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Report (OEI-06-13-00470)

Medicaid DMEPOS Costs May be Exceeding Medicare Costs in Competitive Bidding Areas

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States establish their Medicaid payment amounts for all services-including items in the category of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS)-working within Federal parameters to limit costs while ensuring access. The President's Federal Fiscal Year (FFY) 2014 budget proposal also emphasized cost containment by Medicaid programs, proposing "limiting Federal reimbursement for a State's Medicaid spending on certain DME services to what Medicare would have paid in the same State for the same services."


We examined the FFY 2011 fee-for-service payment amounts for 32 DMEPOS items covered under both the Texas Medicaid program and the Medicare DMEPOS Competitive Bidding Program to compare payment amounts across the two programs in the Dallas/Fort Worth area. For each item for which the Texas Medicaid fee-schedule amount exceeded the Medicare payment amount, we used the Medicaid claims volume to estimate the potential savings that could have been achieved using the Medicare payment amount instead. We then calculated the overall potential savings by summing the potential savings per item.


We found that in FFY 2011, the Texas Medicaid fee-schedule amounts for 30 of the 32 DMEPOS items exceeded the payment amounts under the Medicare DMEPOS Competitive Bidding Program. During this period, Texas Medicaid spent approximately $12 million on these 32 items in the Dallas/Fort Worth area. If it had used the payment amounts from the Medicare Competitive Bidding Program, Medicaid could have saved approximately $2 million (State and Federal shares combined) in the Dallas/Fort Worth area.

Our findings provide a tangible example of potential State and Federal savings for Medicaid programs if the programs were to use the Medicare Competitive Bidding Program payment amounts for DMEPOS items. In July 2013, the Medicare DMEPOS Competitive Bidding Program expanded to cover a total of 100 metropolitan areas nationwide. If the State Medicaid programs were to use the Medicare Competitive Bidding Program amounts-rather than the State Medicaid fee-schedule amounts-the States and the Federal Government could achieve savings.

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