Competitive Bidding In Medicare: A Response To The Bipartisan Policy Center's Proposal

Abstract

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.