- will be required to submit bids to Medicare if they wish to provide beneficiaries with certain types of durable medical equipment and supplies. The plan is consistent with findings by the U.S. General Accounting Office earlier this month for Medicare use of competitive contracting for high-volume medical equipment.
Sen. Bob Graham of Florida, who authored the legislation that led to Medicare's use of competitive bidding, said, "Other federal health care programs have proven that competitive bidding saves money while maintaining access to quality medical supplies and services. I am very proud that Polk County will be leading Medicare into a new era where market forces keep prices low and help to preserve this critical health care program for our children and grandchildren."
The Polk County demonstration project will use competitive bidding for oxygen supplies and equipment; hospital beds and accessories; surgical dressings; enteral nutrition products and supplies, and urological supplies. Nationwide, Medicare paid approximately $6 billion for equipment and supplies in 1996. Roughly half of that amount went for the types of services covered under the demonstration project.
By law, Medicare payments for medical equipment and supplies are based on fee schedules. But studies show that under these fee schedules suppliers have been able to charge Medicare beneficiaries higher prices than those charged at many retail outlets for some medical equipment and supplies.
For example, the HHS Inspector General found that charges to Medicare for enteral nutrients are as much as 42 percent above market prices. The price charged Medicare for nutrient bags and syringes in kits is $10.46, while the individual items in those kits cost $3.69. According to the GAO, the fee schedules Medicare is required to use have forced it to pay between $1.43 and $1.68 for an intermittent urinary catheter, while the average market price is 87 cents.
Last year, and again this year, the Clinton Administration asked Congress for the authority to move to a more competitive pricing system. While Congress has not yet approved that authority, the Balanced Budget Act last year did give Medicare the authority to test new methods of paying for medical equipment, supplies and other items.
Polk County was selected for this demonstration because it has a relatively small population of about 450,000, including 92,000 Medicare beneficiaries, high expenditures per Medicare enrollee for equipment and supplies, and a large number of suppliers servicing the area. In 1997, about 4,500 of the county's beneficiaries received Medicare reimbursements totaling about $6.6 million for the equipment and supplies in this demonstration.
Bid proposals will be evaluated on price and quality. Those companies that bid too high or who do not demonstrate that they provide quality equipment and service will not be able to bill Medicare for the covered items. Medicare will select enough demonstration suppliers to meet the needs of beneficiaries in Polk County. Actual payment on new rates will start in April 1999.
Medicare will pay 80 percent of the selected bid price following a comprehensive education and outreach campaign to beneficiaries, physicians and suppliers. The program will provide a directory of the demonstration suppliers and the new price for every item covered under the demonstration to each beneficiary. Winning demonstration suppliers must agree to accept assignment, which means beneficiaries will have to pay no more than the standard 20 percent copayment.
Medicare recognizes that some beneficiaries may want to maintain their long-standing relationships with oxygen suppliers or continue their rental agreements for nutrition pumps and hospital beds. Those beneficiaries will be able to do so for as long as the medical service is needed.
Beneficiaries will have a number of additional protections -- first among them an emphasis on quality, not just price. An ombudsman will be based in Polk County to handle any beneficiary complaints, and site visits will be conducted for all demonstration suppliers, who will have to meet quality standards which are not currently monitored by Medicare.