Should plans bid on local or regional areas? And should there be adjustments for urban-rural differences?
The current M+C program allows risk-bearing organizations to designate service areas county-by-county (and even to select smaller areas if there is a significant geographic barrier to covering a whole county). Although there is some controversy around this definition, it makes sense for M+C plans to serve small areas because medical care markets are local. This is not the case for pharmacy benefit management. Prices that PBMs pay for drugs are determined by national volume, and utilization management techniques are national in scope as well. Because there is no distinct local market, it follows that the size of the bidding area should be determined by the minimum size needed to achieve economies of scale in administration. As I mentioned earlier, this might be at the statewide or regional level. Small states could be combined to achieve the critical mass needed for an efficient competitive bidding system.[14] Bidding for large regions would solve the problem of access for rural residen
