Working Paper: NBER ID: w28457
Authors: 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.
Keywords: Medicare; Competitive Bidding; Durable Medical Equipment; Healthcare Costs
JEL Codes: I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of the competitive bidding program (CBP) (D44) | reduction in spending (H56) |
| introduction of the competitive bidding program (CBP) (D44) | reduction in prices (P22) |
| introduction of the competitive bidding program (CBP) (D44) | reduction in quantities utilized (L99) |
| reduction in prices (P22) | reduction in spending (H56) |
| reduction in quantities utilized (L99) | concentration among less clinically appropriate patients (I11) |
| demand elasticity (0.272) (D12) | quantity reductions (L42) |
| introduction of the competitive bidding program (CBP) (D44) | unchanged diagnosis rates (I12) |