Competitive bidding in Medicare: A response to the Bipartisan Policy Center's proposal

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Article Highlights

  • The BPC’s proposals for competitive bidding are critically flawed

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  • Under the BPC proposal, MA plans will feel that they are competing with themselves on an unlevel playing field

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  • There is a better alternative: a comprehensive competitive bidding system that includes both MA plans & FFS Medicare

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Editor's note: The full text of this post is available at the Health Affairs website here.

Competitive bidding underlies a growing body of proposals to control costs and increase the efficiency of the Medicare program.  One of the most recent proposals for competitive bidding was released by the Bipartisan Policy Center, a distinguished group that includes two former Senate Majority Leaders (Tom Daschle and Bill Frist), a former Chair of the Senate Budget Committee (Peter Dominici), and a former Director of the Congressional Budget Office (Alice Rivlin).

The interest in competitive bidding is a good sign.  In a review of competitive bidding efforts for Medicare, we found that competitive bidding was relatively straightforward to implement for many different parts of Medicare.  We also found that all of the competitive bidding demonstrations that reached the point of bid evaluation — even those using bidding models that were watered down under provider pressure — demonstrated that they would save substantial amounts of money.

Competitive bidding thus is a proven method for bringing efficient prices to Medicare.  Unfortunately, the BPC’s proposals for competitive bidding are critically flawed.  Most important, the BPC proposal proposes a limited form of competitive bidding, restricted to Medicare Advantage plans only — the traditional Medicare fee-for-service (FFS) plan is not one of the bidders.  For reasons detailed below, that is a serious flaw.  There are other important flaws as well in the BPC proposal.

We propose a bidding arrangement for all Medicare plans, MA plans and the traditional FFS Plan.  In this post, we explain why.  We first review the BPC proposals and then describe the problems that would result from the particular form of competitive bidding BPC has proposed, and why a more comprehensive bidding arrangement would be a far more important reform for Medicare.

Read the full text of this Health Affairs Blog post here.

From: Robert Coulam, Roger Feldman, and Bryan Dowd “Competitive Bidding In Medicare: A Response To The Bipartisan Policy Center’s Proposal” Health Affairs Blog July 2, 2013 http://healthaffairs.org/blog/2013/07/02/competitive-bidding-in-medicare-a-response-to-the-bipartisan-policy-centers-proposal/  Copyright ©2013 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

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About the Author

 

Roger
Feldman
  • American Enterprise Institute (AEI) adjunct scholar Roger Feldman is the Blue Cross Professor of Health Insurance and Professor of Economics at the University of Minnesota, where he specializes in applying economic theory to health services research. He is currently a member of the Congressional Budget Office’s Panel of Health Advisers and consults for various federal and state agencies on health care–related matters.

    Previously, he served on the senior staff of the President’s Council of Economic Advisers. From 1988 to 1992, he directed one of the four national research centers sponsored by the Centers for Medicare and Medicaid Services (CMS) and has advised CMS on the design of a demonstration of competitive bidding for Medicare health plans. At AEI, Feldman’s research focuses on Medicare reform, competition in health care, and health insurance markets.

    Feldman holds a Ph.D. in economics from the University of Rochester. He obtained an M.S. in economics at the London School of Economics, where he was a Marshall Scholar, and a B.S. from the University of Wisconsin-Madison.

  • Phone: (612) 624-5669
    Email: feldm002@umn.edu

 

Bryan E.
Dowd
  • American Enterprise Institute (AEI) adjunct scholar Bryan Dowd is the Mayo Professor of Public Health and the director of graduate programs in health services research and policy at the School of Public Health at the University of Minnesota. His work at AEI focuses on the economics of health care policy, Medicare reform, and health insurance markets.

    A health economist with a Ph.D. in public policy analysis from the University of Pennsylvania, Dowd also has an M.S. in urban administration from Georgia State and a B.A. in architecture from the Georgia Institute of Technology.

  • Phone: (612) 624-5468
    Email: dowdx001@umn.edu

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