Policy Documents

Competitive Bidding Can Help Solve Medicare’s Fiscal Crisis

Roger Feldman, Robert Coulam, and Bryan Dowd –
February 1, 2012

Roger Feldman, Robert Coulam, and Bryan Dowd write that "A major reason Medicare faces a severe fiscal crisis is because it pays too much for basic benefits. But chronic overpayment can be cured by harnessing market forces in the form of competitive bidding. It uses bids from private Medicare Advantage (MA) plans and the traditional fee-for-service (FFS) Medicare program to set the payment rate for all Medicare health plans. Our research shows that competitive bidding—a key feature of the Wyden-Ryan plan—could save Medicare $339 billion over ten years while maintaining basic benefits and without raising taxes. Crucially, the elderly would not be exposed to the risk of higher health care costs, as in approaches that would set fixed voucher payments toward the purchase of medical insurance."