Medicare Auction Will Likely Face Severe Difficulties

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Medical Devices / Diagnostics
Article Date: 06 Jun 2012 – 0:00 PDT

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Medicare’s new method for buying medical supplies and equipment – everything from wheelchairs and hospital beds to insulin shots and oxygen tanks – is doomed to face severe difficulties, according to a new study by Caltech researchers.

The Center for Medicare and Medicaid Services (CMS) implemented the purchasing process – a novel type of auction – in nine metropolitan areas across the country last year and plans to expand it to 91 in 2013.

The competitive bidding process was designed to improve the efficiency of Medicare’s procurement system, potentially saving taxpayers hundreds of millions of dollars. But many experts have criticized the auction, pointing out fundamental flaws in its design. Now, a series of experiments testing the auction structure show that it does, in fact, fall short of expectations. The results of the study, which was conducted by Caltech seniors Brian Merlob and Yuanjun Zhang, and Charles Plott, the Harkness Professor of Political Science and Economics, were published in the Quarterly Journal of Economics.

In principle, auctions are a cheap and efficient way to procure goods and reward companies that can inexpensively produce their goods. In the case of the Medicare auction, various companies make bids to the government that represent their best prices for medical supplies and equipment; the government, in turn, wants the best deal and so chooses the lowest bids. For example, if 1,000 hospital beds are needed and it would take five companies to supply them all, the five lowest bids are chosen.

Unlike standard auctions, however, the CMS auction was designed with two unorthodox rules. First, the eventual selling price is set at the median of all of the winning bids. Second, bids are nonbinding, so companies can change their mind once the prices are set.

Critics say that these rules cultivate a harmful bidding strategy. To ensure a winning bid, each company will make a very low offer; this carries no risk, because the companies can cancel their bid if the median price turns out to be too low. The result is that participants in the auction will tend to make low-ball bids, assuring that the median price will also be very low – so low, in fact, that few of the companies can actually afford it, leading them to cancel their offers. At the extreme, nothing is bought or sold and, Plott says, “the auction crashes. It’s just not an effective auction.”

And what will happen then, critics warn, is that the government will end up negotiating prices with individual companies – negating the whole point of a competitive-bidding scheme in the first place. “You can see immediately from theoretical arguments that the potential for disaster is built right in the strategic structures,” Plott says.

To determine if such theoretical predictions translate into real-world behavior, it is essential to examine experimentally how people behave in an actual auction, says Plott – who, for the last 30 years at Caltech, has been developing experimental techniques to test economic theories. He posed the problem to his experimental economics (EC 160) class. Two of his students, Merlob and Zhang, took up the challenge and spent a year researching, designing, and conducting experiments to test that behavior.

The team used computers at Caltech and the University of Maryland to run a simplified version of the CMS auction and several other auction types; one, for example, followed more standard rules, with binding bids and prices set at the lowest bid that did not win, instead of the median of all winning offers. Each auction involved 12 or 16 bidders (student volunteers from Caltech and the University of Maryland), who first had to pass a quiz showing that they understood how the auctions worked. The volunteers were given just one item to sell – a generic “thing” (since the bidders’ behavior should be the same in a given auction type, regardless of the item being sold) – each at a different cost to them.

The Caltech team also examined the effect of other auction features, such as whether the costs of each item for each bidder are public knowledge and the effect of charging bidders to participate.

The results, the researchers say, convincingly support critics of the CMS auction design. “It’s pretty disastrous what the bidders ended up doing,” Zhang says. In the simulated CMS-type auction, some people bid $0, and the “government” was not able to buy all the items it needed. The experiments also showed that a standard auction is much more efficient and successful: the government was able to buy all the items it needed, and the bidders who had the lowest costs were the winners.

Using this experimental approach, the researchers were able to pinpoint the fundamental problem of the CMS auction design: the two rules. “If you just get rid of one of those two rules, it doesn’t help – you still have problems,” Plott explains. “So you have to get rid of both of them.”

Last summer, 244 economists and auction experts, including Plott and Caltech professors John Ledyard, Thomas Palfrey, and Matthew Shum, signed a letter to urge President Obama to change the CMS auction system; the letter cited the Caltech experiments.

In April, however, a study released by the Department of Health and Human Services reported that the auction saved taxpayers $202.1 million in 2011, with no negative effects on health care. The report also estimates that the auction will save taxpayers and beneficiaries $42.8 billion over 10 years.

A preliminary analysis of the pilot program by Peter Cramton of the University of Maryland, an outspoken critic of the CMS auction and an economist who was not part of the Caltech study, found that the auction did in fact suffer from the problems predicted by theory and experiment. Because of the auction design, prices plunged to unsustainable levels, and suppliers dropped out, forcing Medicare to find new suppliers. Cramton also found that the number of submitted claims for equipment declined, which, he says, led to increased rates of visits to the emergency room and hospitalization. As a result, not only were overall costs higher, but so were health risks.

While Plott says he cannot comment on the report without knowing exactly how the study measured and collected its data, he remains confident in the experimental results and the theoretical arguments against the auction. “The theory gives a rather clear picture about the implications of the auction architecture,” he says. “But only the data can tell us how these ideas actually play out in such a complex application with variables too numerous to be considered in the theory.”

Regardless of whether the CMS will continue to expand the auction or will heed the critics’ warnings, this type of research, Plott says, is a good example for how basic, scientific experiments can have direct impact on society. He considers that an especially important lesson for his students. Over the years, he says, several of his undergraduates have stuck with a project long enough to publish, occasionally leading to several awards and seminal papers. “Taking Professor Plott’s class was fantastic,” Merlob says. “He’s a master experimentalist and an amazing mentor.”

Zhang, who is doing an independent study in decision-making and neuroscience, will start graduate school in economics at UCLA in the fall; Merlob, a political science major, is still exploring his options. “This entire experience was pretty awesome,” he says. “It’s probably one of the best of my Caltech career.”

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Osteoarthritis Patients May Benefit From Drinking Tart Cherry Juice

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Main Category: Arthritis / Rheumatology
Also Included In: Sports Medicine / Fitness;  Nutrition / Diet
Article Date: 01 Jun 2012 – 10:00 PDT

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Tart cherries have the highest anti-inflammatory content of any food, according to researchers, and may help individuals suffering from osteoarthritis manage their disease.

The study, conducted by researchers from Oregon Health and Science University, involved 20 women aged 40-70 with inflammatory osteoarthritis. The study was presented May 30th at the American College of Sports Medicine Conference (ACSM) in San Francisco, California.

The researchers found that drinking tart cherry juice two times per day for three weeks resulted in considerable reductions in vital inflammation markers, especially for participants who had the highest inflammation levels at the start of the study.

Lead researcher of the study, Kerry Kuehl, M.D., Dr.PH., M.S., Oregon Health Science University, said:

“With millions of Americans looking for ways to naturally manage pain, it’s promising that tart cherries can help, without the possible side effects often associated with arthritis medications. I’m intrigued by the potential for a real food to offer such a powerful anti-inflammatory benefit – especially for active adults.”

Osteoarthritis is the most prevalent type of arthritis. According to the Arthritis Foundation, athletes are at particular risk for developing osteoarthritis, due to excessive joint use that can a breakdown in cartilage and lead to pain and injury.

Kuehl’s previous research suggests that the inflammation benefits of tart cherries, available in dried, frozen and juice forms, could be particularly important for athletes. Kuehl found that individuals who drank tart cherry juice while training for a long distance run experienced considerably less pain after exercise than those who didn’t.

The antioxidant compounds in tart cherries, called anthocyanins, provide the fruit’s bright color and have been associated to high antioxidant capacity and reduced inflammation, at levels similar to some popular pain medications.

A daily dose of tart cherries (as cherry extract) reduced osteoarthritis pain by over 20% in most people, according to results from a study conducted by researchers at Baylor Research Institute.

Furthermore, the antioxidant compounds in cherries have also been shown to reduce muscle and joint soreness.

Leslie Bonci, MPH, RD, CSSD, LDN, Director of Sports Nutrition at the University of Pennsylvania Medical Center for Sports Medicine, said:

“Why not eat red when there’s so much science to support the anti-inflammatory benefits of this Super Fruit? And for athletes whose palates prefer the tart-sweet flavor profile of tart cherries, it’s the optimal ingredient.”

To learn more about the body of research supporting tart cherries’ pain-fighting properties click here to download The Red Report. There, you can also reference The Red Recovery Routine, a guide to help people train to manage pain with tart cherries.

Written By Grace Rattue

Copyright: Medical News Today

Not to be reproduced without permission of Medical News Today

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Tart Cherries May Help Millions Reduce Inflammation To Manage Pain, According To New Research

Main Category: Arthritis / Rheumatology
Also Included In: Sports Medicine / Fitness;  Pain / Anesthetics;  Nutrition / Diet
Article Date: 01 Jun 2012 – 0:00 PDT

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Tart cherries may help reduce chronic inflammation, especially for the millions of Americans suffering from debilitating joint pain and arthritis, according to new research from Oregon Health Science University presented at the American College of Sports Medicine Conference (ACSM) in San Francisco, Calif.1 In fact, the researchers suggest tart cherries have the “highest anti-inflammatory content of any food” and can help people with osteoarthritis manage their disease.

In a study of twenty women ages 40 to 70 with inflammatory osteoarthritis, the researchers found that drinking tart cherry juice twice daily for three weeks led to significant reductions in important inflammation markers – especially for women who had the highest inflammation levels at the start of the study.

“With millions of Americans looking for ways to naturally manage pain, it’s promising that tart cherries can help, without the possible side effects often associated with arthritis medications,” said Kerry Kuehl, M.D, Dr.PH., M.S., Oregon Health Science University, principal study investigator. “I’m intrigued by the potential for a real food to offer such a powerful anti-inflammatory benefit – especially for active adults.”

Often characterized as “wear and tear” arthritis, osteoarthritis is the most common type of arthritis. Athletes are often at a greater risk for developing the condition, given their excessive joint use that can cause a breakdown in cartilage and lead to pain and injury, according to the Arthritis Foundation.

The inflammation benefits could be particularly important for athletes, according to Kuehl’s previous research. In a past study he found that people who drank tart cherry juice while training for a long distance run reported significantly less pain after exercise than those who didn’t.2


Go Red Instead to Manage Pain

Along with providing the fruit’s bright red color, the antioxidant compounds in tart cherries – called anthocyanins – have been specifically linked to high antioxidant capacity and reduced inflammation, at levels comparable to some well-known pain medications.3

Previous research on tart cherries and osteoarthritis conducted by researchers at Baylor Research Institute found that a daily dose of tart cherries (as cherry extract) helped reduce osteoarthritis pain by more than 20 percent for the majority of men and women.4 And the same compounds linked to cherries’ arthritis benefits have now shown promise for athletes and sports recovery to help relieve muscle and joint soreness.

According to Director of Sports Nutrition at the University of Pennsylvania Medical Center for Sports Medicine, Leslie Bonci, MPH, RD, CSSD, LDN, who has incorporated tart cherries into the training menu of both her professional athletes and active clients as a natural and easy way to manage pain that also tastes great, “Why not eat red when there’s so much science to support the anti-inflammatory benefits of this Super Fruit? And for athletes whose palates prefer the tart-sweet flavor profile of tart cherries, it’s the optimal ingredient.”

Available every day of the year in dried, frozen and juice forms, tart cherries are a versatile ingredient to include in any training or inflammation-fighting diet.

  • Additional
  • References
  • Citations

To learn more about the body of research supporting tart cherries’ pain-fighting properties, visit http://www.choosecherries.com to download The Red Report. There, you can also reference The Red Recovery Routine, a guide to help people train to manage pain with tart cherries.

The Cherry Marketing Institute (CMI) is an organization funded by North American tart cherry growers and processors. CMI’s mission is to increase the demand for tart cherries through promotion, market expansion, product development and research.

Sources:

1. Sleigh, AE, Kuehl KS, Elliot DL . Efficacy of tart cherry juice to reduce inflammation among patients with osteoarthritis. American College of Sports Medicine Annual Meeting. May 30, 2012.

2. Kuehl KS, Perrier ET, Elliot DL, Chestnutt J. Efficacy of tart cherry juice in reducing muscle pain during running: a randomized controlled trial. J Int Soc Sports Nutr 2010;7:17-22.

3. Seeram NP, Momin RA, Nair MG, Bourquin LD. Cyclooxygenase inhibitory and antioxidant cyanidin glycosides in cherries and berries. Phytomedicine 2001;8:362-369.

4. Cush JJ. Baylor Research Institute, pilot study on tart cherry and osteoarthritis of the knees, 2007.
Weber Shandwick Worldwide

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‘Tart Cherries May Help Millions Reduce Inflammation To Manage Pain, According To New Research’

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