ACI Study Finds Medicare Bidding Program Will Increase Medical Costs, Amputations, Infections and Other Harms


Washington, DC (May 5, 2011) – Increasing medical costs and producing lower quality patient outcomes should not be the goal of the Centers for Medicare & Medicaid Service (CMS) bidding program.  However, the CMS’s new bidding program could, in fact, do just that, according to a newly released study by the American Consumer Institute (ACI).  The study finds that the CMS bidding process has a bias against higher quality, innovative products, and that bias will ultimately increase medical costs and produce worse outcomes for some Medicare patients. 


To demonstrate this problem, the study makes an in-depth analysis of Negative Pressure Wound Therapy (NPWT) – an innovative medical device used for severe wounds.  The study finds: 


• The total NPWT costs in the U.S. totals about $1 billion, representing the maximum savings achievable through the bidding process;

• The upfront daily cost of NPWT is indeed higher than traditional care; and

• Since NPWT dramatically reduces the length of treatment and risk of complications, the annual U.S. economic benefits from NPWT devices total $7.1 billion, with the potential benefits of $14.8 billion.


In other words, $1 billion of NPWT cost produce more than seven times the benefit, and it produces superior patient outcomes compared to standard care.  Because an overwhelming number of economists and auction experts predict that the flaws in the CMS bidding program will set medical device prices below actual cost, supply shortages will result and severely limit patient access to innovative devices for homecare use.  For patients needing wound therapy, for example, total medical costs will increase due to longer stays in hospitals, as well as increases in reinfections and complications, including increased amputation, ambulatory care and prosthetics. 


“Ironically, an auction bidding program that seeks to minimize costs would lead to significantly higher medical costs, as well as worse outcomes for some Medicare patients,” notes Steve Pociask, the study’s author and president of the ACI.  He notes, “The CMS objective of minimizing budget dollars could raise the cost of medical care in the U.S.  It’s pennywise and pound foolish.” 


If this can happened for NPWT devices, then it can happen for other innovative differentiated devices, particularly non-commodity products where bidding will likely select lower-quality devices.  This will mean that patients will have limited access to higher-quality devices for homecare use, which will lead physicians to move patients away from homecare to hospital care, thereby increasing medical costs.


A complete copy of the study is available by clicking here — final-study.