Synopsis of Mini-Case 16.1: Setting Prices for Walkers (p. 257; Lee textbook): This case highlights...

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Synopsis of Mini-Case 16.1: Setting Prices for Walkers (p. 257; Lee textbook): This case highlights approaches that the Centers for Medicare and Medicaid Services’ (CMS), through the passage of the Medicare Modernization Act of 2003, used to lower beneficiary prices for public programs through the implementation of competitive bidding. This impacted the profits of many equipment manufacturers and retailed who were able to successfully lobby Congressional representatives to eliminate the bids and delay the program. The passage of the Patient Protection and Affordable Care Act of 2010 permitted Medicare to once again launch competitive bidding. In 2013, 200 members of Congress signed a letter to delay the program. Prior to competitive bidding, Medicare established a fee schedule, which did little to lower prices, since it was found that the fees the agency paid were “substantially higher” than the typical retail prices. This case demonstrates three points: 1) a well-developed bidding process can lower prices for public programs; 2) these programs are expensive to set up and can take a long-time to implement; and 3) efforts to switch to a bidding process will encounter opposition from those whose profits are adversely effected.

This case illustrates imperfect competition. At equilibrium in a perfectly competitive market, price equals marginal cost. If companies were to produce more product or deliver more service beyond equilibrium, then this would be considered inefficient since the value of the additional output would be less than its’ cost (Lee, XXXXXXXXXXIn an imperfect market, every producer has some level of market power, which allows them to adjust prices to make marginal revenues equal marginal costs. Regulation isn’t always a bad thing in that it established rules needed for the market to work; however, regulation cannot replace the market. The involvement of government in establishing regulations that drive down prices contributes to the imperfect market that typifies the healthcare and many other industries.

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Robert · Accepted Answer

1 
 
1 Answer – The competitive bidding process involves replacement of the methodology of 
paying for the services for few medical items and supplies. It has been implemented by 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Along 
with the benefits attached with the given bidding process, there are few risks also in terms of 
division of expenses among the beneficiary and the programmer. Also, it involves the risk of 
quality management because there is narrow availability of suppliers in the entire competitive 
bidding process. For reducing the out-of-pocket expenses for the beneficiaries the process 
increases the spectrum of classes eligible for availing the facility. Hence, the profits of the 
equipment suppliers and manufacturers were also at risk in the implementation of the 
competitive bidding process. Also, it increases the risks of lives of diabetic patients through 
rising confusion in terms of hospitalization costs and bill payments among beneficiaries. As 
there has been saving of costs in the treatment process, it costs lives of the patients because 
they might not be getting best quality treatment and facilities in hospitals. Competitive 
bidding program is intended to save money mainly from purchasing durable kinds of medical 
equipment. Actually, rise in costs due to hospital bills and longer stays at hospitals which 
could have been easily avoided earlier added to the risk associated with the system 
(Newswire, 2016).

Synopsis of Mini-Case 16.1: Setting Prices for Walkers (p. 257; Lee textbook): This case highlights approaches that the Centers for Medicare and Medicaid Services’ (CMS), through the passage of the...

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