Designed to Fail: The Medicare Auction for Durable Medical Equipment
Peter Cramton, Sean Ellermeyer and Brett E. Katzman
,
1
(
53
)
Economic Inquiry
469-485
January
2015
Abstract
We examine the theoretical properties of the auction for Medicare Durable Medical Equipment. Two unique features of the Medicare auction are (1) winners are paid the median winning bid and (2) bids are nonbinding. We show that median pricing results in allocation inefficiencies as some high-cost firms potentially displace low-cost firms as winners.
