Restructured Medicare DME Program Launches July 1

Barring congressional action, phase one of a competitive bidding program for Medicare durable medical equipment, prosthetics, orthotics and supplies, or DMEPOS, is set for implementation on July 1 in 10 areas of the country.

The program launch areas include certain zip codes in North Carolina, Ohio, Kentucky, Texas, Missouri, Kansas, Florida, Pennsylvania, California and Puerto Rico. Product categories affected by the first round of competitive bidding include:

Family physicians who practice in the designated areas and who write prescriptions for these kinds of medical equipment and supplies should check now to see if the suppliers to whom they refer their Medicare patients are contract suppliers. Some patients may have to choose a new supplier from CMS' contract supplier list to ensure Medicare will pick up its portion of the DMEPOS supplier bill.

According to CMS Acting Administrator Kerry Weems in a June 9 press release, the program will result in lower costs for some durable medical equipment and supplies for the nearly four million Medicare beneficiaries. Some beneficiaries will see "as much as a 43 percent savings for certain items," said Weems. Beneficiaries pay 20 percent of the cost for their medical equipment and supplies; Medicare pays 80 percent.

Government statistics show that Medicare spending on durable medical equipment and supplies has climbed steadily for a decade. According to CMS calculations, Medicare spent about $8 billion on DMEPOS in 2002; by 2005, that figure had increased by 25 percent of that base amount, jumping to more than $10 billion.

Spiraling costs led Congress to add language to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 that required Medicare to phase in a DMEPOS competitive bidding program. The second round of bidding is scheduled for implementation in July 2009. CMS estimates a cost savings of around $1 billion a year when the program is fully implemented in 2010.

Although the first phase of the program is scheduled to begin on July 1, complaints from DME suppliers that weren't awarded contracts about the bidding process may derail the process. Based on concerns expressed by these suppliers and Medicare beneficiary groups, legislation has been introduced in the House and the Senate that would delay the launch of the bidding program for up to 18 months.

In addition, in a letter dated June 2, more than 100 members of Congress appealed to Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, and Rep. Jim McCrery, R-La., ranking member of that committee, to support legislation to postpone implementation of round one of the program for a least a year "until outstanding issues can be resolved."

CMS announced in May that it had offered contracts to 325 suppliers from among 1,005 bidding companies. According to CMS, winning bids were awarded to companies based on their price range for certain equipment and supplies, quality and financial standards, and disclosure requirements.