Getting There
Imagine you are in a room full of diverse people, with differing political views and differing levels of understanding of economics and social science. You are discussing health care.
Yet despite all this diversity there is amazing agreement. You agree on the problem, you agree on the general direction of a solution and then ….. WHAM …. you discover an opinion gap so wide it’s like the difference between night and day.
This happens to me all the time. I find that I am in general agreement with the Obama administration, my friends at Dartmouth and even Don Berwick on four of five steps needed to get from where we are now to a better health care system. Here, for example, is how to reform Medicare:
- We agree there is a lot of waste in the system — maybe even one of every three dollars;
- We agree that quality of care differs across the system, by wide margins;
- We agree that we can generally identify the best (low-cost, high-quality) providers: doctors, clinics, hospitals and even entire health care regions;
- We deplore the fact that the best providers are generally paid less than mediocre ones and we agree that this must change; and finally,
- ??????
There is so much agreement on items 1–4 that we even illustrate the points with the same examples (e.g., Geisinger, Cleveland Clinic, etc.). At this point people begin losing interest. Minds begin to wander. But it is the last detail that will crucially determine whether the reform succeeds or fails.
Okay, reader. What’s your number five? I’ll give you mine below the fold and readers can find more details here.
Goodman’s number five: Tell all of the people who are practicing medicine in a different (and apparently better) way that you will pay them in a different way and increase their total payment by some fraction of the amount they are saving the government. Then announce to all other providers you are willing to pay them in any different way they propose, provided that the government’s cost goes down and quality of care for patients goes up.
Obama’s number five: Ignore all of the centers of excellence and all of the people practicing in them and publish a 429-page book of rules, detailing what the providers must do if they want to be paid more. Pay less to any provider who doesn’t follow the 429 pages of rules.
Am I exaggerating? Maybe. But I’m not exaggerating about this:
- Under Obama’s approach, government is the main actor. Under my approach, the providers are the main actors.
- Under Obama’s approach, government decides how to define and measure quality and cost. Under my approach, providers are completely free to propose new and better ways of defining and measuring these things.
- Under Obama’s approach, providers have only one real incentive: maximize against reimbursement formulas. Under my approach, providers have an incentive to find new and better ways of delivering medical care.
I’ll use an example I’ve used before: Jeffrey Brenner, the Camden, New Jersey doctor who identifies the sickest, most expensive patients and lowers their overall health care costs by getting the patients to change their lifestyles. Because most of what Brenner does is effectively social work and because there is no current procedural technology code for social work, Brenner is essentially working outside the system. He is saving Medicare and Medicaid millions of dollars; but these bureaucracies are doing nothing to reward him for his efforts.
Pro-ObamaCare writer Atul Gawande wrote about Brenner in a widely read article in The New Yorker and I found myself agreeing with everything Gawande wrote. Except for one paragraph, in which he asserted that the Obama administration’s goal was to encourage Brenner’s approach all across the country.
Nothing could be further from the truth. The administration is giving Brenner not one thin dime for his exceptional work. In fact Brenner is surviving and paying the rent only because of help from nonprofit foundations. For Brenner to get government help, he must jump through all kinds of hoops and try to qualify as an Accountable Care Organization!
[BTW, this is the only point in Gawande’s article where he becomes sloppy — treating step five as though it were an unimportant afterthought.]
My solution: Give Brenner 25% of all the money he’s saving the federal government. Let him become a millionaire. Then invite every other doctor in the country to copy Brenner’s example, or even improve on it.
When people hear of my approach the most common reaction is disbelief that a government agency could actually pull it off. But what I have in mind is not all that different from a lot of things the government already does. We put out bounties for the head of Osama bin Laden and for the capture of other dangerous criminals. We let whistle blowers share in the savings they help snare. What’s so hard about rewarding people who find ways to save the government health care dollars?
I will readily admit that government is not the ideal vehicle to pull this off, however. That’s why we need to transfer more control over health care dollars to patients and to private health plans. More efficiencies will emerge if both sides of the market have incentives to find them.
If you want providers to boost efficiency and improve quality, they must have an incentive. I would argue it is also counterproductive to mandate how they must achieve those goals since strict rules are bureaucratic and inhibit the ability of providers to innovate.
My number 5, but would put as number one- Put the costs and money back in the patients hands – let them control it and make decisions for themselves. The rest of the problems will disappear.
A better understanding of the “principal-agent” problem and agency costs will help the problem with health care. Feel free to call me at 903-586-3324 if you want to learn more.
I agree with Mike Ainslie, however, a number of market reforms must precede putting costs and money back in the patients hands. State and federal laws around licensing and financing of providers and facilities need to change to permit the innovations on the care delivery side that will truly lower health care costs. Turning everything back over to the patients without accomplishing those kinds of reforms first is throwing the patients under the bus.
Good post – a perfect musical pairing would have been the theme song to Clint Eastwood movie The Good, the Bad and the Ugly.
Berwick’s number five would be command and control. That’s the way everybody in the Obama administration thinks.
John,
I agree with Mike Ainslee above. You, and Mark McClellan, and Atul Gawande may be able to sit around a table and agree on all these points, but so what? How are you three going to help me find the right surgeon for my condition? What if you three direct me to someone who turns out to be a liar on his paperwork? Does my surviving widow get to sue you three for malpractice?
In my talks I sometimes offer to personally direct the audience’s health care choices. I mean, I used to be an insurance executive, so I am well-qualified, no? I offer to do it for cheap — $10/month per person. So far no one has taken me up on it. I guess they would rather control their own decisions than give me the authority. Strange, because these audiences of health economists are trying to inflict the exact same thing on the rest of the population.
Great post John, this coming from someone who often has a different perspective on these matters. All the alarmist partisan rhetoric we have been hearing about health reform (from both sides) is largely obscuring the fact that there is broad consensus about what are the biggest problems in the medical system.
Even the possible solutions are similar, as both John and the Affordable Care Act (through the formation of ACO’s) argue that incentives need to be re-aligned to favor the provision of high-quality care at a lower cost. The theory behind the ACO shared savings model is very similar to what John describes as “increas(ing) their total payment by some fraction of the amount they are saving the government.” There are certainly philosophical differences in determining how these incentives should be applied.
The current fee-for-service structure is clearly broken. As long as physicians are incentivized to provide high volumes of care (that may be unnecessary) and a huge information asymmetry exists between provider and patient, it is unrealistic to expect physicians to change their ways without substantial reforms to the payment or regulatory structure.
Alas, our polarized political system will likely run off a highly competent and non-partisan technocrat in Berwick who has done so much throughout his career to promote quality in the health care system, and reduce harm to patients. It also prevents real discussion of how to address over utilization (instead we get fallacious objections about bureaucrats rationing care).
John:
I disagree that “we can generally identify the best (low-cost, high-quality) providers: doctors, clinics, hospitals and even entire health care regions.” Maybe you as economists can do so in your tidy world of numbers and assumptions, but not physicians. Politicians and courts can always do so with the force of law and the state. The laws of nature are something else. Our definitions of the “best” are imperfect as are our methods of tracking outcomes. and everyone dies eventually.
I’m just back from a brief very expensive work-up at the Mayo Clinic in Rochester – got a clean bill of health but a humongous bill. Does anyone want to see how “little” they charge for their high quality work? The idea that Mayo and the Cleveland Clinic are low cost providers is nonsense. And they don’t have to follow their out of town patients over time like small town doctors do. One of the biggest problems of formulating health care policy is that economists call the shots. But that’s the way our system works. The result is that all pay way too much money for economists’ lame brain theories (RBRVS, DRGs) about how doctors ought to practice, and many pay with their lives. Taking care of very sick people – or people who think they are sick – is a messy process, rife with uncertainty. We have too many non-doctor experts getting rich telling doctors how to practice. But these days every TV pundit and NPR sound bite expert knows the right way to practice medicine. Good luck.
My #5 is simple. We need to be willing to consolidate specialty care regionally to increase efficiencies and improve outcomes rather than maintain the cottage industry that currently exists. We need to push for Value-Best outcome/lowest cost.
Mike, Greg and Brant make good points. “Our definitions of the “best” are imperfect as are our methods of tracking outcomes. and everyone dies eventually”, says Brant. Stop and think how ludicrous it is to try to “manage” these constantly evolving medical considerations for a population. It’s clear that by the time “tracking” data is analyzed and acted upon bureaucratically things may be drastically different.
Perhaps 50 years ago such “information managing” by government might have some use, but not today. Today if we want to buy a voltage regulator for a 1955 Buick we have only to type same in our browser and we will instantly know the availability and price of every such item in the country (the world actually). With this kind of power in the hands of the individual, why is it so hard to imagine that the healthcare consumer needs a bureaucrat managing his needs and financial expenditures?
If this makes sense why do we even discuss “why” we should take such (government management) approaches seriously, much less discussing “how” it can be done.
Shouldn’t we be discussing “how” enabling services can be used to help individuals manage their own affairs?
John , Glad to see you going to the middle of the road as a reformer and joining the Obama Administration. Sounds reasonable at least initially. I will use your paper for students in the Fall to understand various sides to the debate.
Budget deal seems like a fairly crude tool to reduce everything and make the divide between half and half-not wider. I understand on the tax issue that we have some of the lowest taxes in industrial world. Lower than most European nations. Lower than Canada? Yet Canada still has jobs. Are taxes rates the lowest they have been in some 50 years or so.? Stockton of Reagan administration has said for the years that the supply side game is a faud. He even thinks Rep. are in fair land on tax issue. Low taxes and collect more income taxes has not in general worked out.
I agree with you and other that health care industry needs to reduce it profits and scale back service cost. Hospitals, home care agencies , nursing homes and physicians will need to take 5% cut or so every year for some time and live in smaller houses and drive smaller cars ..as teacher , govt. employees , have asked to do. How to get there.. like the Greeks .. is the issue. Market model is too slow perhaps ?
If hospitals were asked to make their plants all zero energy buildings, after some 5% cut .. could they do it.. ? I think so.. Germany has many buildings feeding electricity to the grid .. making money. Is the Germany corporate world all crazy.
Stan
Eric writes: “The current fee-for-service structure is clearly broken.”
That may be the case but not because fee for service is a problem rather too much government intervention into fee for service is the culprit. Look at Medicare and note that every time the government intervenes to change FFS habits the costs rise.
I wonder how much hammers would cost at Ace Hardware if government were involved in paying the bills. Many years ago the answer was $500. That tells us a lot about government’s ability to purchase anything.
Under the Fold. I suggest a new class of Primary Care Physicians. Cash for Care. This group of physicians would accept no insurance, medicare or medicaid. They would be the doctors who would close the gap between people who have no money and people who make money but have no insurance. Millions of people just do not have enough money to pay for office calls and don’t have insurance. So, let’s say that our Cash Care office has an advertised price list as follows:
10 minute Office visit: $35.00
Xray $25.00
Vaccination 15.00
Stitches: $75.00
blood tests: lab costs plus 10%
pap smear: lab costs plus office visit
many other services can be priced by the physician
but all are paid in cash eliminating the need for an insurance billing clerk. Costs for credit card use are elimininated as well.
Client agrees to sign an indemnification releasing the doctor from all liability so that physician does not have to purchase medical malpractice insurance (big savings). Doctor can see more patients by hiring PA’s and Nurse practitioners and make patient care available to more and better care available to all people.
TaTA
Marti Settle
Marti writes: “Client agrees to sign an indemnification releasing the doctor from all liability so that physician does not have to purchase medical malpractice insurance (big savings). ”
Marti, I believe one is not able to sign away rights and have that upheld by law. Thus whether or not the indemnification was signed the physician can still be sued for malpractice.
I believe I predicted correctly. After points 1 – 4:
“people begin losing interest. Minds begin to wander.”
But perhaps I could have been clearer.
@ Greg, Brant and Frank
No question that our quality measurements are imperfect. And I don’t want government to try to do it anyway. If it does define it and try to reward it, people will just practice medicine to a new cookbook formula. But as long as government is paying the bills, it has to do something. That is why I am proposing to let doctors propose different ways of being paid and different ways of measuring quality. I see this as a liberating step not an act of further confinement.
@ Eric
The Goodman approach and the Obama approach are not similar. I’ve never had a great problem with the ways President Obama has described some of our health care problems. The solutions, however, are 180 degrees apart.
@ Stan
I have not come to the middle. In fact, I haven’t changed at all.
@ AI
You are right, You can’t contract away your tort liability rights, for all practical purposes.
John,
I understand, but let me provide a link to a very fine piece by Chris Jacobs — http://dailycaller.com/2011/07/09/who-am-i-to-decide-how-my-own-health-care-should-be-handled/comment-page-1/#comment-531756
My own view is to put as much control (and money) in the hands of the patients as possible and let them decide how best to spend it. Yes, many will be unable to do so by themselves, although Cash&Counseling suggests that number may be fewer than we assume.
But what do we do when confronted with any complex system? We hire an agent as our advocate. I would take the first $1,500 and hire a concierge Doc who knows me well to advocate for me in the health care system
@ Stan Ingman: Where did Dr. Goodman state that “health care industry needs to reduce it profits and scale back service cost”? On the contrary, those who can “scale back service cost” would profit mightily under consumer-driven reforms, and society should cheer that!
With respect to Dr. Brenner: His major obstacle, of course, is that he reportedly spends most of his time treating patients who need care. He does not appear to have the character and personality required to do less of that and more engagement with lobbyists, regulators, and politicians to ensure that his modalities are tolerated under the forthcoming regulations.
If I were to inteview Dr. Brenner, I would ask him:
How many times have you visited Washington, DC last year? Which lobbyists have you engaged? Do you know which bureaucrat in Sec. Sebelius’ office is writing the regulations that have an impact on your practice? Do you know where his (her) favorite table is at the Capital Grille? Do you know his (her) favourite wine? Etc., etc.
I suspect Dr. Brenner would throw me out of his office – which explains why he cannot succeed under health “reform.”
John,
What you have described is a virtual Mobius strip. No matter how far along the edge you travel, you are just as far from the other side as when you started:)
Seamus
Great post. I like the first four points. You are right about Gawande; it is easy to agree with almost everything he says. Almost.
Measuring quality is such a difficult task. I don’t know how we can pick good providers without improving our measurement process. If there is anyone that can do it, they will make a fortune.
John–An excellent exposition. I have a number 6 to add:
Delegate to a well-managed organization the task of planning, developing and operating high-value healthcare services, especially those that deploy physicians as heads of teams of health professionals who can care for individuals, families and cohorts; to address the great gap between the numbers of people needing care in the future (46% more Medicare patients…) and the number of providers available to take care of them. (Loss of Boomer doctors, loss of doctors being paid less through cuts in government programs, lack of enough new entry young people into health professional schools because they lack enough English proficiency, have not graduated from either high school or college, and come from a culture that is not accustomed to aspiring to having a health professional career.
In other words, the main difference between Obamacare and a good 21st Century healthcare system is one is managed centrally by technocrats, and one is managed at a local/regional level by managers who know the health system and know how to encourage the best work by medical practitioners. When people give approval to organizations like Geisinger, Cleveland Clinic and Mayo, they may talk about the excellent doctors, but these are well-managed organizations–that’s what makes them superior. And, one can get those effects if the professionalism and value of managers is recognized and rewarded, not just the work of the medical professionals under them.
Best regards,
Wanda J. Jones
President
New Century Healthcare Institute.
Excellent post, John. I think doctors should be paid based on clinical outcomes, as long as the outcomes are properly adjusted for severity of illness, patient compliance, etc. But of course, if that were the case, it would not work unless patient/consumers had the freedom to pick & choose their physicians.
For Frank & others: with regard to patients purchasing medical services as a commodity, do you seriously believe that purchasing health care is fundamentally no different from buying flat screen TVs or new cars??
Jmitch asks: “do you seriously believe that purchasing health care is fundamentally no different from buying flat screen TVs or new cars??”
In many cases yes, that is what I think. I need an MRI, I need to fill my BP meds, I need my broken arm set. I need my cough looked at.
But in other cases I think it is “fundamentally no different” than buying attorney services in a complex legal case.
How am I wrong?
@ jmitch
“..do you seriously believe that purchasing health care is fundamentally no different from buying flat screen TVs or new cars??”
Fundamentally, absolutely no difference – that is correct. We are talking about the fundamental laws of supply and demand, and competition’s impact upon costs.
Health care providers have something the patient wants, and the patient wants that service at what they believe is the optimum cost/quality exchange.
If you think this is incorrect please explain why. But please don’t maintain that healthcare is too important or too critical to be provided and priced at the whim of market economics. Obviously it is too important to be meted out and priced at the whim of bureaucrats and politically motivated Apparatchik. So who should make such decisions pray tell?
jmitch writes: “I think doctors should be paid based on clinical outcomes, as long as the outcomes are properly adjusted for severity of illness, patient compliance, etc.”
You are not alone in that regard. The only problem is that every time someone is asked in detail how one uses these determinations effectively they are unwilling to subject themselves and their ideas to deep analysis. The number of variables is astounding. All too frequently N is closer to 1 than it is to any statistically significant number.
Frank & Greg: purchasing health care services is not like buying a commodity like TVs or new cars. That’s because consumer purchasing decisions in healthcare are (1) limited by informational asymmetry between the buyer (patient) and seller (physician), i.e., the doc knows more about how to diagnose & treat your disease than you do & therefore can artifically induce demand for his services; and (2) private insurance companies limit your choices to providers in the network and thus create financial barriers to choosing out-of-network providers; this is not the case with new cars or TVs.
James,
First, Information asymmetry works in two ways. Yes the Doc has more information about treatments and symptoms, but he has no information at all about how I am feeling, my life style, my resources, my emotions, other than what I reveal. He is working in the dark. So we need a relationship of absolute trust and confidence so we can TOGETHER come to the best solution.
Second, In this way the physician is exactly like an attorney, and accountant, or any other professional I might hire to help me with a complex situation.
You are right that the insurance companies get in the way of a productive relationship. That is why I am trying to minimize their role.
Greg: If you know you need your BP meds renewed, OK, not fundamentally different from buying a TV. But how do you “know” you need an MRI? And if your broken arm needs to be set, how do you know if it just needs a splint ($) or an operation ($$$$)? If you need your cough looked at, what does “look at” mean? An antibiotic ($), a chest Xray ($$) or a CT scan ($$$$)?? It is sometimes difficult for doctors to sort this out, harder still for the average layman with even an average degree of health literacy.
@ James
James, I am confused. You seem to be misapplying the concept of managing one’s own healthcare. Knowing whether or not one needs an MRI, how one’s arm should be set if it is broken, an antibiotic or not, X-rays, scans, etc. is not about replacing the skills of the professional physician. It is about being able to freely consult with that physician and come to the best solutions together without third party interference.
The cost of it all is best controlled in this atmosphere. Doctors (or anyone else) usually would find it difficult to look his patient in the eye and purposefully lie to him about what is needed or to overcharge for his services if he knows the patient is paying the bill. At the same time a doctor (or anyone else) might not have the same personal restraints if he is fighting with a third party entity over procedures and payments. It becomes a game (“You got me this time but I will make it up on the next one”) that does nothing but aggravate all involved, and increase costs in the long haul. We are talking “human nature” here. This doesn’t have to be over analyzed.
James,
I have said several times that buying physician services is (or should be) very much like buying the services of any other professional, yet you keep coming back to buying a TV set. If you want to continue the discussion, I suggest you move on — how do you think buying physician services is different than buying legal services?
Greg: Legitimate question. I can think of at least 4 reasons that purchasing legal services is different than purchasing physician services: (1) if I want a lawyer, I ask my friends, or search the yellow pages. I don’t have to check to see if the lawyer I want is “in the network” as I’d have to do if I wanted to see a certain physician; (2) compared to healthcare, legal “emergencies” are rare, thus you generally have more time to compare legal options than in the case of seeking physician services when you have acute symptoms; (3) health insurance drives decision-making for physician services – most people don’t have “legal insurance”; (4) for the most part, healthcare is more expensive than legal care.
Frank: “It is about being able to freely consult with that physician and come to the best solutions together without third party interference.” Exactly. A physician’s loyalty is to his patient. The for-profit insurer’s loyalty is to its stockholders. Don’t you think there’s an inherent conflict of interest in the business objectives of a for-profit insurer??
“At the same time a doctor (or anyone else) might not have the same personal restraints if he is fighting with a third party entity over procedures and payments.” Agreed. So let’s stop the fighting by eliminating greedy private third-party payers and move to a Medicare-for-All program. Government-financed healthcare is not a panacea, but private insurance is worse, and at least the government is not required to make a profit.
Now we’re getting somewhere. James.
1. The network issue is not a function of the special nature of health care, but about the idiot nature of insurance companies. But many people argue we need insurance companies to run things because health care is “different.” No, it is the interference of the insurers that makes it different.
2. I don’t know about you but I have had a whole lot more “legal emergencies” in my life than medical ones. I’m 64 and don’t think I have ever had a medical emergency.
3.True enough but see my answer to #1.
4.Again, HC is more expensive than legal BECAUSE of insurance company third-party payment. If we applied the same payment system to legal it too would be through the roof in a few years.
James, of course an insurance company’s loyalty is to its stockholders – as well it should be. I think you again miss the point. It is the “managed care” element of the current health insurance practice that causes the problems we all recognize. “managed care” is another term for “third party management”.
What you seem to be ignoring is the fact that “any” government involvement in the financing of healthcare on any level (Medicare, Medicaid, or general population healthcare) necessarily involves the most stringent elements of “managed care”. If you think the appeal processes for insurance claims adjudication is unfair and cumbersome with the insurance companies you won’t believe what it will be like with government bureaucrats in control.
Do you seriously think the motivations of insurance companies answering to their stockholders is worse than the motivations of politico’s pressure on bureaucrats to keep costs down? At least with the current system there is still an option to use competitive insurance carriers if one doesn’t like the practices of another. What most of us want is even much more competition to force the highest level of quality and price among insurance companies. That is why (just as with any other marketable good or service) competition is the key element to keeping costs down – be it insurance companies, physicians, hospitals and any other medical service provider.
Frank: OK, help me out here. You say “What most of us want is even much more competition to force the highest level of quality and price among insurance companies.” Why not just cut out the middleman & force quality & price competition directly among doctors & hospitals? What, pray tell, is the marginal benefit of private health insurance vis-a-vis a public program like Medicare? Compared to private insurance, there is no evidence of which I’m aware that Medicare provides care of inferior quality, blocks access, or is administratively less efficient in delivering care. As a doctor, I can tell you that Medicare is MUCH easier to deal with than private insurance. If I see a Medicare patient, I can refer him/her to any participating specialist that I want (or one requested by the patient). I can write any prescription without checking a drug formulary. I can admit the patient, if necessary, without concern that my hospital doesn’t accept Medicare patients. This degree of autonomy is definitely NOT the case with patients covered by managed care plans. And, with Medicare, I get paid – on time – 93% of the time without re-billing. I hear complaints from colleagues all the time about insurance company denials, hassles, fee negotiations, etc.
Greg: Excellent. Agree with you 100% on #1 & #4. As for #2, I’m glad to hear that, but you will eventually have a medical emergency, with no time to “shop around” for the best bargain in terms of price & quality. And since you are soon to be on Medicare, you will finally reap the benefits of years of paying Medicare taxes. What do you have to show for all the years you paid private health insurance premiums?
RE: “the idiot nature of insurance companies” – I agree. But tell me, in your opinion, what exactly is the marginal benefit of private, for-profit health insurance, vis-a-vis a public plan like Medicare?
James, although there are certainly others here that can answer your questions regarding doctor interaction with Medicare better than I, I can address some of your questions.
First, I am not sure who you are referring to as the “middleman” here, but if you mean the “claims adjudication process” I agree with you up to a point. If you are suggesting that the service and payment of service process be streamlined between the patient and provider I am on board. That is what Consumer Directed Healthcare concepts are all about. At some level that process becomes problematic (when insurance kicks in).
With regard to the marginal benefits of private insurance vs. government I’m not sure I know where to start other than to point out operational realities. But I think we have to recognize a couple of things in order to make the discussion more than academic.
First, (and this is my own personal opinion) the administrative processes that you and the rest of us experience everyday in our current insurance system are not what I am defending or supporting. They are silly, inefficient, and getting worse all the time. They are the direct result of efforts of third party payers injecting themselves in treatment determination and payment. Healthcare reform is about correcting this foolishness. Consequently, it is frustrating when you and others who dislike this system presume that the only other option is government.
Secondly, the reality that Medicare (and Medicaid) is about to go Draconian on you very shortly. I don’t have to tell you about Medicare funding problems, and what the bureaucrats solutions are going to be. Doctors are going to be squeezed financially and care for patients is going to be rationed to one degree or another. Whatever your past warm and fuzzy experiences with Medicare are most certainly going to become much less comfortable. Getting paid 93% of the time at 30% what your services are worth is hardly a bargain for you.
Then we can get into the problems of provider contracting which is an entirely different discussion but also a huge problem that needs to be addressed. But that is a bit of a digression.
James, there are two differences that I can see —
1. Medicare is a monopoly. If you don’t like what they do, too bad.
2. Medicare tries to minimize administrative expense, so it fails to do due diligence in paying claims. Thus we get massive fraud. This is never remedied other than token criminal prosecutions once every five years or so.
Other than that the pernicious effects of third-party payment are identical.
Greg:
1. Technically, Medicare is a monopsony (single-buyer), not monopoly. In terms of Medicare’s policy of “if you don’t like what they do, too bad” – the same can be said for for-profit insurers. Doctors have much more autonomy in terms of ordering tests & drugs under Medicare than they do under a private insurance contract.
2. I would challenge your assertion that Medicare “fails to do due diligence in paying claims. Thus we get massive fraud.” Attorney General Holder has stated that fraud costs Medicare $60B per year (about 12% of total Medicare expenses). If that’s true, then Medicare’s total administrative expenses including fraud would be roughly equivalent to total admin. expenses of private insurers. In other words, private insurers spend at least as much in unnecessary administration as Medicare loses in fraud – amazing!
James,
I disagree. It is a monopoly in that people of age 65 and above have nowhere else to go. It is providing coverage, so it is a sole “seller” of coverage. It is not in fact a monopsony because it is not the sole buyer of heath care services.
Medicare is profoundly different than private health carriers because people can in fact change carriers.
Holder is a fool.
Greg,
RE: “people of age 65 and above have nowhere else to go.”
Really? I know of no law that prohibits people of age 65 and above from buying private health insurance, as my 72 year-old cousin, a retired DEA agent, has done (he does not think much of the federal government). There are also those seniors, whose number is steadily dwindling, who have the luxury of retaining private insurance subsidized in part by their former employer. Geez, I wonder why more seniors, especially those who HATE the federal government’s “meddling” in their health care, don’t keep their pre-65 private insurance? Do you think it’s the high cost of the private insurance premiums? Or that they feel entitled?
jmitch, perhaps you ought to check on what type of insurance your cousin has and what state he resides in etc. If my recollection serves me correctly at that time DEA agents, were provided with a type of private indemnity insurance. I’m not sure that they have to take Medicare or completely pay for their insurance. SS, DEA, ATF agents and some other lines of security work in government in the past were always provided with insurance options not available to most workers.
Medicare ended up crowding out almost all options regarding the over 65 group that might have been better deals. My relative, well over 65 maintains his private insurance because after adding up the costs of medications, premiums, and deductibles the private insurance was less expensive and he felt it had broader coverage or at least the same coverage. He could do that only because he was self employed.
Along with being terribly wasteful, Medicare is way too intrusive in our lives and requires the extreme force of government agencies to get it through the day. In the medical arena it is also like a dictatorship and Medicare has been known to be abusive, breaking laws at will without any check on their power. One can sue an insurer and get punitive damages. One cannot do the same with Medicare.
jmitch, I don’t know about your cousin, but most people don’t consider it a sound financial decision to pay Thousands of dollars into Medicare for the past 40 years and refuse any repayment after they reach the age of eligibility.
Of course, that “should” be a viable option in the future if Medicare is completely and properly reformed.