Facts R Us

In high school physical science, we were supposed to be learning about energy and engines and how stuff works. The truth is, I spent most of my time in Mr. Hill’s ninth-grade class trying to figure out if he indeed (as my friends swore) had a glass eye.

You can imagine my grasp of the scientific subject matter, although somehow I did come out of the year with the rudimentary understanding that’s it’s hard to argue with evidence.

Skipping ahead, I recently read one of the most compelling documents to cross my desk in a long while.

“Will Competitive Bidding Decrease Medicare Prices?” is a study by two economics professors who took an in-depth look at the 1999 competitive bidding demonstration projects in Polk County, Fla., and San Antonio, Texas. The academic paper may not be the stuff of a best-seller, but one glance at the summary page was enough to keep me riveted.

The authors — Brett Katzman of Kennesaw State University in Atlanta and Kerry Anne McGeary of Philadelphia’s Drexel University — conclude that CMS’ basic competitive bidding format is flawed, in some instances even resulting in higher prices and poorer quality of service. Here it is in their own words:

“The theoretical results found in this paper show that the CMS format will likely result in an inefficient supply of medical equipment, increased prices on a number of goods and potential problems for beneficiaries in obtaining equipment.”

What’s more, the good professors, who presented their paper in the peer-reviewed Southern Economic Journal, also put forth empirical evidence that supports their findings. I won’t pretend I’m smart enough to understand their economic formulas. But there’s no mistaking that after 17 pages of examining the evidence from the demonstrations, these experts don’t think competitive bidding is going to work.

Of course, providers in Florida and Texas who participated in the demonstration projects have been telling CMS such things for years, but their anecdotal pleas have been pitted against the agency’s view of the demonstrations, which, according to government officials, couldn’t have gone better. At times, I have wondered if those providers and CMS were even talking about the same experiment.

Now, however, it seems attention must be paid. As CMS prepares to implement competitive bidding on a much larger scale, this study’s results show beyond a doubt that the outcome may not be as rosy as the agency would have us believe. Just like Mr. Hill used to say, “Facts are facts.” And this study is based squarely on them.

Many in the industry have been holding out hope that a knight in shining armor would ride up to rescue them from certain ruin under the Medicare bidding program. I’ve warned against such thinking in this very column because that kind of thing usually happens only in fiction. I don’t know whether Professors Katzman and McGeary own a horse, but their study does offer a solid argument against competitive bidding in its current form.

In short, the industry has some new allies — the facts. And with the reality of competitive bidding drawing closer by the day, it’s time to use them. Mr. Hill would be so proud.