If Medicare 'Auctions' are the New eBay, Critics Aren't Buying

I wish I could type as fast as an auctioneer can speak so that I could kick off this article with a joke about how much you’d be willing to bid for 8,000 mobility scooters or 1.5 million external catheters.

But the reality is that I can’t in fact type that fast, so you’ll just have to imagine how amusing the intro to a story about the Centers for Medicare & Medicaid Services’ plan to compel medical equipment suppliers to bid for Medicare contracts could have been.

CMS’s plan was originally launched as a pilot program in Pittsburgh and handful of other cities across the country, but will now be expanded nationwide. One hundred U.S. cities will participate in the program starting July 1, 2013.

The basic premise seems logical. Market capitalism in action. Think eBay. Think Priceline (well, at least before William Shatner had a “daughter” [from television's The Big Bang Theory] that he loaned to ninja monks in a commercial that tells us we no longer have to bid on Priceline). But according to a story on triblive.com, those very medical device suppliers are less than thrilled about CMS’s foray into the world of auctions.

The article notes: “‘The bottom line is, it’s a nightmare, it’s hard to imagine a worse program and it needs to be fixed,’ said Peter Cramton, a University of Maryland economics professor and expert on auction theory.”

“’Every auction expert in the world that I’m aware of agrees with me,’ he said.”

[Editor's Note: Given his field of study, Cramton probably knows a lot of auction experts. Let's hope so. I myself cannot recall the last time I bumped into an auction expert say near the onion section of the supermarket, but perhaps I don't get out enough.]

The article continues: “Cramton and more than 240 economists, computer scientists and engineers with expertise in auctions sent a letter to President Obama in June 2011 pointing out problems in the Medicare program, including the use of nonbinding bids, a lack of transparency in bid selection, and arbitrary price setting by Medicare administrators.”

“’For example, bidder quantities are chosen arbitrarily by (the Centers for Medicare and Medicaid), enabling a wide range of prices to emerge that have no relation to competitive market prices,’ the experts said in the letter.”

So perhaps the isn’t the brave new free market utopian auction world it originally seemed to be. But for now the plan is scheduled to move forward in less than six months.

Where shall we start the bidding on whether or not it will survive additional scrutiny?