• Competitive bidding and Medicare: If at first you don’t succeed …

    This is a follow up to my first post on the recent paper on competitive bidding in Medicare by Coulam, Feldman, and Dowd. I presume you’ve read that post. If you have, you might be wondering when Medicare has attempted competitive bidding and what the consequences have been. In an appendix, the authors run down the evidence, which I summarize only very tersely here and in (roughly) chronological order. All emphasis mine.

    Mid-1980s-1987: Clinical Laboratory Services Demonstration

    Under pressure from the clinical laboratory industry, Congress imposed a multiyear moratorium on competitive pricing activities for lab services in 1987.

    Mid-1990s-2008: Clinical Laboratory Services Demonstration (take 2)

    [After bids were submitted], Congress repealed CMS authority to conduct a competitive bidding demonstration. […] [Concerned] the HHS Secretary would retain the […] bidding information [and use it] to make recommendations […] three clinical laboratories in the San Diego area brought suit, challenging the government’s right to retention of the documents. The suit was successful, and the documents were destroyed.

    Late 1980s: Durable Medical Equipment Demonstration

    Congress barred funds for the demonstration and substituted a fee schedule.

    Mid-1990s and Continuing: DME Demonstration and Nationwide Implementation

    The demonstration was tested in Florida and Texas sites, showing a savings of 20 percent with no notable beneficiary harm. […]

    [In a] ten-site bidding program […] bids showed average price reductions of 26 percent across product categories and MSAs. […]

    [In a round 1 rebid], average price savings across all product categories were 32 percent. […]

    [A]s of July 2010, 250 members of the House of Representatives supported a bill that would repeal CMS authority to run this competitive bidding program.

    More recent news on DME bidding is here.

    1991-1996: Coronary Artery Bypass Graft Demonstration

    CMS estimated the demonstration saved nearly $40 million (10 percent) in 10,000 CABGs performed at the seven sites. […] The demonstration gave rise to the “Centers of Excellence” program.

    1991-1996: Cataract Surgery Alternate Payment Demonstration

    Negotiated bundled payment for Part A and B services for cataract surgery. … [CMS] estimated that the demonstration resulted in modest savings to Medicare: more than $500,000 for some 7,000 surgeries.

    1995-1997: Medicare HMOs, Waiver Authority Demonstrations

    Bids that were submitted and examined by CMS showed savings of 25 to 38 percent compared with the government’s payments to plans at that time. Congress then stopped the demonstration.

    1997-2000: Medicare HMOs, Balanced Budget Act Demonstrations

    Congress stopped the demonstration.

    2010: Medicare HMOs, Competitive Cost Adjustment Demonstration

    Section 1102(f) of the reconciliation act […] formally repealed CCA, along with the competitive bidding provisions contained in the original health reform bill.

    2006-2008: Part B Competitive Acquisition Program for Drugs/Biologicals

    CMS postponed the program indefinitely.

    2006 and Continuing: Part D Payment System

    The bidding system was implemented in two years and has been setting payments and premiums for Part D since 2006, with few complaints about the fact that it is “competitive pricing.”

    Interestingly, in all cases where competitive bidding was tested, it led to large savings. However, more often than not, Congress or CMS repealed or suspended bidding demonstrations and programs.

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