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It’s Medicare Versus Medical Supplier in Controlling Costs


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On July 1, Medicare begins a second round of competitive bidding for medical equipment and supplies, such as diabetes testing strips that beneficiaries use to check their blood sugar levels. There’s nothing remarkable about any of this except that the industry is fighting to make sure that competitive bidding does not happen.

This fight is emblematic of the difficulty Medicare has containing costs when the profits of sellers of medical goods and services are at stake. As we know, one person’s savings is often the loss of another’s income. We also know that industry folks squawk mighty loudly to Congress when their income is threatened.

Taking a page from the script of AHIP, the health insurers’ trade association and maker of diabetes supplies, which has been hard at work building a case that competitive bidding harms seniors. Perhaps you recall the insurers were successful this spring with a strategic lobbying campaign that got the public on their side. Instead of reimbursement cuts, the Centers for Medicare and Medicaid Services (CMS) gave Medicare Advantage plans a raise.

Two years ago, Medicare began a pilot program of competitive bidding in nine metro areas for what’s called durable medical equipment — things like hospital beds, oxygen and prosthetics. Then Medicare contracted with the lowest bidders. In effect, they were doing what insurance companies do for the rest of us — nudge us to get medicines through the mail and steer us to discounted providers and facilities  because it’s cheaper for both policyholders and insurers.

This program has saved Medicare some $400 million and is now being expanded to 91 metro areas. It is expected to save Medicare about $43 billion over the next 10 years. Seniors will save money, too.  Just because Medicare covers these supplies, doesn’t mean that seniors don’t have out-of-pocket expenses. Beneficiaries are responsible for 20 percent coinsurance — the percentage of the bill that patients must pay. Either they pay that on their own, or their Medigap policy pays. Medicare says the new round of competitive bidding will save seniors about $17 billion in reduced coinsurance and premiums.

That sounds like a pretty good deal for beneficiaries who have heard a lot this year about having to pay more out-of-pocket as cost shifting has become one of the favored methods for containing costs. That’s why manufacturers of test strips are worried. Their profits and market shares are at stake.

Like the insurance industry that used TV commercials to scare seniors into thinking they might not get their Medicare Advantage plans if budget cuts materialized, Abbott Laboratories, a leading maker of diabetes supplies, bought some commercials on MSNBC, ESPN and USA Network that also appeared to scare seniors. An announcer says: “Your supplier could try to switch you to a brand that might not be as accurate, a brand your doctor never heard of.”

Indeed, the manufacturer’s campaign seems to be based on the idea that consumers will be harmed by competitive bidding. The Diabetes Access to Care Coalition, one of those disease-focused groups funded by drug and device makers to subtly promote their products, noted in a recent news release, “The Coalition is concerned that competitive bidding for diabetic testing supplies may cause seniors to lose access to the most commonly prescribed diabetes testing supplies or create confusion about where they can obtain the supplies they are currently using.”

The Coalition funded a study done by researchers at George Washington University who advised that “competitive bidding makes an already vulnerable population even more vulnerable.”  They urged Medicare to take immediate steps “to help seniors with diabetes avoid confusion.”

Medicare says the first round of bidding has not harmed beneficiaries. Some 2.3 million of them live in areas covered by the pilot competitive bidding program, and according to deputy Medicare administrator Jonathan Blum, there were only 151 complaints in 2011 and only 33 in 2012.

If we’re really serious about paring down Medicare’s costs, those small numbers seem like a pretty good reason to give competitive bidding another — bigger — try.

More Blog Posts by Trudy Lieberman

author bio

Trudy Lieberman, a journalist for more than 40 years, is an adjunct associate professor of public health at Hunter College in New York City. She had a long career at Consumer Reports specializing in insurance, health care, health care financing and long-term care. She is a longtime contributor to the Columbia Journalism Review and blogs for its website,, about media coverage of health care, Social Security and retirement. As a William Ziff Fellow at the Center for Advancing Health, she contributes regularly to the Prepared Patient Blog. Follow her on twitter @Trudy_Lieberman.

Tags for this article:
Health Care Cost   Pay for your Health Care   Diabetes   Inside Healthcare  

Comments on this post
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bob hertz says
July 4, 2013 at 11:22 AM

Great article!

I have an article which I would like to send you.
Trudy, can you give me an email address that I can send it to?

Bob Hertz
The Health Care Crusade
[email protected]