Fact Sheets

REFORMING MEDICARE'S CONTRACTING PROCESS

Overview:

The Centers for Medicare & Medicaid Services (CMS) is taking its first step in launching the Medicare contracting reforms mandated by section 911 of the Medicare Prescription Drug, Improvement and Modernization Act (MMA).  This important new effort will improve the operation of the Original Medicare program affecting both beneficiaries and the providers and suppliers who treat them.  

Since its inception in 1965, the Medicare program has been required to contract with health insurance companies to perform its claims processing and related administrative functions.  Over the ensuing 40 years, the contracting portion of Medicare’s fee-for-service administrative structure has not been modernized to keep up with changes in healthcare delivery and in society.  Starting in FY 2005, Medicare will change all of its existing claims-processing contracts, introducing competition and performance incentives for its contractors.  These improvements, mandated by the Medicare Modernization Act (MMA), were outlined in a Report to Congress released by the Secretary of Health and Human Services on February 7, 2005.

CMS’ vision for Original Medicare, the fee-for-service (FFS) program, is that of a premier health plan that allows for comprehensive, quality care and world-class beneficiary and provider service.  Achieving this vision requires substantial improvement of Medicare’s current FFS administrative structure.  Although the Medicare contracting reform provisions contained in the MMA provide significant improvements to the structure, setting the stage for a new, more competitive era in Medicare contracting, CMS will introduce additional administrative improvements in order to achieve improved administrative services and a greater efficiency.

DME Medicare Administrative Contractors:

The first competition in the fee-for-service program will be for the durable medical equipment (DME) claims workloads to be administered by DME Medicare Administrative Contractors (MACs).  In fiscal year 2004, the existing DME regional carriers (DMERCs) processed over 68 million claims from suppliers of DME, orthotics and prosthetics amounting to Medicare program benefit payouts in excess of $9,074 million.   Starting with this discrete, comparatively small workload will allow CMS to closely examine its acquisition and transition efforts, avoiding disruption to providers and beneficiaries.

The DME MAC contracts will be awarded after a full and open competition.  The service areas for these contracts will be similar to the current jurisdictions administered by the DMERCs.  Those jurisdictions will be announced shortly.

Next Steps:

CMS released a Request for Information (RFI) concerning the DME MAC procurement on February 8, 2005.  CMS is encouraging industry and other interested entities to provide any feedback, comments, questions or concerns.  This feedback will assist CMS in refining the acquisition materials prior to the release of a formal Request for Proposal.

CMS will hold a Town Hall Meeting on February 25 to provide information about the report and CMS’ plans for the MAC procurements, and an Open Door Forum that afternoon, during which industry and other interested parties may voice comments, concerns, and questions about the RFI.  Formal announcements of the meetings will be made at a later date and will be posted on the CMS website.

CMS’ DME MAC procurement schedule anticipates releasing the Request for Proposal in March 2005 and awarding contracts in December 2005.

All procurement related information will be provided to the public on the Federal Business Opportunities website at: http://www.fedbizopps.gov.  CMS will have a link to this website available on its Medicare Reform web page at: http://www.cms.hhs.gov/medicarereform/contractingreform/.