The Centers for Medicare & Medicaid Services (CMS) issued a final rule that will reduce beneficiary out-of-pocket costs, improve the accuracy of Medicare's payments for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), help combat supplier fraud, and ensure beneficiary access to high quality DMEPOS items and services through a new competitive bidding program.

In 2008, the competitive bidding program will operate in competitive bidding areas (CBAs) within 10 of the largest Metropolitan Statistical Areas (MSAs), excluding the New York, Los Angeles, and Chicago MSAs and will apply to 10 of the top DMEPOS product categories based on criteria outlined in the final rule. The program will be expanded into 70 additional MSAs in 2009. After 2009, CMS will expand the program to additional areas and items.

"The final rule we are announcing today is focused on improving both service delivery and the quality of care, while getting savings for beneficiaries and taxpayers." said CMS Acting Administrator Leslie V. Norwalk, Esq. "Given the need to tackle the continued and unsustainable growth in health care costs, this new program represents yet another way to use the competitive marketplace to bring the best possible and most efficient care to Medicare beneficiaries. And when combined with the accreditation and quality standards initiatives that are already underway, this program will provide assurance that high quality service and items are available to those who need medical equipment for home use."
The new competitive bidding program, which is required by the Medicare Prescription Drug, Improvement & Modernization Act of 2003 ("Medicare Modernization Act" or "MMA"), will replace the current payment amounts, for the items being bid, under Medicare's DMEPOS fee schedule with payment rates derived from the bidding process. Suppliers that wish to furnish competitively bid items in a CBA will be required to submit bids to furnish those items. Contracts will be awarded to a sufficient number of winning bidders in each CBA to ensure access and service to high quality DMEPOS items. The winning bids will be used to establish a single Medicare payment amount for each item.

For beneficiaries in the selected CBAs, this program will reduce out-of-pocket expenses while ensuring that they receive high quality items and services. This is because the rule requires all contracting suppliers to be accredited by an approved accreditation organization as meeting CMS' quality standards. CMS has designated 10 entities as qualified to accredit DME suppliers, based on quality standards that were posted on the CMS website in August 2006. The single payment amounts established through competitive bidding will be lower than the current fee schedule amounts for the items. In addition, contract suppliers must accept the single payment amount established through competitive bidding as payment in full. The beneficiary's liability is limited to 20 percent of the payment amount and any unmet Part B deductible.

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