Research & Commentary: Competitive Bidding for Medical Devices

Published March 29, 2011

This year Medicare is implementing a change in how it determines which companies can provide durable medical equipment to the system’s beneficiaries. These products, known as “durable medical equipment, prosthetics, orthotics, and supplies” (DMEPOS) include everything from simple devices like walkers and wheelchairs to complex medical pumps designed to heal wounds.

First envisioned in the 2003 Medicare Modernization Act (which added the Medicare drug benefit), the new program puts up for competitive bid many of the contracts for the production and distribution of medical devices and equipment. The bidding program is designed to decrease the prices Medicare pays for these products.

Supporters of the bidding system say it is well-designed and could save Medicare and its beneficiaries approximately $28 billion over the next 10 years. Opponents say it violates the rules of good competitive bidding auction design and hence is unlikely to produce its promised savings and may sacrifice quality of care.

The following articles examine competitive bidding for medical equipment from multiple perspectives:

Medicare and Competitive Bidding for Complex Therapeutic Devices
This Policy Brief from The Heartland Institute describes the system of competitive bidding for medical devices and its effects on the availability and price of those products.

CRS: Medicare Durable Medical Equipment: The Competitive Bidding Program
This report from the Congressional Research Service provides the legislative history of the Medicare DMEPOS Competitive Acquisition Program. It summarizes suppliers’ implementation concerns and outlines various responses to those concerns: administrative responses, GAO analysis of implementation issues, and subsequent legislation to amend the program.

Bidding on Medical Devices: A Race to the Bottom?
This article from the Pittsburgh Post-Gazette discusses the “race to the bottom” effect of the competitive bidding process as medical suppliers are forced to bid at rates sometimes lower then cost to win a contract.

Bipartisan Duo Drops Bill to Terminate Medical Equipment Bidding
This article from The Hill highlights recent legislative efforts to repeal the competitive bidding program.

GAO: Competitive Bidding for Medical Equipment and Supplies Could Reduce Program Payments, but Adequate Oversight Is Critical
This report from the Government Accountability Office studies competitive bidding for medical devices, finding that competitive bidding can create savings for the Medicare program but requires significant oversight to ensure the quality of the medical products.

National Association for Home Care & Hospice: Reject Competitive Bidding for Home Medical Equipment
This release from the National Association for Home Care & Hospice criticizes the competitive bidding program, arguing that the process is anti-competitive, retards medical product innovation, and limits access to medically necessary products and services.

Medical Supply Firms Chafe at Bidding Process
This article from Crain’s Cleveland Business examines medical device suppliers’ response to the new competitive bidding process. The article discusses the harm from “suicide bidding” and the potential of the program to force small medical device suppliers out of the market.