Competitively Bidding Problematically

An interesting report from a trio of writers from AEI on competitive bidding is worth thinking about. Competitive bidding is one of those pet ideas of wonks for Medicare—essentially, it works by giving seniors a voucher, and having each insurer bid for the right to cover each senior. The value of the voucher is set to the second-lowest bid—so the senior can go with anything from the cheapest option (and pocket the difference) or anything above it. Many variations of the plan give seniors the option to stick with traditional, fee-for-service Medicare.

One of the striking facets of the report is their arguments for savings—they estimate $339 billion over 10 years, which really isn’t all that much for a program touted as a cost-saving measure. (They have a long list of reasons as to why their estimates are conservative, but all health policy people are convinced their plans save more than the conservative estimates, as anyone who remembers the CBO saga from the health care reform fight.)

The other striking facet that I hadn’t really thought about enough was this:

Under competitive bidding, some beneficiaries will pay higher monthly premiums if their current health plan bids high, but they can avoid that higher payment by changing plans

This is mostly just a thought at this moment, but do we really want people switching health plans vigorously? Ideally it wouldn’t make much of a difference, but currently health care is fragmented and encouraging people to switch between plans frequently might increase fragmentation—if differences in networks are high, or if certain insurers have closer amounts of integration with certain health care providers…and it’s possible to imagine problems with non-interoperable EMRs, and so on and so forth. Maybe I’m just worrying over nothing, but it might be something worth thinking about.