Last week began a national race for $50 billion in federal funds designated for rural healthcare in the states. Centers for Medicare & Medicaid Services head Mehmet Oz made big promises in a press event about the program’s impact, calling it a “massive opportunity to make rural America healthy again.” This comes as CMS just concluded taking public comment on its Competitive Bidding Program (CBP), a lesser-known initiative but one with far-reaching consequences for patients using medical devices. CMS’s proposal is a bad one and could counteract much of the good associated with the disbursement of funds for rural care.
CMS wants to sweep urological, tracheostomy, and ostomy supplies into the CBP so that Medicare would only cover the most cost-effective devices. This could be mistaken for budget-hawkery and the government looking to lower spending, but the end result is a healthcare market flooded by riskier products and significantly higher chances of ending up in the ER.
Those emergencies often occur when specialized medical products are not tailored to a patient’s needs, such as catheters that must be inserted multiple times a day, and ostomy supplies that need to fit perfectly to prevent leakage or skin damage.
CMS proposes treating these products as bulk-packaged commodities, where suppliers winning contracts are typically those offering the cheapest products, rather than those delivering the best outcomes.
We saw this happen with durable medical equipment like oxygen tanks and wheelchairs, both of which have already been subjected to competitive bidding going back to the Obama administration.
The result has been lower costs, the stated goal, but also less inventory and delivery delays. Patients experience a real drop in product quality and access. When it comes to internal-use devices, items that go into the patient’s body, low-quality products lead to infections and unwanted ER visits.
At the end of the day, any proposed savings from including urological, tracheostomy, and ostomy supplies into the CMS’s Competitive Bidding Program will likely be wiped out by the downstream costs from medical complications. Treating a single catheter-associated urinary tract infection (CAUTI) can cost Medicare over $1,000, and ostomy pouch problems can lead to skin breakdowns requiring wound care specialists or even surgical revisions.
It’s a time-tested example of where you get what you pay for, and cutting corners on upfront costs means downstream costs that could be even greater. Cutting food with a discount store kitchen knife is the kind of thing that lands you in the ER for a deep gash on your hand.
Similarly, CMS may save a few pennies on supplies upfront, but they’re likely to spend much more helping patients overcome preventable harms.
Medical device manufacturers developing next-gen products like advanced antimicrobial barriers and smarter catheter tech won’t survive in a race-to-the-bottom bidding system. Why innovate when CMS will only reward the cheapest option on the menu?
There’s a notorious historical example of this perverse incentive system at play, as seen in the 1860s, when the Pacific Railroad Acts dispersed $16,000 per mile to rail companies for their work. This incentivized crooked routes designed to rake in more government subsidy dollars, making quality a secondary priority. We’re not dealing with the same kind of malicious graft as was seen with laying rail; it’s just rational economics.
The cheaper products are what Medicare will cover, so that’s what you get more of. It’s a bad policy that leads to fewer reliable choices in the marketplace.
Perhaps that’s why Congress already decided this was a bad idea 20 years ago. The Medicare Modernization Act of 2003 provided an explicit exemption for urological, tracheostomy, and ostomy supplies from competitive bidding, acknowledging the complexity and risks associated with these supplies. CMS now wants to bypass the Congressional carveout for these products without new data on patient safety and outcomes.
CMS, along with other agencies, is under real political pressure to contain costs. And to be fair, massive fraud hasn’t helped achieve that goal. Just last month, the Department of Justice executed Operation Goldrush, a fraud bust that exposed more than $14.6 billion in false claims submitted to Medicare for durable medical equipment like catheters.
There are more sustainable paths forward that can combat fraud without compromising access, and the government can streamline reimbursement without limiting choice. Innovative tech begets innovative tech, and what you want is a system to incentivize medical breakthroughs, which have the downstream effect of lowering prices on whatever came before.
Medical patients are often in a tough situation where short-term thinking wins out over long-term considerations, but lawmakers and regulators have to bring wisdom to bear in making sure patients aren’t getting supplies from the bargain bin. CMS’s reform proposal fails on this metric and more.
CMS can stay focused on lowering costs without settling for cheaper, riskier products.
Elizabeth Hicks is the U.S. Policy Analyst with Consumer Choice Center.
