Medicare meets the bidding war

Gregory Warner Apr 19, 2012

Kai Ryssdal: Much tends to be made in the ongoing budget debates about how the government needs to treat its finances as if it were a family — spend only what it takes in. Economists disagree on that, but the fact is, the government’s not like a family in a lot of ways.

When it needs something, for instance, it can’t just go shopping. Whether it’s toilet paper, screwdrivers, ground-to-air missiles, what-have-you — there’s a competitive bidding process. Except when the government is buying medical supplies — oxygen tanks or wheelchairs for Medicare patients.

President Obama said this week that’s gonna change. From the Marketplace Health Desk at WHYY In Philadelphia, Gregory Warner explains.

Gregory Warner: For years, if you wanted to sell an oxygen tank to a Medicare patient, all you needed was a license and a willingness to accept Medicare’s price. There was no bidding process. No rewards for manufacturers who could sell that tank cheaper at a higher volume.

Robert Laszewski: You know we’d probably be better if we went on and bought our durable medical equipment.

Robert Laszewski is a long-time health care consultant. This week, President Obama announced –- not — but a pretty suprising shift. After a successful yearlong experiment, Medicare will roll out a national bidding process for medical equipment. It’s expected to save the government and seniors $42 billion over the next 10 years.

Laszewski: It only makes sense from the market perspective that they go out for bids when they buy something. That’s what big business would do that’s what hospital would do.

But for decades it’s what Congress refused to do. Competitive bidding rewards big manufacturers with economies of scale. This could put a lot of little guys out of business.

Gail Wolensky: There are a lot of little guys. And they have employment in the local districts. And they contact their members of Congress. And usually Congress caves.

Gail Wolensky is a former director of Medicare. She’s now a senior fellow at Project Hope. She says the future of health care reform depends on the governments ability to reward the best performers. If there was this much political resistance to comparing one wheelchair maker to another, how about when the products are harder to compare? Like rewarding the safer hospital? Or the more effective surgeon? Solving that puzzle she says is the key to real reform.

In Philadelphia, I’m Gregory Warner for Marketplace.

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