CMS Intends To Lower Payments to Medical Suppliers, Scully Tells Senate Subcomittee

Although CMS has proposed a reduction in Medicare payments for some medical supplies, agency Administrator Tom Scully on June 12 told members of a Senate subcommittee that the "savings may not be as great as a [recent] study suggests," USA Today reports (USA Today, 6/13). An HHS Office of Inspector General study released this week found that Medicare pays more for medical supplies such as wheelchairs and saline solution compared with regular market prices and prices paid by the Department of Veteran Affairs. According to the study, Medicare in 2000 spent about $1.7 billion for 16 "common medical items." Had Medicare paid the same prices as the VA, it would have saved nearly $1 billion, the study found. Medicare beneficiaries without supplemental health insurance often have to pay 20% of the cost of medical supplies out-of-pocket (Kaiser Daily Health Policy Report, 6/12). Scully told members of the Senate Appropriations Subcommittee on Labor, HHS and Education that CMS has proposed a new rule that would allow Medicare to reduce payment levels for medical supplies "when we are faced with grossly excessive charges" (Rich, CongressDaily/AM, 6/13). Scully also told lawmakers that he would support a competitive bidding system for some purchases, a policy that would require congressional approval (USA Today, 6/13). He said that competitive bidding "can produce significant savings for Medicare and beneficiaries." Subcommittee Chair Tom Harkin (D-Iowa) agreed, saying, "The VA participates in the far more cost efficient process of competitive bidding" and "is able to save millions in medical supply costs." However, representatives of medical supply companies testified that the "VA comparison is inappropriate" (CongressDaily/AM, 6/13). The VA makes "bulk national purchases, while Medicare pays for individual purchases that may involve delivery, service, maintenance and other costs," medical supply company representatives said. Scully added, "We just aren't in the same situation as the VA, and we can't always expect to get VA prices." Harkin disagreed, saying that "with Medicare's buying power, it should get even cheaper prices" than the VA (USA Today, 6/13).