Medicare’s DME System: Are Cost Cuts Compromising Patient Care?

WASHINGTON, D.C. – November 04, 2025 – A recent report from the Pacific Research Institute (PRI) is raising concerns about proposed changes to Medicare’s competitive bidding process for durable medical equipment (DME). While intended to curb costs, critics argue that the reforms risk compromising patient access to essential items like wheelchairs, oxygen tanks, and CPAP machines. The debate centers on whether a relentless focus on price is creating a system where quality and reliability are sacrificed for short-term savings.

A System Under Strain

Medicare’s competitive bidding program for DME was initially designed to foster competition among suppliers and drive down costs. However, the program has been plagued by challenges, including supplier consolidation and reports of shortages. The PRI report argues that the current system, and proposed modifications that utilize the 75th percentile bid, continue to prioritize the lowest price, incentivizing suppliers to cut corners on quality and potentially leaving patients vulnerable. “The fundamental flaw isn’t the idea of competition, but the way it’s structured,” explains a healthcare economist familiar with the program. “Suppliers are effectively forced to bid lower and lower, which can lead to the use of substandard equipment or reduced service levels.”

Industry sources corroborate these concerns. A representative from a national DME supplier association stated that the program has created a “race to the bottom,” forcing many smaller, independent suppliers out of business. “These were often the providers who offered personalized service and specialized equipment,” the source explained. “Now, patients may have fewer choices and limited access to the supplies they need.” The consequences of these issues can be severe, ranging from discomfort and inconvenience to serious health complications for patients reliant on DME.

The Promise and Peril of the 75th Percentile Bid

In response to concerns about access and supplier viability, the Centers for Medicare & Medicaid Services (CMS) proposed changes that utilize the 75th percentile bid as the basis for reimbursement rates. The rationale is that a higher percentile will provide suppliers with more sustainable margins and encourage wider participation in the program. However, the PRI report contends that this adjustment is insufficient to address the underlying problems. “While a move to the 75th percentile is a step in the right direction, it doesn’t fundamentally change the incentives,” says Dr. Wayne Winegarden, director of the Center for Medical Economics and Innovation at PRI. “Suppliers will still be pressured to cut costs, and the risk of shortages and compromised quality remains.”

Furthermore, critics point out that the 75th percentile may not accurately reflect the true cost of providing high-quality DME, particularly in rural areas with higher transportation costs and limited supplier networks. “It’s a one-size-fits-all approach that doesn’t account for regional variations,” notes a policy analyst specializing in healthcare finance. “What works in a densely populated urban area may not be feasible in a remote rural community.” The debate highlights the complex trade-offs involved in balancing cost containment with ensuring access to quality healthcare for all Medicare beneficiaries.

A Call for Structural Reform

The PRI report proposes a radical alternative: a single-price bidding structure. Under this model, CMS would establish a fair and transparent price for each DME item based on the actual cost of providing quality equipment and services. Suppliers who meet specific quality standards would then be eligible to provide the equipment at this set price. “This approach would eliminate the downward spiral of price competition and allow suppliers to focus on providing reliable, high-quality equipment,” Dr. Winegarden argues. “It’s about shifting the focus from cost minimization to value maximization.”

While the single-price model has potential benefits, it also faces challenges. Determining a fair price that accurately reflects the cost of providing quality DME across different regions and for a wide range of equipment would be a complex undertaking. “You’d need robust cost modeling and input from a diverse group of stakeholders,” says a healthcare supply chain expert. “Transparency and accountability would be crucial to ensure that the price is fair and sustainable.” However, proponents argue that the benefits of a more stable and reliable DME supply chain outweigh the challenges of implementing a new pricing model. The ongoing debate underscores the need for a comprehensive review of Medicare’s DME bidding process and a willingness to consider innovative solutions that prioritize patient care and quality over short-term cost savings. The potential for increased patient safety and long-term cost reduction through improved DME quality are prompting further investigation from policy makers and healthcare advocacy groups alike.