Controversy Heats Over Auction Program

September 13th, 2011 by @lamberts

Homecare Advocate has been covering issues related to the controversial bidding program that will detrimentally affect seniors and destroy the homecare equipment supplier network throughout our country.  Today, The Tennessean published an article highlighting concerns from the supplier community on their ability to withstand the low-ball bid pricing that occurs in this contentious program. 244 economists have weighed in on this program, predicting system-wide failure and unsustainable pricing that is manipulated by the government.  End result?  Bad policy for seniors and for the thousands of mom-and-pop homecare equipment supply companies throughout the country.

Jesse Schwartz, an economics professor at Kennesaw State University, was interviewed by The Tennessean.  He explains that the program is ill-designed by encouraging low-ball bids that companies are not bound to.  “That’s a big problem because Medicare might not be able to meet demand because there won’t be enough suppliers.”  Schwartz joined hundreds of his esteemed colleagues in June writing a letter to President Barack Obama strongly warning about the flaws in the bid program and the serious harm it will bring.  In the letter to the President, the economics experts implore the White House Administration to bring effective reform and to abandon the flawed principles of the current program. “Indeed, the current program is the antithesis of science and contradicts all that is known about proper market design.”

Many homecare equipment companies agree with these economists.  Lambert’s owner, Randy Wolfe, was interviewed by The Tennessean and told the reporter, “I don’t mind being in a program where products are competitively bid or auctioned; we just don’t want to have to auction off our companies.”  And that is exactly what the current program will do.  Current estimates show that 42% of non-contracted companies will go out of business with over 80,000 people losing their jobs by 2014. 

To lose a bid is the kiss of death for many companies, but several companies in this first round of 9 areas have gone out of business even when they WIN contracts. Meet Rob Brant, former co-owner and president of City Medical Services in Miami, Florida.  His company aggressively bid and won the contract to supply oxygen to Medicare beneficiaries in the Miami metro-area.  Though he also bid on the other product categories within his normal scope of business, he did not win anything else.  He laid off half of his staff and reduced the store size, but even with drastic measures his company still lost $25,000/month as a “bid winner”.  Operating at an unsustainable rate, he had to make the decision to close his business.  Rob’s story is hauntingly familiar as other companies risked and lost everything to participate in the Competitive Bidding Program.

Here is Congressman Heath Schuler speaking in with the Subcommittee on Small Business about the disastrous Competitive Bidding program back in 2009.

Years later, the Centers for Medicare & Medicaid Services have failed to address these very issues.  Auction expert Jesse Schwartz stands alongside his esteemed colleagues in pushing for complete reform of this egregious program, and patient advocacy groups across the country are fighting to repeal it.

Unless swift action is taken, the significant majority of seniors in the United States will be affected by the auction program’s second round rollout, due to take effect in 2013.  The Tennessean reports that all four major cities in Tennessee will be included, making Tennessee disproportionally targeted for the second round (with only large states like California and Ohio having more congressionally bid areas).  Call your representatives and let them know that you do not want this program coming to your town, taking away jobs, putting small businesses out of business, and harming Medicare beneficiaries.


7 Responses to “Controversy Heats Over Auction Program”

October 02, 2011 at 8:49 pm, Small Business said:

Hello. Great job. I did not imagine this. This is a excellent story. Thanks!


October 08, 2011 at 11:00 am, Mildred said:

truly wonderful posting, many thanks


November 07, 2011 at 8:32 pm, Brittni said:

You made some good points there. I did a search on the topic and found most people will agree with your blog.


December 23, 2011 at 11:10 am, Elton Snider said:

Awesome post! I will keep an on eye on your blog.


September 05, 2012 at 2:33 pm, Calvin Drought said:

Hi there! This is my first comment here so I just desired to give a quick shout out and say I really enjoy reading as a result of your posts. Can you recommend any other blogs/websites/forums that cover the same topics? Thanks for the time!


October 30, 2012 at 12:14 pm, Ashley Plauche said:

Sure! There are wonderful resources available, including info from the American Association for Homecare, The People for Quality Care, and Professor Peter Crampton’s Scholarly Posts on Competitive Bidding. We urge you to talk to your elected officials about repealing this disastrous program and replacing it with the Market Pricing Program (HR 6490). An easy form letter may be found here where you may edit and customize as you see fit.


February 14, 2013 at 9:21 am, Dominica Mclauren said:

Spot on with this write-up, I seriously believe that this website needs a lot more attention. I’ll probably be back again to read through more, thanks for the advice.


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