Applying competitive bidding to health care

This paper reviews the empirical literature on competitive bidding for health services under public programs and, in this context, discusses the major issues that must be confronted in designing bidding systems. These issues include the specification of units of service, the selection of winning bidders, the determination of reimbursement for winning bidders, the treatment of losing bidders, and contract enforcement. The paper then illustrates these issues in practice by outlining one possible competitive bidding system for purchases and rentals of durable medical equipment under the Medicare program.     

Rationing health care: it's a matter of the health care system's structure

The article examines two primary policy proposals for how the U.S. should allocate its limited health care dollars: a centralized model in which a commission establishes rationing guidelines, and a decentralized model in which rationing decisions are made by health care providers on a case by case basis. The author finds significant advantages with each position, leading the author to assert that a combination of each is key to an effective rationing policy: a centralized control of structure coupled with decentralized physician-level decision making. While mindful that formal rationing guidelines alone are unfeasible to effectuate cost-effective care, the author introduces two decentralized policies to control costs: the limitation of resources at physicians' disposal and elimination of physicians' personal incentive to provide high-cost care.     

Taking action to contain health care costs---Part II

Last month, Mr. Larson explained some large corporations' methods of saving health care dollars within existing corporate roles. This month, he outlines what companies are capable of doing, once certain organizational barriers are removed.