“It’s clear that we’ve been paying too much for medical equipment and supplies,” CMS acting Administrator Kerry Weems said during a conference call with reporters.

In some cases, the prices based on the bids will be substantially lower than Medicare now pays through its regulated administered pricing formula.

At present, for example, Medicare pays $199.28 per beneficiary each month on average in rental and service fees to suppliers of stationary oxygen concentrators placed in patients’ homes. The competitively bid prices are 22 percent to 32 percent lower, with the average being $140.82.

Because Medicare beneficiaries pay for 20 percent of the cost of these supplies, patients will get their equipment “at substantially lower prices than they are paying now,” Weems said. The new prices take effect July 1.

Under the first phase of the program, suppliers seeking to provide 10 different kinds of equipment to patients in 10 metropolitan areas were asked to submit bids. In July, CMS will begin expanding the program to 70 additional metropolitan areas.

“We expect that when the program is [fully] implemented … Medicare will save about a billion dollars a year in the cost of equipment and supplies,” Weems said.

Medical suppliers, most prominently the oxygen industry, and some allied lawmakers have expressed strong misgivings about CMS’s handling of the competitive bidding program, which was mandated by Congress in 2005.

Sens. Blanche Lincoln (D-Ark.) and Pat Roberts (R-Kansas), as well as Reps. John Tanner (D-Tenn.) and Phil English (R-Pa.), attracted the support of many colleagues who signed on to letters the lawmakers sent to the administration criticizing the program.

Their complaints focused chiefly on the potential impact of the bidding process on access to supplies, the quality of service and the competitiveness of smaller providers.

Weems sought to allay those concerns, noting that more than 6,300 companies submitted bids, that the supplies being offered are “nationally known, brand name, quality products,” and that 64 percent of the winning bids came from small suppliers (defined as having gross annual revenues of $3.5 million or less).

CMS did not disclose what companies submitted winning bids because the agency is still in the process of notifying the firms that competed for contracts. Once notified, the companies have 10 days to decide whether to accept the new prices. The winners will be announced by May, Weems said.

The first phase of the program will affect beneficiaries living in Charlotte, N.C.; Cincinnati, Ohio; Cleveland, Ohio; Dallas, Texas; Kansas City, Mo.; Miami, Fla.; Orlando, Fla; Pittsburgh, Pa.; Riverside, Calif. and San Juan, P.R.