Health Reform WK-EDGE Reduced payments for durable medical equipment did not negatively impact beneficiaries
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Thursday, August 30, 2018

Reduced payments for durable medical equipment did not negatively impact beneficiaries

By David Yucht, J.D.

Reduced Medicare payments for durable medical equipment (DME) in areas not subject to competitive bidding has resulted in substantial cost savings while not negatively impacting the health care of beneficiaries, according to the Government Accountability Office (GAO). The GAO found that the number of suppliers furnishing rate-adjusted items in non-bid areas in 2016 decreased 8 percent compared to 2015 and beneficiary use of rate-adjusted items in non-bid areas in 2016 changed little compared to 2015. The GAO conducted the study at the request of Congress to provide additional information on reduced Medicare payment rates for durable medical equipment (GAO Report, GAO-18-534, August 24, 2018).

Purpose of study. For purposes of cost cutting, Congress required CMS to implement a competitive bidding program (CBP) in certain geographic areas for certain DME items. CMS estimates that competitive bidding will save Medicare $19.7 billion between 2013 and 2022. The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) required CMS to use CBP information to adjust fee-for service payment rates for certain DME items in geographic areas not covered by CBP. On January 1, 2016, adjusted rates for 393 items went into effect in non-bid areas. CMS estimated these adjusted rates will save Medicare about $3.6 billion between 2016 and 2020. The GAO was asked to review the potential effects of these adjusted rates in non-bid areas.

Scope of study. The GAO looked at payment rate reductions and changes (if any) in the number of DME suppliers, changes in the use of rate-adjusted DME items, and evidence concerning potential changes in Medicare beneficiaries’ access to rate-adjusted DME items. The GAO compared non-adjusted 2015 fee-for-service payment rates to adjusted 2016 and 2017 rates and reviewed Medicare claims data from 2010 through 2016. The GAO also looked at CMS’s monitoring activities and interviewed CMS officials. In addition, the GAO interviewed beneficiary advocacy groups and DME industry trade organizations.

GAO conclusions. For the first year adjusted rates were in effect in non-bid areas, the GAO saw generally significant reductions in rates, which were varied by DME type. The unweighted average reduction in payment rates for the five rate-adjusted DME items with the highest expenditures in 2016 within each DME category was 46 percent. Changes in the number of suppliers furnishing rate-adjusted items were fairly consistent with prior years. The GAO also noted that CMS had reported that data from its health status monitoring tool (which had recently been analyzed and found reliable by the GAO) indicated that the reduced payment rates did not change access to DME items or health outcomes in non-bid areas.

Stake-holder comment. The GAO interviewed several stakeholder groups that reported anecdotal examples of access problems attributed to rate adjustments. According to the GAO, these stakeholders could not show that these problems were widespread. The GAO noted that its findings were consistent with CMS’s monitoring results, which indicated that there were no widespread effects on beneficiary access in the year after the adjusted rates went into effect. However, the GAO was careful to note that some effects may take longer to appear.

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