Round 2 of DMEPOS Competitive Bidding Program Starts July 1st

Round 2 of DMEPOS Competitive Bidding Program Starts July 1st

Round 2 of Medicare’s Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) competitive bidding program starts July 1, 2013. This round expands the DMEPOS competitive bidding program to beneficiaries in 91 major metropolitan areas across the country, and adds new product categories and a mail-order competition for diabetic testing supplies. In California, Round 2 will continue in the following competitive bidding areas: Bakersfield-Delano, Fresno, Los Angeles-Long Beach-Santa Ana, Oxnard-Thousand Oaks-Ventura, Sacramento-Arden-Arcade-Roseville, San Diego-Carlsbad-San Marcos, San Francisco-Oakland-Fremont, San Jose-Sunnyvale-Santa Clara, Stockton, and Visalia-Porterville. Round 1 started in January 2011 and ended last year.

A tool to prevent fraud and cut costs

The DMEPOS competitive bidding program was established as part of the Medicare Modernization Act of 2003 to create more accurate payment rates for equipment and supplies, which, in turn aims to cut costs and reduce fraud. The Centers for Medicare and Medicaid Services (CMS) has been overpaying DME suppliers on fee schedules that date back to the 1980s. This overpayment has attracted fraudsters and contributed to the proliferation of DME and supplies-related scams.

Under the competitive bidding program, DMEPOS suppliers must compete to become a Medicare contracted supplier. Only companies who offer competitive pricing, and meet more stringent eligibility, quality and financial standards have a chance at being selected as a Medicare contracted supplier.

Also, beneficiaries living in one of these competitive bidding areas should make sure to only use suppliers who have been selected and have a contract with Medicare. This way Medicare will cover their medically necessary supplies and/or equipment. If a non-contracted supplier in one of these competitive bidding areas (CBAs) tries to sell a beneficiary any DMEPOS items, they must notify the beneficiary that they are not a contracted supplier, that the beneficiary is responsible for the costs, and they must present the beneficiary with an Advance Beneficiary Notice before completing a sale.

Greater savings predicted for Round 2

Medicare had a 42% reduction in costs for certain durable medical equipment and supplies as a result of Round 1. Savings from Round 2 are expected to be even greater at 45% for various equipment categories, including oxygen equipment, standard wheelchairs, walkers and hospital beds. In July, Medicare will also start to reimburse a single payment amount for diabetic testing supplies, whether those supplies are purchased through a mail order supplier or a retail supplier. CMS estimates that beneficiaries will save an average of 72% on these supplies as a result of a new mail-order competitive-bidding program.

For example, under the current fee schedule, the average Medicare monthly payment to suppliers for diabetes testing supplies is $77.90. Beneficiaries pay 20% of that amount, or about $15.58. Under the mail order competitive bidding program, the average Medicare monthly payment will go down to $22.47, with beneficiaries paying about $4.49.

In total, the DMEPOS competitive bidding program is projected to save the Medicare Part B Trust Fund $25.7 billion and beneficiaries $17.1 billion between 2013-2022, according to the CMS Office of the Actuary.

See the Centers for Medicare and Medicaid Services website for more information on the DMEPOS competitive bidding program.

Karen Fletcher
Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.