On 1 April 2011, 110 stakeholders in the Medicare Durable Medical Equipment (DME) industry came to the University of Maryland to discuss how the CMS’ current competitive bidding program could be improved. The participants included Medicare providers, government leaders, and auction experts. A...

One sensible way to reduce healthcare costs is to harness market forces, where practical, to nurture competition and innovation. Lower prices and improved services should follow. However, the switch to market pricing is not an easy one. Medicare’s experience with medical supplies illustrates...

In the fall of 2010, 167 auction experts from top universities around the country sent a letter to Congress expressing concern regarding the Centers for Medicare and Medicaid Services (CMS) planned implementation of the durable medical equipment (DME) competitive bidding program which was...

Economists and other auction experts agree that using administrative prices from 25 years ago to set Medicare prices is a bad idea, and that a much better approach is to price Medicare supplies in competitive auctions. That is not surprising. What is surprising is the degree of consensus that...

The Medicare Auction Conference, sponsored by the National Science Foundation and the University of Maryland, was an opportunity for collaboration among the stakeholders of the Medicare DME Competitive Bidding program: DME providers, Medicare beneficiaries, government agencies, Congressional...

Chairwoman Ellmers, Ranking Member Richmond, and members of the House Committee on Small Business, I am honored to appear before you today and have this opportunity to speak to such a critical committee on a matter of great significance to our future: Medicare auction reform. Without the...

We examine the theoretical properties of the auction for Medicare Durable Medical Equipment. Two unusual features of the Medicare auction are 1) bids are non-binding and 2) winners are paid the median winning bid. These two features lead to complete market failure. Lowball bids result in a price...

We are economists, computer scientists and engineers with expertise in the theory and practice of auctions. In September 2010, many of us signed a letter to Congressional leaders pointing out the numerous fatal flaws in the current Medicare competitive bidding program for durable medical...

Controlling Medicare costs is essential to our health care system. Yet as we look to the future, unfunded Medicare expenses are estimated to be about 70 trillion dollars—an unsustainable amount. Effective use of market methods in Medicare is our best hope for controlling these costs while...

An auction design for Medicare Durable Medical Equipment is presented. The design addresses the flaws in the current program. Bids are binding commitments. Each bid binds the bidder to particular performance obligations depending on the auction outcome. The bids are made credible through a...