Medicare discovers free market, baffles beneficiaries

By Susan Jaffe
6/10/2008 © Florida Health News

WASHINGTON, D. C. – Ruth Kleiner of Delray Beach, who has emphysema, got a letter the other day from the company that delivers her portable oxygen tanks. She read it three times, but still wasn’t sure what to make of it.

Medical Home Care Supply said that because of Medicare changes, the company had to take away her tanks and oxygen concentrator, and she’d have to find a new supplier by July 1. But the letter also said she could remain their customer and Medicare would pay.

She tried to call Medicare for an explanation of the contradiction, but couldn’t get through to anyone. “You could have your breakfast and lunch and dinner while you’re on hold with Medicare,” she said.

The phones may be tied up because 10 U.S. metro areas that contain 4 million Medicare beneficiaries are converting to a new payment system July 1 for diabetes supplies and medical equipment such as wheelchairs, oxygen tanks, and in-home hospital beds. Two of the 10 areas are South Florida and metro Orlando, which together include 761,403 Medicare beneficiaries.

On Monday, the Centers for Medicare and Medicaid Services held a telephone news conference to remind reporters about the point of it all: Saving money for both taxpayers and patients who use the equipment.  Federal investigators and budget analysts have repeatedly concluded that CMS’ antiquated payment system pushed prices far higher than those paid by private citizens, companies or even other federal agencies.

CMS administrator Kerry Weems told reporters Monday that savings in the target areas would approach 30 percent, based on the bids. But a price comparison by Florida Health News found savings in the Miami-Dade and Orlando areas of as much as 42 percent for diabetic supplies and 35 percent for an oxygen concentrator. While most of the savings go to taxpayers, some go to patients, who are responsible for 20 percent of the bill.

“Both beneficiaries and the program save money,” Weems said.

Among the big-ticket items, the price comparison found that a Medicare patient who needs a power wheelchair in Miami or Orlando will spend about $250 less than a similar patient in Tampa or Jacksonville. Taxpayers, meanwhile, save about $1,000 for the chair.

With some exceptions, patients in the affected zones who get supplies or equipment from a company that doesn’t have a Medicare contract will be stuck with the bill. In some cases, though, the supplier can continue to serve the patient – if the company is willing to accept the new, lower Medicare rate.

CMS has provided information on the new system to state officials, advocates and providers who work with seniors, congressional staff, and reporters, as well as medical equipment suppliers – nearly everyone except seniors themselves. Weems has asked reporters to help. “Be part of the solution,” he said during a May news conference. “If there are particular problems, let us know…right away.”

Later this month, CMS will send out a letter about the program to those in the affected counties, including those who haven’t yet had any need for medical equipment. “This new program will save you money and ensure that you continue to get quality medical equipment, supplies, and services,” the letter will say. “It will also help limit fraud and abuse in the Medicare Program.”

The cost-cutting competitive bid system was mandated by a 2003 federal law. CMS invited companies interested in doing business in the selected 10 metropolitan areas to bid on contracts.  Bids that weren’t too high but weren’t impossibly low either were accepted if the company passed an accreditation process. CMS announced in mid-May that 325 of the 1,005 companies bidding would receive contracts. They are listed at www.medicare.gov.

In July 2009, another 18 million beneficiaries in 70 metropolitan areas will be covered by the bidding system. By July 2010, it will affect about 30 million Medicare beneficiaries who are not in private Medicare Advantage plans.

Medicare savings are expected to reach $1 billion a year. While that is just a small fraction of the total Medicare medical and administrative budget – about $499 billion for fiscal year 2009 –Weems said the savings are important to Medicare’s financial future and could hold down beneficiaries’ monthly outpatient premiums.

But Congress may have second thoughts as protests intensify from companies that didn’t win the bids. Calls for a one-year delay in beginning the new payment system have prompted a letter of support from 132 members of the House of Representatives, including nine of Florida’s 25 representatives. A House committee is drafting legislation. Meanwhile, a similar letter is being circulated this week in the Senate, said Michael Reinemer of the American Association for Home Care, which works with 35 state associations of medical equipment suppliers.

By requiring companies to be accredited and meet quality and performance standards, the new system is also intended to weed out fraud by medical equipment suppliers, which has plagued South Florida for years. Since the U.S. Attorney’s office began targeting the region in March 2007, the Miami area has generated 20 percent of the nation’s criminal Medicare fraud cases; civil and criminal settlements in that period totaled $638 million, U. S. Attorney General Michael Mukassey told a meeting of prosecutors and investigators May 28.

Under some conditions, companies that didn’t win the bidding can continue to supply Medicare customers; one example is by working as a subcontractor. The bidding rules also allow the losers to continue to serve their Medicare customers who rent certain equipment, including oxygen concentrators and hospital beds, as long as the company agrees to accept Medicare’s lower payment. However, new customers in the bidding zones can go only to a Medicare-approved supplier. Diabetic supplies not ordered through the mail are exempt from the new pricing system.

As for Ruth Kleiner, her Lake Worth oxygen supplier decided to lower its prices and accept what Medicare will pay to keep her as a customer. She won’t notice the price reduction; her 20 percent of the price is covered by a Medicare supplement.

Company owner Maurie Lecker, who has been in business 15 years, said he didn’t have much choice -- getting paid something is better than nothing. The contractor that handled the bids for Medicare told Lecker his bid was rejected because of a missing balance sheet. Lecker said it is on the back of page three of his bid and no one told him page three was missing. Bidders were supposed to be contacted if their bids were deficient, but Lecker says that didn’t happen.

Medical equipment suppliers who lost contracts are, of course, not happy. About 20 demonstrated in front of the federal courthouse in Fort Lauderdale last week.

Low bids typically came from inexperienced companies, said John Mieras, owner of Advanced Medical Support Inc. of Palm Beach Gardens, one of many companies that bid too high to keep its oxygen contract. Some winners lack the offices, trucks and staff in Florida they need to make the oxygen deliveries, he said. Some lack the state permits needed to sell contained oxygen, he said, a process that can take up to nine months.

“These companies have zero possibility of providing oxygen to people in Florida on July 1,” he said. “There’s a total train wreck coming.” 

Weems doesn't think Medicare patients will have any trouble finding suppliers. The winning bidders have enough capacity to take on all comers, he said.

But the companies that lost Medicare contracts say the new system will jeopardize their business as well as their customers. “With these prices," Lecker said, "it will be very difficult to serve the patient properly and make a profit.”  

Florida Health News Editor Carol Gentry contributed to this report. She can be reached at Carol.Gentry@FloridaHealthNews.org. Contact Florida Health News Washington correspondent Susan Jaffe at Susan.Jaffe@FloridaHealthNews.org.