New Independent PAMS Study Calls NCB an “Anti-Competitive Scheme”

A new study from the Pennsylvania Association of Medical Suppliers (PAMS) calls the upcoming national competitive bidding (NCB) program “an anti-competitive scheme that threatens Medicare patients and businesses in Pittsburgh and nine other metropolitan statistical areas across the United States.” Pittsburgh is among the areas scheduled to take part in the Centers for Medicare & Medicaid Services’ (CMS) first round of competitive bidding.


The independent study was conducted by Brian O’Roark and Stephen Foreman, economics professors at Robert Morris University in Pittsburgh. O’Roark and Foreman examined the potential economic impact of competitive bidding for DME, and their findings called competitive bidding “uncompetitive” and “poor public policy.”


In the study summary, the professors said, “The ‘competitive bidding’ policy will lead to serious, long-term, unintended consequences: Any short-term cost savings will be more than offset by long-term increases, as successful bidders gain market power over time.” In fact, the report says CMS’ attempts to pay less for the product categories involved in NCB — including scooters, standard power chairs and complex power chairs and accessories — will likely backfire.


“Interference with competitive markets leads to higher, not lower prices,” the report said. “The customer base for medical equipment is expected to grow dramatically during the next 20 years. Restricting the market now will lead to substantial market failure in 10-20 years. Government intervention in the market for DME will produce reduced efficiency, fewer transactions and job losses.”


O’Roark and Foreman added that competition is desirable because “Prices tend to be lower and consumer options greater — competition maximizes the total ‘social welfare,’” which the study’s authors defined as “the greater good for everyone.”
The professors also questioned why DME was being targeted, since “only 1.3 percent of U.S. health care’s spending in 2005 was for DME. Based on these figures, a case could be made that spending for DME and supplies in the U.S. is not a problem at all.”


The authors concluded that NCB is “poor public policy indeed” and predicted initial “small short-term benefits” would eventually result in “major long-term problems.”


The National Association of Independent Medical Equipment Suppliers (NAIMES) lauded the study and “urges all suppliers to use the materials on the PAMS Web site to further educate their patients, referral sources and members of Congress on the likely effects of this ill-conceived policy.”


To read the O’Roark/Foreman study, visit PAMS at www.pamsonline.org. The study includes impact summaries regarding the DME industry, suppliers/small businesses and patients.

This article originally appeared in the April 2008 issue of Mobility Management.

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