About 1 year after CMS’s demonstration authority ended, MMA required the  agency to conduct competitive bidding for DME, supplies, off-the-shelf  orthotics, and enteral nutrients and related equipment and supplies. As CMS implements  competitive bidding, its payment- setting experience in the demonstration  will prove useful as the agency considers items for competitive bidding and  approaches to streamline implementation, collect information on specific  items provided to beneficiaries, and ensure that beneficiaries’ access to  quality items and services is not compromised. For example, nondemonstration  items that CMS could choose include power wheelchairs and lancets and  test strips used by diabetics. These three items accounted for about   $1.7 billion, or about 17 percent, of Medicare allowed charges for DME,  prosthetics, orthotics, and supplies in 2002. In order to expand competitive  bidding, CMS could potentially use two streamlining approaches— developing standardized steps that are easily replicated in different  locations and using mail-order delivery for selected items for which fees  are determined through nationwide competitive bidding. Better Information on Specific Items Provided to Beneficiaries Could Ensure More Appropriate Payment

Finding ways to collect better information on the specific items provided to  beneficiaries is the third issue for CMS to consider as it implements  competitive bidding on a larger scale. As competitive bidding proceeds, routine monitoring of beneficiaries’  complaints, concerns, and satisfaction can be used as a tool to help ensure  that beneficiaries continue to have access to quality items. As competitive bidding expands and affects larger numbers of  beneficiaries, small problems could be potentially magnified. In the past, when implementing significant  Medicare changes, such as new payment methods for skilled nursing  facilities and home health services, the agency has lacked timely and  accurate information about how the changes affected beneficiary access. Recommendations for Executive Action

To increase potential savings from competitive bidding, streamline  implementation, help ensure that Medicare is paying appropriately for  items, and promote beneficiary satisfaction, we recommend that the  Administrator of CMS take the following seven actions:  consider conducting competitive bidding for demonstration items and  items that represent high Medicare spending that were not included in  the competitive bidding demonstration;  develop a standardized approach for competitive bidding for use at   consider using mail delivery for items that can be provided directly to  beneficiaries in the home, as a way to implement a national competitive  bidding strategy;  evaluate individual HCPCS codes to determine if codes need to be  subdivided because the range in characteristics and price of items  included under the individual codes is too broad;  periodically obtain specific identifying information on selected high- cost items to  monitor the characteristics of items subject to competitive  bidding that are provided to beneficiaries, such as manufacturer, make,  and model number;   monitor beneficiary satisfaction with items and services provided; and  seek input from individuals with technical knowledge about the items  and services suppliers provide to beneficiaries. Scope and Methodology

To assess issues that the Centers for Medicare & Medicaid Services (CMS)  might consider as it implements the Medicare Prescription Drug,  Improvement, and Modernization Act of 2003 (MMA) provisions  concerning competitive bidding, we reviewed the relevant provisions of  MMA.
Why GAO Did This Study

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) requires the Centers for Medicare & Medicaid Services (CMS) to conduct large-scale competitive bidding for durable medical equipment, supplies, off-the-shelf orthotics, and enteral nutrients and related equipment and supplies provided to beneficiaries. The Balanced Budget Act of 1997 mandated that GAO study an earlier Medicare competitive bidding demonstration. To address this mandate, GAO assessed this past experience in relation to four issues that CMS might consider as it implements large-scale competitive bidding: (1) items for competitive bidding, (2) how to streamline implementation, (3) ways to collect information on specific items provided to beneficiaries, and (4) steps to ensure quality items and services.

What GAO Found

CMS's experience in the Medicare competitive bidding demonstration may prove instructive as the agency implements provisions in MMA to conduct large-scale competitive bidding for durable medical equipment, supplies, off-the-shelf orthotics, and enteral nutrients and related equipment and supplies. The experience gained during the demonstration provides insight as the agency considers four implementation issues. Items for competitive bidding: Items for competitive bidding could include those selected for the demonstration and others that account for high levels of Medicare spending. For example, nondemonstration items that CMS could choose for competitive bidding include power wheelchairs and lancets and test strips used by diabetics. In 2002, these three items accounted for about $1.7 billion in charges for the Medicare program and its beneficiaries. How to streamline implementation: Because of the large scale of future competitive bidding, it will be prudent for CMS to consider ways to streamline implementation. Two ways to streamline are developing a standardized competitive bidding approach that can be replicated in multiple geographic locations and using mail-order delivery for selected items, with uniform fees established through a nationwide competition. Ways to collect information on specific items provided to beneficiaries: Gathering specific information on competitively bid items provided to beneficiaries could help ensure that suppliers do not substitute lower-priced items to reduce their costs. Currently, CMS is not able, or does not routinely, collect specific information on the items that suppliers provide to beneficiaries. Steps to ensure quality items and services for beneficiaries: Routine monitoring could help ensure that beneficiaries continue to have access to suppliers that deliver quality items and services. The agency, when implementing significant Medicare changes in the past that affected payment methods, has lacked information on how the changes affected beneficiary access. As competitive bidding expands, small problems could be potentially magnified. Using quality measures to choose multiple suppliers and having suppliers meet more detailed standards than are currently required can also help ensure quality for beneficiaries.