Medicare's Disastrous Bidding Process

In the Weekly Standard, Eli Lehrer discusses a little understood but deeply flawed process that Medicare is using to bid on certain medical equipment. The consequences of the flawed system may lead to higher healthcare costs and lower life expectancies:

In the trial areas, problems have already emerged. Diabetics have run into difficulty getting supplies that work with their testing meters and CMS has had to rejigger delivery quantities for almost every major item it has put out for bids. While these short-term fixes have prevented calamity, the fragile, nearly arbitrary process that now exists could show real strains as soon as the “round two” process expands current practices to a total of 91 metropolitan areas that collectively contain almost the entire population.

In fact, just about every independent study of the process makes decidedly dour predictions. One report from the Pacific Research Institute finds that CMS’s methods could reduce investment in medical device markets by as much as $3.1 billion over a 10-year period (essentially stopping the development of new high-tech devices) and cost $50 billion in terms of reduced life expectancy. Another report from the American Consumer Institute finds that the process’s consequences for one category of equipment—vacuum pumps that help heal serious wounds—would increase medical costs by $6.8 billion if it slows the technology’s rollout. “The CMS bidding process is so flawed that it will fail to find sustainable market prices for medical equipment,” says Steve Pociask, ACI’s chief economist and the study’s author. But CMS has given every indication it plans to push forward with the process unchanged.

Click here to read the full piece.