- The Washington Times - Tuesday, August 23, 2011

A poorly designed set of changes to Medicare announced earlier this month could have serious negative consequences as it hits home here in the Washington, D.C., area. The venture, known by the only-a-bureaucrat-could-love-it name of Competitive Bidding Program for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies, has some decent ideas at its core, but serious design flaws could cause it to waste money, override doctors’ decisions and harm patients here and everywhere else in the country.

Some background can explain why the effort matters and how it could do harm. Since the late 1990s, Medicare, the major federal health care program for the elderly and disabled, has performed studies and experiments asking vendors to place competitive bids for “durable medical equipment” ranging from hip replacements to walkers. Early results have shown the government pays at least 20 percent less than open-market prices. So far, so good.

But the same experiments that have shown savings also reveal deep problems. Diabetics have had great difficulty getting needed supplies, and potential shortages have cropped up in nearly every supply area with which Medicare’s overseers have experimented. In addition, a group of nearly 250 academic bidding experts led by University of Maryland professor Peter Cramton has criticized the program’s construction: Because of a quirky set of rules, some vendors will be allowed to sell only for less than they bid, while the government will more or less force others to take more money than they requested. (What a deal!)

Most important, the bidding process is essentially arbitrary. In many cases where shortages otherwise would have developed, the people running the program simply have changed the rules on the fly.

Thus, the purported savings that appeared so promising in early experiments are unlikely to occur in the real world. A report from the Pacific Research Institute finds the bidding methods could reduce investment in medical-device markets by as much as $3.1 billion over 10 years (essentially stopping the development of new high-tech devices) and cost $50 billion in terms of reduced life expectancy. A report from the American Consumer Institute finds the effect on one category of equipment - vacuum pumps that help heal serious wounds - would increase medical costs by $6.8 billion if the process slows the technology’s rollout. Such costs ultimately could be paid in part by big Washington-area employers such as the Washington Hospital Center.

Even worse, the cold logic of bidding largely leaves doctors out of the process. Although few physicians have strong preferences for one brand of wheelchair over another, nearly all have preferences regarding the more complex tools they use in their trade. By limiting them to just one or two brands, the bidding process threatens to take away this choice.

In the end, patients may end up getting the worst deal from this. They’ll get worse care, see decisions their doctors made overridden by bureaucratic dictates and may not get the things they need. The idea of having Medicare take bids is a decent one, but the process that’s about to hit home here in Washington will do harm.

Congress needs to act, stop the bidding process and order Medicare’s overseers to fix it.

Eli Lehrer is vice president of the Heartland Institute and national director of its Center on Finance, Insurance and Real Estate.