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Getting the Price Right? The Impact of Competitive Bidding in the Medicare Program

Author

Listed:
  • Hui Ding
  • Mark Duggan
  • Amanda Starc

Abstract

We study Medicare's competitive bidding program (CBP) for durable medical equipment (DME). We exploit Medicare claims data to examine both prices and utilization, focusing on continuous positive airway pressure (CPAP) devices to treat sleep apnea. We find that spending falls by 47.2% percent after a highly imperfect bidding mechanism is introduced. The effect is almost entirely driven by a 44.8% price reduction, though quantities also fall by 4.3%. To disentangle supply and demand, we leverage differential cost sharing across Medicare recipients. We measure a demand elasticity of -0.272 and find that quantity reductions are concentrated among less clinically appropriate groups.

Suggested Citation

  • Hui Ding & Mark Duggan & Amanda Starc, 2021. "Getting the Price Right? The Impact of Competitive Bidding in the Medicare Program," NBER Working Papers 28457, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28457
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    Cited by:

    1. Judith Liu & Yuting Zhang & Cameron M. Kaplan, 2023. "Effects of Medicare Part D coverage gap closure on utilization of branded and generic drugs," Health Economics, John Wiley & Sons, Ltd., vol. 32(3), pages 639-653, March.
    2. SUN Jessica Ya & YIN Ting & LIU Zhiyong, 2023. "When State Becomes the Only Buyer: Effects of national volume-based procurement of cardiac stents in China," Discussion papers 23065, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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