Marilyn Tavenner has been administrator of Medicare and Medicaid officially for only about a month, but already she faces a policy challenge from Congress. A majority of the House, 145 Republicans and 82 Democrats, wrote to Tavenner on Wednesday, asking her to delay implementation of a Medicare cost-reduction initiative, scheduled to take full effect July 1, for six months.
They complain that procedural irregularities threaten patient access to wheelchairs, oxygen tanks, beds and diabetes test strips — known in Medicare parlance as "durable medical equipment, prosthetics, orthotics and supplies," or DMEPOS for short. In fact, these concerns are overblown. Tavenner should not postpone these overdue reforms to Medicare's DMEPOS program.
Excessive DMEPOS reimbursements have plagued Medicare for years. As documented by executive and legislative watchdog agencies, Medicare routinely paid several times the retail price for items from power chairs to hand braces.
Partly, the problem was corruption: lax federal screening of suppliers let swindlers into the business. More fundamentally, the issue was that Congress drew up the DMEPOS reimbursement schedule in 1989, and then left it almost unchanged thereafter, despite intervening cost reductions for many products. Between 2000 and 2010, Medicare spent $69.4 billion on outdated — and inflated — DMEPOS reimbursement rates.
The remedy is to make DMEPOS suppliers compete on price; pilot programs have demonstrated that competitive bidding saves hundreds of millions of dollars with no harm to patient care, which is why competitive bidding is about to go into effect on a near-nationwide basis July 1 — as authorized under the Affordable Care Act and earlier law. Projected savings for taxpayers and beneficiaries over the next 10 years: $42.8 billion.
Firms that benefit from the status quo — and they're in congressional districts across the country — have fought reform every step of the way. The letter to Tavenner reflects more such lobbying. Its core allegation is that some companies that won the contracts, which take effect on July 1, lack the requisite state business license.
In Tennessee, for example, 30 out-of-state suppliers licensed in their home jurisdictions turned out not to have Tennessee licenses and had their winning bids disqualified. In Maryland, more than 100 bidders aren't state-licensed, according to the Wall Street Journal. Purportedly, the unlicensed participants artificially depressed winning bids, and their subsequent disqualification will leave the market undersupplied.
Medicare officials argue persuasively that the remaining suppliers can meet demand while the government decides whether additional bids are necessary. As for the alleged price distortion, an ironic complaint, given the previous artificial inflation: There is no evidence it's widespread enough to warrant a national delay.
And there's more irony, one might even say hypocrisy. Democratic signatories of the letter are questioning a key part of President Barack Obama's health-care law, for which most of them voted. The Republicans, many of them tea party backbenchers, are resisting a market-based alternative to government price-setting. Their proposed delay could add to the federal deficit. And their argument hinges on the alleged failure of private businesses to satisfy bureaucratic rules and regulations.
Tavenner should tell all of them "no."