Imagine the wailing and gnashing of teeth that would occur among providers if Congress mandated that all DME was to be collected from the patient's home when it was no longer needed, sent to a common site to be refurbished, and then reassigned to another Medicare beneficiary. National competitive bidding can, and is, being replicated by states on a regional basis for such things as disease management, pharmaceuticals, and even full-spectrum health insurance programs. Can HME and rehab be far behind?

The industry seems to have survived several cuts in reimbursement for home oxygen therapy services. What do you suppose the reaction would be if Medicare, using look-behind investigations and the promulgation of new and precise regulations, forced changes in the way providers do business with significant volume customers? As much of a pain in the neck as maintenance and repair of equipment can be, how many providers would willingly give up this revenue stream to regional repair operations chosen by a process known as "selective contracting?"

The HME services industry invests significant time and resources into monitoring and trying to influence the actions of Congress and the Medicare bureaucracy. The industry must continue to do this, because history shows that state Medicaid programs quickly follow the lead of Medicare policy makers, and private insurance plans are never far behind. It is incumbent upon every provider—and equally incumbent upon trade publications and trade associations—to refocus time and resources on what is happening at the state level within Medicaid programs.

The examples given above were not pulled out of thin air. They come from phone and face-to-face interviews with state Medicaid program directors from five large states, and one relatively small state. For obvious reasons, these individuals would rather not be named in this column.

There are some things that we must keep in mind when developing relationships with state legislators and Medicaid program directors. Unlike the federal government, every state is required to operate under a balanced budget. There are no slush funds to borrow from, and states can't print more money when spending exceeds the revenue side of the ledger.

State budget directors will tell you that the fastest growing expense line in their budget is the cost of running either the state prisons or Medicaid. According to one budget director, growth in Medicaid spending must be reduced in every state if the states are to carry out their mandates in the areas of education, public safety infrastructure maintenance, construction (roads and highways), and public health.

As Medicaid costs grow, the federal government is returning less and less money to the states to help them comply with federal mandates. The downturn in the economy, the loss of American jobs that carried with them health insurance benefits, and the desire of every governor to provide health insurance to every child under age 16 is causing runaway spending growth in every state Medicaid program. Governors, budget directors, Medicaid program directors, and state legislators are all under the gun to reduce Medicaid spending.

State Medicaid program directors talk to each other. Through their national organization, they share ideas and best practices. They even have focus groups that analyze why certain attempts at reducing expenditures failed to yield the projected amounts.

Keep in mind that CMS is an acronym for the Centers for Medicare and Medicaid Services, and the Medicaid program is a federal-state partnership. Depending on a number of factors, the federal government contributes a significant percentage (32%- 45%) of the states' Medicaid costs. CMS has a vested interest in bringing state Medicaid program directors together on a regular basis to update them on the newest federal regulations, and to share information about potential fraud and abuse.

For example, ethical providers should be aware that state Medicaid program directors are beginning to share information about cost shifting—providers billing the Medicaid program for services provided to nursing home residents that have already been paid for as part of the Medicare per diem. This could be the next black eye on an industry kept in a defensive posture by the bad acts of a few bad actors.

Medicare and Medicaid are twin sisters—children of the 1960s—whose parents were "the Great Society." The difference between the two programs is that one is forced to live within its means and as such will be more aggressive in finding ways to cut costs. That one, Medicaid, requires as much attention and media coverage as its twin sister.

Cara C. Bachenheimer, JD, is VP of government relations for Invacare Corp.
David T. Williams is a political and legislative strategy consultant.