N.Y. DOH Rejects Bidding for its Medicaid Program

State health department questions methods used by HHS OIG report advocating bidding for the state.

The New York State Department of Health rejected a recommendation by a report from the Health and Human Services Office of Inspector General that the state should implement competitive bidding for its Medicaid Program.

The HHS OIG report, released last month, argued that the state could have saved $8.9 million during 2011 and 2012 by establishing a competitive bidding program for its Medicaid. However, the state health agency disagreed with the recommendation, citing in a public response several key reasons ranging from cost to reporting methods why competitive bidding would not work for the state.

One primary issue the state had with competitive bidding for its Medicaid program was that implementing such a program would require statutory authority through legislative approval, a process that would involve consensus among various stakeholders and require significant dedication of its resources.

“This would involve consensus among the various stakeholders, including providers, beneficiaries, advocates and legislators,” the state department’s reply read. “Achieving a consensus would necessitate significant dedication of resources by the Department at a time when the New York State Medicaid program is moving more and more beneficiaries out of the traditional fee-for-service program examined in this audit towards managed care, managed long term care and other reimbursement models.”

The State agency also found that that the methods used in this audit report to compare New York State Medicaid Reimbursable Amounts (MRA) to averaged competitive bidding amounts might not have provided an accurate estimate as to the potential savings of a competitive bidding initiative by New York State Medicaid.

“The [HHS OIG] report states that the eight Round One competitive bid rates (established in 2009 and implemented in 2011) were averaged and compared to the New York MRA for 74 DME items,” the state agency noted. “A review of the Round One CBA areas used in the audit analysis reveals that all are major metropolitan areas located throughout the country with none being within New York State. Thus, the CBA average payment used may not be representative of DME costs within New York.”

The state agency pointed out that the HHS OIG audit did not take into consideration the difference in beneficiary populations between New York State Medicaid and the Federal Medicare programs. The agency pointed out that Medicaid services a large population of children and special needs adults, some with complex health problems not prevalent in the Medicare population. So, the Medicaid reimbursement levels must accommodate a variety of needs, products and pricing sufficient to ensure access to medically necessary services, and that reimbursement model and set of beneficiary needs is not parallel to those of Medicare.

Looking at a specific category, the N.Y. Department of Health pointed out that the HHS OIG report did not take into account that New York Medicaid and Medicare have different reimbursement policies for respiratory equipment. In Medicaid, respiratory equipment is rented on a monthly basis for as long as the beneficiary needs the equipment, and the rental fee includes the equipment, supplies, delivery, repairs and maintenance. Meanwhile, Medicare uses a capped rental reimbursement policy with supplies and maintenance potentially payable separately.

“The two reimbursement policies produce fees that should not be practically compared when producing a cost savings estimate,” the state agency noted in its reply.

Last but not least, the state agency pointed out one factor the HHS OIG did not highlight in its recommendation that New York implement competitive bidding for its Medicaid program: cost.

“The costs of developing and maintaining a New York State CBA initiative were not considered in the potential cost savings calculation,” the state health department wrote. “The costs would be reasonably expected to be significant.”

That point, along with the other issues noted, led the N.Y. Department of Health to conclude that it would not pursue competitive bidding for its Medicaid program.

About the Author

David Kopf is the Publisher and Executive Editor of HME Business and DME Pharmacy magazines. Follow him on Twitter at @postacutenews.

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