Why Medicare Is the Solution — Not the Problem

Why Medicare Is the Solution — Not the Problem

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Not only is Social Security on the chopping block in order to respond to Republican extortion. So is Medicare.

But Medicare isn’t the nation’s budgetary problems. It’s the solution. The real problem is the soaring costs of health care that lie beneath Medicare. They’re costs all of us are bearing in the form of soaring premiums, co-payments, and deductibles.

Medicare offers a means of reducing these costs — if Washington would let it.

Let me explain.

Americans spend more on health care per person than any other advanced nation and get less for our money. Yearly public and private healthcare spending is $7,538 per person. That’s almost two and a half times the average of other advanced nations.

Yet the typical American lives 77.9 years – less than the average 79.4 years in other advanced nations. And we have the highest rate of infant mortality of all advanced nations.

Medical costs are soaring because our health-care system is totally screwed up. Doctors and hospitals have every incentive to spend on unnecessary tests, drugs, and procedures.

You have lower back pain? Almost 95% of such cases are best relieved through physical therapy. But doctors and hospitals routinely do expensive MRI’s, and then refer patients to orthopedic surgeons who often do even more costly surgery. Why? There’s not much money in physical therapy.

Your diabetes, asthma, or heart condition is acting up? If you go to the hospital, 20 percent of the time you’re back there within a month. You wouldn’t be nearly as likely to return if a nurse visited you at home to make sure you were taking your medications. This is common practice in other advanced countries. So why don’t nurses do home visits to Americans with acute conditions? Hospitals aren’t paid for it.

America spends $30 billion a year fixing medical errors – the worst rate among advanced countries. Why? Among other reasons because we keep patient records on computers that can’t share the data. Patient records are continuously re-written on pieces of paper, and then re-entered into different computers. That spells error.

Meanwhile, administrative costs eat up 15 to 30 percent of all healthcare spending in the United States. That’s twice the rate of most other advanced nations. Where does this money go? Mainly into collecting money: Doctors collect from hospitals and insurers, hospitals collect from insurers, insurers collect from companies or from policy holders.

A major occupational category at most hospitals is “billing clerk.” A third of nursing hours are devoted to documenting what’s happened so insurers have proof.

Trying to slow the rise in Medicare costs doesn’t deal with any of this. It will just limit the amounts seniors can spend, which means less care. As a practical matter it means more political battles, as seniors – whose clout will grow as boomers are added to the ranks – demand the limits be increased. (If you thought the demagoguery over “death panels” was bad, you ain’t seen nothin’ yet.)

Paul Ryan’s plan – to give seniors vouchers they can cash in with private for-profit insurers — would be even worse. It would funnel money into the hands of for-profit insurers, whose administrative costs are far higher than Medicare.

So what’s the answer? For starters, allow anyone at any age to join Medicare. Medicare’s administrative costs are in the range of 3 percent. That’s well below the 5 to 10 percent costs borne by large companies that self-insure. It’s even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums). And it’s way, way lower than the administrative costs of individual insurance (40 percent). It’s even far below the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.

In addition, allow Medicare – and its poor cousin Medicaid – to use their huge bargaining leverage to negotiate lower rates with hospitals, doctors, and pharmaceutical companies. This would help move health care from a fee-for-the-most-costly-service system into one designed to get the highest-quality outcomes most cheaply.

Estimates of how much would be saved by extending Medicare to cover the entire population range from $58 billion to $400 billion a year. More Americans would get quality health care, and the long-term budget crisis would be sharply reduced.

Let me say it again: Medicare isn’t the problem. It’s the solution.

[This is drawn from a post I did in April, also before current imboglio]

Robert Reich served as the 22nd United States Secretary of Labor under President William Jefferson Clinton from 1992 to 1997. He shares many of his thoughts and columns at Robert Reich, where this post first appeared.

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84 Comments on "Why Medicare Is the Solution — Not the Problem"


Guest
Dr. Mike
Jul 22, 2011

I believe that Mr Reich might have something to add to the discussion, however, his liberal use of medical myths will most certainly overshadow everything else. When will people learn – you can’t tell a lie to try and convey truth.

“Medical costs are soaring because our health-care system is totally screwed up.”

This is false. Our medical system has its problems, but it is they way in which healthcare is paid for that is screwed up, not the hospitals and physicians.

“Doctors and hospitals have every incentive to spend on unnecessary tests, drugs, and procedures.”

This is false. The majority of physicians, contrary to popular liberal legend, do not profit from the tests they order. The major drivers of unnecessary medical testing are unrealistic patient expectations, especially at the end of their lives, fear of malpractice, and over utilization of the Emergency room due to lack of disincentives for the patients to do so and lack of primary care.

“You have lower back pain? Almost 95% of such cases are best relieved through physical therapy. But doctors and hospitals routinely do expensive MRI’s, and then refer patients to orthopedic surgeons who often do even more costly surgery. Why? There’s not much money in physical therapy.”

This is false. Again, very few physicians profit from testing such as MRI’s, and it is illegal if they profit from referral to another physician. The reasons for excessive use of laminectomy are many, but it is too simplistic and thus false to lay all the blame on greed. “Not much money in physical therapy”? There is for the therapists.

“Your diabetes, asthma, or heart condition is acting up? If you go to the hospital, 20 percent of the time you’re back there within a month. You wouldn’t be nearly as likely to return if a nurse visited you at home to make sure you were taking your medications. This is common practice in other advanced countries. So why don’t nurses do home visits to Americans with acute conditions? Hospitals aren’t paid for it.”

Home health agencies are tasked with home visitation. Why is it that they received cuts in the most recent health care legislation?

“America spends $30 billion a year fixing medical errors – the worst rate among advanced countries. Why? Among other reasons because we keep patient records on computers that can’t share the data. Patient records are continuously re-written on pieces of paper, and then re-entered into different computers. That spells error.”

This is just a silly mixing of unrelated facts. Part of the reason is that other countries don’t even know or admit they made the errors, and their inaccurate statistics are compared to our more accurate ones. Most medical errors occur and are fixed in the same institution – having their records “continuously re-written” has nothing to do with it.

“Meanwhile, administrative costs …. twice the rate of most other advanced nations. Where does this money go? Mainly into collecting money”
Do you really think that billing and collecting from Medicare costs me less than from other sources? Really?

“A major occupational category at most hospitals is “billing clerk.” A third of nursing hours are devoted to documenting what’s happened so insurers have proof.”

False. A third of nurse hours are spent in CYA documentation. Thats not to say that documentation for reimbursement purposes is insignificant, but it’s a little disingenuous don’t you think to omit the fact that the rules for documentation are entirely driven by what Medicare requires.

The are enough true examples of the deficiencies of our system that is baffling why any one would resort to untruths, especially someone who has at their disposal people to do a little basic research for them.

Guest
Jul 22, 2011

Allow me to add to this excellent list that those “other countries” also “keep patient records on computers that can’t share the data. Patient records are continuously re-written on pieces of paper, and then re-entered into different computers” and this doesn’t “spell error” any more than the alternative, and therefore doesn’t explain anything, even partially.

I am a liberal, perhaps even a flaming liberal (if you ask Nate), and I do believe Medicare for all is a great idea, but there is no need to provide faulty arguments for this concept. There are plenty of valid and good ones.
And the government and its advocates are making a huge mistake by casting a wide net of profiteering, greed and unethical behavior to cover all physicians. These are the people you need on your side if you want to accomplish anything of any substance in health care.
Besides, when you live in a glass house you should be careful even with the first stone….

Guest
Nate Ogden
Jul 22, 2011

eh, sparkeling liberal maybe, comments like this cost you your flaming designation.

Guest
Craig "Quack" Vickstrom, M.D.
Jul 23, 2011

Will have to agree with Dr. Mike’s post. This is not one of Mr. Reich’s better efforts. This one is shot through with holes.

Guest
steve
Jul 23, 2011

“Do you really think that billing and collecting from Medicare costs me less than from other sources? Really?”

It does for me. Quite a bit less. I am the president of our 50 provider group, and know our expenses quite well.

Steve

Guest
Nate Ogden
Jul 22, 2011

“Yet the typical American lives 77.9 years – less than the average 79.4 years in other advanced nations. And we have the highest rate of infant mortality of all advanced nations.”

This propoganda has been disproven and discredited so many times no one spouting it is taken serious. Life Expectancy doesn’t have anything to do with healthcare spending and neither does infant mortaility.

if this is the best you can come up with it proves medicare is not the solution but the problem, that and propogada like this

Guest
Nate Ogden
Jul 22, 2011

For a good debunking of this junk science and a list of a few of the liberals peddling this BS;

http://www.nationalcenter.org/NPA547ComparativeHealth.html

Clearly shows how its a flawed argument from the beginning. Nothing scientific or accurate about it.

Guest
Nate Ogden
Jul 22, 2011

Yet the United States has the highest GDP per capita in the world, so why does it have a life expectancy lower than most of the industrialized world? The primary reason is that the U.S. is ethnically a far more diverse nation than most other industrialized nations. Factors associated with different ethnic backgrounds – culture, diet, etc. – can have a substantial impact on life expectancy. Comparisons of distinct ethnic populations in the U.S. with their country of origin find similar rates of life expectancy. For example, Japanese-Americans have an average life expectancy similar to that of Japanese.10

A good deal of the lower life expectancy rate in the U.S. is accounted for by the difference in life expectancy of African-Americans versus other populations in the United States. Life expectancy for African-Americans is about 72.3 years, while for whites it is about 77.7 years

Guest
Nate Ogden
Jul 22, 2011

But infant mortality tells us a lot less about a health care system than one might think. The main problem is inconsistent measurement across nations. The United Nations Statistics Division, which collects data on infant mortality, stipulates that an infant, once it is removed from its mother and then “breathes or shows any other evidence of life such as beating of the heart, pulsation of the umbilical cord, or definite movement of voluntary muscles… is considered live-born regardless of gestational age.”16 While the U.S. follows that definition, many other nations do not. Demographer Nicholas Eberstadt notes that in Switzerland “an infant must be at least 30 centimeters long at birth to be counted as living.”17 This excludes many of the most vulnerable infants from Switzerland’s infant mortality measure.

Switzerland is far from the only nation to have peculiarities in its measure. Italy has at least three different definitions for infant deaths in different regions of the nation.18 The United Nations Statistics Division notes many other differences.19 Japan counts only births to Japanese nationals living in Japan, not abroad. Finland, France and Norway, by contrast, do count births to nationals living outside of the country. Belgium includes births to its armed forces living outside Belgium but not births to foreign armed forces living in Belgium. Finally, Canada counts births to Canadians living in the U.S., but not Americans living in Canada. In short, many nations count births that are in no way an indication of the efficacy of their own health care systems.

The United Nations Statistics Division explains another factor hampering consistent measurement across nations:

…some infant deaths are tabulated by date of registration and not by date of occurrence… Whenever the lag between the date of occurrence and date of registration is prolonged and therefore, a large proportion of the infant-death registrations are delayed, infant-death statistics for any given year may be seriously affected.20

The nations of Australia, Ireland and New Zealand fall into this category.

Registration problems hamper accurate collection of data on infant mortality in another way. Looking at data from 1984-1985, Eberstadt argued that, “Underregistration of infant deaths may also be indicated by the proportion of infant deaths reported for the first twenty-four hours after birth.”21 Eberstadt found that in the U.S. and Canada more than a third of all infant death occurred during the first day, but in Sweden and France they accounted for less than one-fifth. Table 3 shows that the pattern still holds today.

Inconsistent measurement explains only part of the difference between the U.S. and the rest of the world. Were measurements to be standardized, according to Eberstadt, “America might move from the bottom third toward the middle, but it would be unlikely to advance into the top half.”22 Another factor affecting infant mortality Eberstadt identifies is parental behavior.23 Pregnant women in other countries are more likely to either be married or living with a partner. Pregnant women in such households are more likely to receive prenatal care than pregnant women living on their own. In the U.S., pregnant women are far more likely to be living alone. Although the nature of the relationship is still unclear (it is possible that mothers living on their own are less likely to want to be pregnant), it likely leads to a higher rate of infant mortality in the U.S.

In summary, infant mortality is measured far too inconsistently to make cross-national comparisons useful. Thus, just like life expectancy, infant mortality is not a reliable measure of the relative merits of health care systems.

Guest
Nate Ogden
Jul 22, 2011

What year is it? This post from Robert is like a Flashback to the 90s he throws out every dishonest misleading and strait out lie every uttered.

“For starters, allow anyone at any age to join Medicare. Medicare’s administrative costs are in the range of 3 percent. That’s well below the 5 to 10 percent costs borne by large companies that self-insure. It’s even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums). And it’s way, way lower than the administrative costs of individual insurance (40 percent). ”

Medicare is not 3% and its dishonest to show it as a percent, paper and salaries are not paid as a % of premium, dishonest liberals use this argument becuase the higher claims cost of Medicare mask the higher administrative cost.

Why don’t you use hard dollars Robert? 3%, bogus number, of $7000 is $210. 5% of $3000 is $150. Self Funded plans are $60 cheapers, useing your bogus numbers. Please explain how spending an extra $60 is saving money? Why is Medicare as low as it is, they skimp in admin and thus have a ton more fraud, 10% times $7000 is $700 lost to fraud. Theres some real savings.

Guest
Barry Carol
Jul 23, 2011

To add to Nate’s comment regarding infant mortality rates, roughly 40% of all births in the U.S. are paid for by the TANF segment of Medicaid. It’s likely that the infant mortality rate among this low income subset of our population is comparatively high because of factors, including personal behavior, related to poverty, not healthcare system quality.

As Dr. Mike’s comment suggests, this post from Robert Reich has an unusually high concentration discredited liberal talking points. It’s unfortunate that someone of Dr. Reich’s intellect and stature continues to cling to them and, worse, to publicize them.

Guest
Deron
Jul 23, 2011

Mr. Reich’s post was very disappointing. The longer we keep rehashing the same faulty arguments, the longer it’s going to take to fix things. By making it political, we take the most effective solution off the table: addressing the health of the population. Why? Because it is not a good political move to tell your constituents they are part of the problem when, in fact, they are the biggest cost driver of all.

Guest
Nate Ogden
Jul 23, 2011

This was pretty much a repost of the exact same post he made in April of 2011. In the comments it was debunked with the same facts that Robert apparently chooses to ignore. Think of the lively conversation from a few days ago if someone knowingly continues to publish the same lies and mnisinformation how should the debate deal with them? Obviously Mr. Reich has no interest in resolution or honest factual debate, do you just continue to argue against them in comments hoping 20% of people see the truth or do you aggresivly discredit them and draw attention to them so they exit the debate or start using real facts not talking points?

I am sure Mr. Reich will continue to peddle these bogus arguments until he has no creditibility and probably even long after that.

Guest
Jul 23, 2011

I thought that Robert Reich was an excellent Secretary of Labor, but boy, he really did miss the train on current health care reform.

If the great flaw of Republicans has been reforming without a heart, then the great flaw of Democrats has been reforming with no attention to numbers.

There are about 130 million adults in America who are not on Medicare or Medicaid or in the army or in prison. (I am ignoring children for the moment.)

If every one of them received full Medicare, the cost would be no less than $5,000 each and could be much more.

At $5,000 each, the total bill is $650 billion, and then you have to add something for children.

So we are pushing $800 billion.

Total payrolls in this country are between $5 and $6 trillion.(and they sure are not growing very fast if at all.)

So Medicare for all would require a new payroll tax of about 15%.

This is perfectly in line with what one sees in Germany, France, and Canada —-but it is wildly out of line with what is possible in the American political system today.

It is distressing that prominent Democrats just glide over this. I also admire Dennis Kucinich, but he said for years that Medicare for all would cost only 7% in taxes.

Incidentally, one of the best posts I have ever read on Medicare financing was by Nate Ogden in The Health Blog around September 2009, in back of an excellent article by Joe Flower on what actually works in cost control.

Just thought I would mention it.

Guest
MD as HELL
Jul 23, 2011

Half of everyone in the ED so far today is on Medicare. It is Saturday. They have come in like they are going to a yard sale. They have all seen their doctors in the last month. They are here on an impulse. Thre is nothing different about them. they simply had no reason not to come in.

This country is going broke because people are looting it.

Guest
MD as HELL
Jul 23, 2011

And I don’t mean doctors. It is the citizens (and others) just getting theirs.

I am for balance billing and collecting.

Guest
Nate Ogden
Jul 23, 2011

There use to be a time, in many people’s memory, when you could go to the doctor and pay for it out of pocket. You could go years without every fileing an insurance claim. How could we reset the system, back to when we didn’t need government or insurance?

Can we pick a date and say as of 1/1/2014 its 1964 again.

Or do we need to wind back to the way it use to be? I din’t think this would be possible, I would think we would need to freeze the present and let the past catch up.

Would affordable healthcare, fewer uninsured, and no pending bankruptsy be satisfatory or are we still chasing utopia?

Guest
Jul 23, 2011

And, would you care to enlighten us as to just how more limited were diagnostic capabilities and clinical procedures and therapies during that Swell Romantic Norman Rockwell era?

Guest
MD as HELL
Jul 23, 2011

Everybody still died….sometime

Guest
Jul 23, 2011

“How could we reset the system, back to when we didn’t need government or insurance?

Can we pick a date and say as of 1/1/2014 its 1964 again. ”

Nate, could you please check your numbers and see how many Americans had health insurance in 1964?

Guest
MD as HELL
Jul 23, 2011

His point is that no one needed insurance in 1864.

Guest
steve
Jul 23, 2011

Let’s see. We had (almost) no ICUs in 1964. No NICUs. No CT scans or MRIs. No US IIRC. We just didnt do that much surgery on older patients as we paternalistically told them they were too old (our diagnostics and monitoring sucked also). There was certainly a lot less need for insurance.

Steve