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

Hui Ding, Mark Duggan and Amanda Starc

No 28457, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: I11 (search for similar items in EconPapers)
Date: 2021-02
Note: EH IO
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Citations: View citations in EconPapers (3)

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