Revitalizing Medicare’s Pricing System with Auctions

17 Pages Posted: 18 Sep 2020

See all articles by Robert F. Graboyes

Robert F. Graboyes

Mercatus Center at George Mason University

Daniel Black

George Mason University, Department of Economics, Students

Carl Johnston

Government of the United States of America - Department of Homeland Security

Date Written: September 18, 2020

Abstract

This paper examines some of the flaws in Medicare’s pricing system and considers some potential fixes. As currently structured, Medicare’s reimbursement system stifles incentives to seek lower prices. Prices are recommended by provider groups and centrally administered. With what amounts to an elaborate cost-plus-pricing model, systemic reductions in costs will spark systemic reductions in prices and profits, thereby discouraging moves to lower costs. This is especially important as Medicare costs are among the largest financial challenges facing the United States government over the long haul.

Keywords: Medicare, Medicare pricing, Medicare costs, Medicare Private Fee For Service (MPFFS), Resource-Based Relative Value Scale (RBRVS), Relative Value Units (RVUs), Public Choice, price competition, auction pricing, Medicare Advantage, healthcare

JEL Classification: D44, I180, I130, H510

Suggested Citation

Graboyes, Robert F. and Black, Daniel and Johnston, Carl, Revitalizing Medicare’s Pricing System with Auctions (September 18, 2020). Available at SSRN: https://ssrn.com/abstract=3695020 or http://dx.doi.org/10.2139/ssrn.3695020

Robert F. Graboyes (Contact Author)

Mercatus Center at George Mason University ( email )

3434 Washington Blvd. 4th Floor
Arlington, VA 22201
United States

Daniel Black

George Mason University, Department of Economics, Students

Fairfax, VA
United States

Carl Johnston

Government of the United States of America - Department of Homeland Security ( email )

United States

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