Thursday, September 30, 2010

NY Times Freakonomics: Fix Medicare's Bizarre Auction Program

The New York Times Freakonomics blog post today titled, “Fix Medicare’s Bizarre Auction Program,” explains that “for the last ten years, the Centers for Medicare and Medicaid Services has been testing an auction approach that is incredible in the inefficiency of its flawed design.”

The article explains that “Medicare should junk the flawed procurement auction rules and take advantage of the enormous advances that have been made in auctions and market design to fix the auction rules.”

In conclusion, “The mystery is why the government has failed over a period of more than ten years to engage auction experts in the design and testing of the Medicare auctions. The letter confirms that any expert would be able to quickly identify fatal flaws in the Medicare competitive bidding program. We suspect the problem is that CMS initially did not realize that auction expertise was required, and once they spent millions of dollars developing the failed approach, they stuck with it rather than admit that mistakes were made. This bureaucratic inertia is seen not just in government but in all organizational decision making.”

To read the full post, click here.

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