Unbiased Analysis of Today's Healthcare Issues

The market works!

Written By: Jason Shafrin - Aug• 16•17

In 2011, CMS created a demonstration to have competitive bidding for durable medical equipment (DME).   Prior to the implementation of this program, CMS used an administrative fee schedule, similar to how physicians are currently reimbursed.  How did this market-based solution fare?  A paper by Newman, Barrette, and McGraves-Lloyd (2017) answers this question.

We compared prices from Round 1 of the Medicare competitive bidding program, which were established for the periods 2011–13 and 2014–16, to prices paid by national commercial insurers for the same types of items in 2011–14. Our results suggest that the initial years of the program produced prices comparable to those obtained, on average, by large commercial insurers—sophisticated purchasers that presumably were able to negotiate prices with suppliers of durable medical equipment and similar items.


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