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...

Our Economists’ Voice column of October 2010 summarized the severe problems with the current and proposed Medicare auctions. The column was based on a careful reading and analysis of the auction rules. Since that time we and other auction experts have studied the Medicare auctions with theory,...

We are economists, computer scientists, and operation researchers with expertise in the theory and practice of auctions. We write to express our concerns with the Medicare Competitive Bidding Program for Durable Medical Equipment operated by the U.S. Department of Health and Human Services. We...

On 11 September 2012, the Subcommittee on Healthcare and Technology of the United States House Committee on Small Business led by Chairwoman Renee Ellmers (R-NC) and Ranking Member Cedric Richmond (D-LA) held a hearing on Medicare’s Durable Medical Equipment Competitive Bidding Program, which...

A procurement contract is granted by a bureaucrat (the auctioneer) who is interested in a low price and a bribe from the provider. The optimal bids and bribes are derived based on an iid private cost assumption. In the experiment, bribes are negatively framed (betweensubjects treatment) to...

This paper aims to present a combined fuzzy Analytical Hierarchical Process (AHP) and Simple Multi-Attribute Ranking Technique (SMART) approach to deal with the contractor selection problem in government procurement auctions. The proposed approach utilises a set of ten attributes for the...