New Studies by Dr. Peter Cramton and CalTech Criticize CMS Competitive Bidding Process

Two new studies add further academic fuel to the public fire over CMS’ home medical equipment competitive bidding program.

The new paper by Peter Cramton and Brett E. Katzman, “Designed to Fail: The Medicare Auction for Durable Medical Equipment” examines “the theoretical properties of the proposed auction format for Medicare Durable Medical Equipment.”     Cramton and Katzman conclude that the CMS process will result in “low-ball bids that set prices too low and result in supply shortages. …  In other words, although it is imperative for CMS to make bids binding in order to eliminate the low-ball bidding strategies, that is not enough, since reverting to a median-price auction with binding bids would also be highly inefficient.”

The Crampton-Katzman study concurrs with an analysis by academicians at California Institute of Technology, “An Evaluation of the Proposed Procurement Auction for the Purchase of Medicare Equipment: Experimental Tests of the Auction Architecture” which also found that CMS’ use of non-binding bids and median price awards results in an unsustainable situation.

Both papers may be found below.

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