Think Tank Doesn’t Think Much of NCB

SAN FRANCISCO — Adding its thumbs down to a growing list
of studies and commentaries that slam national competitive bidding,
the Pacific Research Institute weighed in last week with another
damning review of the process, saying it “yields prices for
equipment that are substantially lower than those that would emerge
in a competitive market.”

In a study titled “Medicare Auctions for Durable Medical
Equipment,” Benjamin Zycher, PhD, a senior policy fellow at PRI,
wrote that under the “flawed auction system, prices for medical
devices and equipment are likely to be about one-third to
two-thirds below the competitive price.

“Accordingly, market incentives to invest in new medical
technologies will be reduced as well,” Zycher said. “Investment
would be reduced by 12-15 percent or approximately $2.1-$3.1
billion annually from 2011 through 2020.”

According to Zycher, “This investment loss would cause,
conservatively, a loss of about 500,000 expected life-years each
year, the economic cost of which would be about $50 billion per
year, which is substantially greater than the entire U.S. market
for medical devices and equipment.”

A June 13 statement from PRI said CMS has “powerful incentives
to pursue budget savings rather than economic efficiency, or
patient wellbeing, in resource use.”

The California-based think tank, which champions free-market
policies, said the study demonstrates that the magnitude of such an
adverse economic effect should make reform of CMS’ bidding program
“a high priority for policymakers.”

Download a PDF of the full report.

In addition to PRI, the American Consumer Institute, Galen
Institute and Heartland Institute have also published reports
criticizing the CMS bidding program.

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