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Archive for April, 2012

Medicare and Auctions

April 18, 2012 Leave a comment

The federal government has successfully held auctions to allocate wireless spectrum, raising substantial amounts of revenue in the process. This experience would suggest that the same methods used to successfully carry out these auctions would be used by other government agencies. Apparently this is not the case.

The Medicare system has recently implemented an auction system to obtain goods and services for Medicare recipients that is seriously flawed. The system recently put in place does not require commitment by any winning bidders, meaning that the winners are not required to deliver the services and products associated with their winning bid. Further, in pilot programs that were tried, winning bidders were not knowledgable about the products they were to deliver and the winners were often found to be financially suspect. A pilot program testing these auctions was scrapped and, despite the problems observed in the pilot study, the auctions were implemented with the same design flaws used in the pilot programs.

The design deficiencies in these Medicare auctions prompted a number of professional economists, expert in auction theory, to send a letter to the Obama administration expressing their concerns detailing the problems associated with the auctions used by Medicare. The link to this letter is here.

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Categories: Health Care Policy

How to Reform the Health Care and Insurance Markets

April 4, 2012 1 comment

The court case litigated at the Supreme Court last week regarding the Patient Protection and Affordable Care Act has again focused the public’s attention on not just the merits of this law (aka Obamacare) but also on alternatives to Obamacare that might be implemented. I have written on this blog that there is much about Obamacare that provides the wrong incentives in the health care market and the law exacerbates the financial problems facing the U.S. government. An interested reader might ask “Well, if you don’t like Obamacare, what would you recommend to reform the health care and insurance markets?” This is a good question and economist John H. Cochrane has provided an answer to this question.

Professor Cochrane is on the faculty of the business school at the University of Chicago (his faculty web page may be found here). He recently wrote a piece in a popular news outlet regarding his views about how an economist would want to reform the health care and insurance markets. This is reading that I highly recommend and you will see that many of the problems observed in the health care and insurance markets are products of the central planning done by state and federal governments.

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