Does Competitive Bidding Make the Market Less Competitive? The Case of Medicare

In 2009, the Centers for Medicare & Medicaid Services (CMS) implemented a wide-scale competitive bidding process for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) for the Medicare program in order to decrease out-of-pocket costs while facilitating access to quality goods and services for the patients. In this paper, I investigate whether the introduction of the competitive bidding process in the Medicare program has made the market for DMEPOS less competitive. More specifically, this study exploits the geographic and time variation in the implementation and expansion of these changes in the Medicare program across several metropolitan areas to estimate their effect on the number and size of firms in the market as well as prices and availability of goods and services for the consumers.