Medicare's Bidding Program Found Higher Prices in 2021. It Ignored Them.

A wheelchair, an oxygen concentrator, a hospital bed at home — Medicare calls this durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), and in 2024 it paid $9.1 billion for it, per MedPAC's payment-basics primer.▸ Since 2011, a chunk of that spending has run through a competitive bidding program (CBP): suppliers bid a price per item per region, Medicare picks the lowest bidders until it has enough capacity to meet demand, and everyone awarded a contract gets paid that "single payment amount." The law creating it — the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 — has one non-negotiable requirement: the program has to reduce what Medicare spends. For the highest-expenditure categories, it has: payment rates have fallen by an average of nearly 50% since bidding began, with, per MedPAC, no documented effect on beneficiary health outcomes. Then in 2021, the market answered a question CMS didn't want asked, and the agency simply declined to hear it.

Medicare pays 80% of whatever the fee schedule or the CBP's single payment amount says an item is worth; the beneficiary owes the other 20% as coinsurance, once they've cleared the annual Part B deductible ($257 in 2025), per MedPAC.▸ Applied to the $9.1 billion total, that's roughly $7.28 billion from the Medicare trust funds and $1.82 billion straight out of beneficiaries' pockets — which is exactly why the statute cares so much about the price: every dollar competitive bidding cuts off a wheelchair or an oxygen concentrator is a dollar off both sides of that split at once.

CMS ran four competitive-bidding rounds between 2011 and 2018, then paused for 2019 and 2020.▸ In 2021 it tried again — a single round covering 15 product categories across 130 competitive bidding areas, 13 of which had already been through the program before. The results split down the middle. For two new categories, off-the-shelf back and knee braces, the bids came in below the existing fee schedule, so CMS awarded contracts it estimated would save $934 million. For the other 13 — categories that had already been bid down once — the new bids came back higher than the rates already in place. Awarding those contracts would have raised Medicare spending by $1.2 billion, which the statute doesn't allow a competitive-bidding round to do. So CMS didn't award them. It kept the old, already-discounted rates, updated only for inflation, and called the resulting freeze a "temporary gap period."

That gap period has now run longer than the rounds that preceded it.▸ Most DMEPOS categories priced under the CBP have not seen a genuine re-bid since somewhere between 2016 and 2018 — the program's own market test, in 2021, found the market didn't want to sell at 2018's rates anymore, and CMS's answer was to keep charging the market 2018's rates by decree. The $1.2 billion figure is not a scandal by the usual definition; no one pocketed it. It's a program legally required to only ever find savings, encountering a year it didn't, and quietly refusing to publish the result as anything other than an intermission.

Five years on, CMS is trying again.▸ The CY2026 DMEPOS Competitive Bidding Program Updates final rule, published in the Federal Register on December 2, 2025 as part of the same rulemaking that set the 2026 Home Health payment rates, takes effect January 1, 2026, though the next actual round of bidding doesn't begin until January 1, 2028. It adds new product lines that have never been through the CBP — Class II continuous glucose monitors and insulin pumps, urological and ostomy supplies, hydrophilic urinary catheters, tracheostomy supplies, and off-the-shelf back, knee, and upper-extremity braces — and it changes how the winning price is set, moving to the 75th percentile of winning bids rather than the prior method, a shift suppliers argue will push payments down further. It also restructures who can win: instead of competing region-by-region, several categories will be decided as a single nationwide contest with a small, fixed number of winners supplying the entire country.

Off-the-shelf back braces get the smallest field: four companies, one national contract pool, for every Medicare beneficiary who needs one, per DLA Piper's reading of the rule.▸ CGMs and insulin pumps get the largest, at ten. None of the seven categories gets more than ten national winners — a sharp narrowing from a fee-schedule market that, before bidding, any accredited supplier could enter. The proposed rule drew more than 950,000 public comments, an extraordinary volume for a Medicare payment rule, from patients worried about losing a supplier who knows their equipment and from suppliers who stand to be one of the ones locked out of the national contract entirely. CMS finalized the rule largely as proposed.

Figures cover Medicare fee-for-service DMEPOS spending and the competitive bidding program's federal rulemaking record through the CY2026 final rule; Medicare Advantage plans' separate DME purchasing arrangements, state Medicaid DME programs, and supplier-level financial or employment data are outside this piece's scope.