Peter Cramton: Medicare Auction Gadfly

My friend and co-author Peter Cramton continues his two-year crusade to improve the workings of “Medicare’s Bizarre Auction Program.”  You can watch his YouTube testimony before the United States House Committee on Small Business here

(See also his Oral TestimonyTranscript of HearingVideo of Entire Hearing.)

Peter’s supplemental comments are particularly devastating in rebutting two claims of Lawrence Wilson, Centers for Medicare and Medicaid Services (CMS) Director of the Chronic Care Group:

CMS [claim]: “CMS worked closely with stakeholders to design and implement the program.”

Mr. Wilson. “CMS worked closely with stakeholders to design and implement the program in a way that is fair for suppliers and sensitive to the needs of beneficiaries.”

Despite this supposed collaboration with stakeholders, CMS managed to come up with a design that stakeholders—beneficiaries, providers, non-CMS government leaders, and auction experts—all agree is flawed.

Mr. Cramton. “So there is unanimous consent on this, and, in fact, I have been working on this for 2 years. I have talked to people around the world, and, indeed, I have never heard anybody disagree with the remarks that I presented today and that are presented in my written testimony before you.”

CMS [claim]: “We are open to improvements as the program expands.”

Mr. Wilson. “We continue to be open to further improvements as the program expands.”

Really?  Then why in the face of overwhelming practical scientific evidence of severe problems, does CMS make no significant changes to the program as the program expands to one-half of the country. The most serious flaws, non-binding bids and the median pricing rule were identified by 167 auction experts in September 2010 and sent to CMS not only by the experts but by numerous Congressman.

Why does CMS not release any of the essential data necessary to properly evaluate the pilot program? Remarkably, the absence of data even extends to the DMEPOS Competitive Bidding Program Advisory and Oversight Committee (PAOC) established by Congress to monitor the program.

Peter’s comments end with the postscript:

Immediately following the Medicare auction hearing, I left for Washington Dulles Airport to fly to London, where I spent the rest of the week advising the United Kingdom’s Department of Energy and Climate Change on the design of the U.K. electricity market and the Office of Communications on the U.K.’s upcoming 4G spectrum auction for mobile communications.

The contrast with my CMS experience over the last two-years was so dramatic that I thought I had been transported to an alternate universe where truth was truth and rational thought was not only valued but essential to government decision making. My three days in London were filled with tireless informed debate of the difficult issues of designing auctions in complex economic settings—electricity and telecommunications. As discussed in my testimony, I am well aware that the U.S. government also is capable of such innovative expert decision making—my testimony gave the FCC’s spectrum auctions and FERC’s electricity markets as clear examples.

One thing I do know: Congress and the White House must act to reform the Medicare auction. If we do not effectively apply market methods to health care, Medicare is unsustainable.

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  1. frankenduf says:

    “fair for suppliers”- heh- the suppliers’ egregious profits feeding out of the public trough is a significant portion of our extortive health care costs- this is probably a dog whistle for industry lobbyists to fight for leverage in negotiated costing

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  2. Alan T says:

    Ian,

    Yes, if we do not apply market methods to health care, Medicare is unsustainable.

    Since 1969, the real cost per beneficiary of Medicare has risen by a factor of slightly more than 5. This is horrible. But in the same time period, the real cost per beneficiary of private health insurance has risen by a factor of slightly more than 8. (source: http://krugman.blogs.nytimes.com/2011/06/12/its-the-health-care-costs-stupid/)

    Maybe we need to apply market methods to the health care market.

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  3. Rick says:

    Mr Franken DUF

    You sound like a person sounding off, like most in DC that have absolutly no knowledge of what you are talking about. Your stance and opinion are so elementary that I am num to them. In the DME industry the public trough went by the wayside during the Ronald Reagan presidential period. The DME industry has been cut, cut, cut and cut for many years sence. I can tell you a few things that have not been cut. First, is the demand for quality service by our patients. They still require 24/7 service, by qualified staff, high quality products at no extra charge. CMS has not cut the red tape to be able to supply service or products. In fact they are making it impossible to provide DME benefits due to below cost reimbursements, audits and this train wreck ” Competitive Bidding” . CMS and the OIG continue to spout off that Medicare is over paying for DME items. They look at a product on the internet for $100.00 and find that Medicare pays $150.00. Looks like a great talking point, but in reality their study could be done by a 4th grader. I am waiting for the OIG to do a “Complete Study” and include provider cost of providing DME to the Medicare beneficary. Just to get you started..Add $43.81 to every deliver product I deliver to a patients home. This addition is for my distributon cost with gas at $4.25 per gal. This additional cost does not account for any department other then Distribution. Our organization provides delivery to 98% of those we serve. Let me know your thought, and I will provide any additional info you need. I have been in the industry for 38 years, and have seen and heard everything.

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  4. Rick says:

    Mr. DUF

    More reality for you. “Is a significant portion of our healthcare cost”
    DME is less then 1.2% of the healthcare expenditure, and has been in free fall for years. More reality for you. With the baby boomer population, the only way to reduce overall cost in Medicare is: 1-Preventive life style 2- Homecare. It is a known fact that patients want to be AT HOME where they are comfortable, and for tax payers, the cost is a fraction compared to the hospital care setting. More homework for you. Rick

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    • Paul says:

      Rick,

      I’m sure most patients would rather be at home. But the actuaries have found that adding home care benefits increases costs, not decreases them, and does little to keep people out of the hospital. And if you tell me that the DME industry does not have more fraud than most of the rest of the healthcare industry (home health is very high too), then I guess you are either in denial or not knowledgeable about the data

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      • Rick says:

        Paul

        I will provide more data when I have time. In so. cal last year the LA Times ran an article on the cost of 1 day in the hospital. The quotes were from $4500.00 to $7500.00 per day. Your statement that benefits would increase does not make sence. We keep patients at home and out of the acute care facilities. Home oxygen cost less then $6.50 per day, and a front wheel walker about $110.00 for the purchase. Keeping a patient in the hospital with COPD at thousands per day, or not providing a patient with a $110.00 walker to prevent a fall and hip fracture, is penny wise and dollar fooish. I could just imagine what hip surgery would cost us taxpayers. Our industry has been on the front line fighting fraud and CMS has been lagging for years. CMS has given billing privleges to crooks for years. Its like blaming the car dealer for driver misconduct, when it was the DMV who issued the license in the first place. The argument no longer hold water.

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