I found Eric’s Novack’s June 13 post, “The Three Percent Myth,” provocative, though I’m afraid I can’t agree. Medicare is, in fact, more efficient than private insurers.
In his comment on the post, Rick underlines a key difference: In contrast to private insurers Medicare doesn’t have to spend millions on marketing, advertising, and Washington lobbyists.
On top of that, private insurers must generate profits for their shareholders. In 2003, the HMO industry as a whole reported total earnings of $5.5 billion—up 83 percent from $3 million in 2002 , according to Weiss Ratings, a firm that assesses the financial strength of banks and insurance companies.
In 2004 the industry’s profits jumped another 10.7 percent to $11.4 billion, and in the summer of 2005 industry leader WellPoint told investors that it expected its profits to continue to levitate by an average of 15 percent a year for the next five years. That same week Wellpoint announced its plans to boost average premiums by 16.6 percent in 2006.
In my 2006 book, Money-Driven Medicine: The Real Reason Health Care Costs So Much, I quote Weiss vice-president Melissa Gannon, who is remarkably candid about
the impact the insurance industry’s fat profit margins have on society:
“While this bodes well for the industry’s overall health, rising premiums have forced many consumers to select more restrictive health plans or opt not to purchase insurance entirely.”
But it’s not just the cost of marketing, advertising, lobbying and providing profits for investors that makes a private insurer’s overhead so much higher. Insurers also have higher administrative costs because they are constantly enrolling and disenrolling customers as people change plans. (The average turnover in an employer-sponsored insurance plan is 20% to 25% a year. By contrast, Medicare patients stay put. Even if they could switch, most prefer Medicare’s coverage to the coverage they had under a private insurer.)
In Money-Driven Medicine, I quote former Medicare chief Bruce Vladeck who points out that:
“. . . even very efficient insurers must spend roughly 5 percent of their premiums just to enroll and disenroll customers . . . . This is why, when I was in Washington, some of us talked about giving people age 55 to 65 the opportunity to voluntarily enroll in Medicare –letting them pay premiums to the government in exchange for full Medicare coverage . . Donna Shalala, who was Secretary of Health and Human Services at the time, said to me, ‘You really want to compete with the insurance companies, don’t you?’
And I said, ‘You bet,” Simply because our costs were so much lower, I knew I could beat them.’”
In his post, Eric also argues that Medicare is less efficient because its oversight is lax, and thus millions are lost to fraud. But if you look at cases where healthcare providers like National Medical Enterprises cheat insurers, you’ll find that they are just as likely to bilk private insurers.
If anything, private insurers may be more laid-back because they can “pass the costs associated with fraud on along their customers in the form of higher premiums,” notes The Wall Street Journal, quoting Louis Parisi, director of the New Jersey Insurance department fraud division. (Medicare has a harder time finding funds to cover fraud.)
In the same story, the Journal quotes the medical director of an NME hospital saying that when he tried to inform the Prudential Insurance Company of possible fraud, company executives merely laughed, saying that for them, large bills meant large premiums and big bonuses.
Eric goes on to suggest that Medicare’s voluminous rules create “hidden overhead” for healthcare providers who must spend hours deciphering the coding. But Jonathan is right in pointing out that private insurers also create “hidden overhead”: for doctors who must deal with the 12 different sets of forms form 12 different insurers—all designed to make it difficult for the doctor to be reimbursed.
While interviewing doctors for my book, I found that the vast majority found Medicare’s paper-work far simpler. They also liked the fact that Medicare does not try to micro-manage their practice by forcing them to call and ask permission to keep a patient in the hospital an extra two days, or to perform a certain procedure. Medicare simply publishes a list of what it will and won’t cover—and that’s that. When dealing with private insurers, by contrast, physicians spend hours on the phone.
What’s interesting is that, in the course of interviewing doctors for Money-Driven Medicine, I found that the majority preferred Medicare—even when it paid less—because it was so much less hassle. As The New York Times recently pointed out, private insurers make a game out of delaying reimbursement, and designing the forms so that the doctor leaves out one detail, he or she won’t be paid.
Finally, I agree with John when he points out in his comment that even if we switched to Medicare-for-All ( a bill now in Congress that would let people 55-65 and those under 20, voluntarily switch to Medicare, paying Medicare rather than a private insurer for coverage) —and even if Bruce Vladeck is right that because Medicare’s administrative, marketing, advertising and lobbying costs are so much lower, and because it doesn’t have to generate profits, Medicare could provide more coverage for less—this still doesn’t solve the larger problem of health care inflation of 8% a year. After a couple of years, inflation would exceed the lower administrative costs—then what?
Ideally, if more people were on Medicare, Medicare would begin to exercise its clout as the nation’s largest payer—the way other governments do—negotiating with drugmakers and device-makers for lower prices. (The high cost of drugs and devices is a major reason why our hospital bills are so high—drugs and devices account for 15% of the $2 trillion-plus that we spend on healthcare each year. Private insurers are less likely to bargain because they can always pass the cost along to their customers—and they do just that.. In just the last five years the cost of an average insurance premium has risen 75%.)
Of course drugmakers and device-makers argue that Americans need to pay twice what patients in other countries pay for their products in order to cover the high cost of research.
This is simply not true. Analysis by Families USA, a non-profit consumer group, shows that drugmakers spend roughly twice as much on advertising, marketing and administration as they spend on research.
Moreover, from 1995 to 2002, drugmakers took top prize as the nation’s most profitable industry, showing profit margins of 13 percent to 18.6 percent of sales each and every year. (In 2004, they fell to third place, but still posted profits equaling 16 percent of sales.) Meanwhile, in recent years, device makers have boasting profits margins as high as 20%.
There is no reason for drug makers and device-maker to make so much more money than other industries—especially when those industries are going broke trying to cover the high cost of healthcare for their employees. Investors needed to be rewarded for taking a risk, but there’s just not that much risk when you invest in Pfizer or Johnson and Johnson.
Even on Wall Street, health care analysts say, that that if you cut profit margins in these industries—and cut back on excessive marketing, advertising and lobbying— and drug-makers and device-makers could roll back prices without making a dent in their research budgets.
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Competition lower costs assumes that you have a free market, with some degree of transparancy. The unpleasant reality is that we have neither today. If you are injured in an accident, will the paramedics take you to any hospital? Do you get to price shop for the services? (In fact some time actually try to find out what ANYTHING actually costs in a hospital before you get the bill). Even without the same Hospital Group, at two hospital only 6 miles apart, the difference between the charges for exactly the same service can vary by as much as a factor of 8! Never mind that the charges have nothing to do with what will be accepted as payment in full from an insurance carrier.
A Free market is defined as a market place where neither party is compelled to act. Let me know if you think you aren’t compelled to act if you have Cancer, or ar involved in an automobile accident. Almost by definition, Health care is NOT a free market. Consequenlty anyone who believes that the market place can sort out health care, simply doesn’t understand what a free market is. Health Care isn’t a free market, and both the providers and insurance carriers go to great lengths to insure that it stays that way.
As for transparency, any relationship between the bill the health care system generates, and what is accepted as payment in full from an insurance carrier is pure coincidence.
While it would be nice to be able to shop for service, the complete lack of transparency makes it impossible to do.
I like to talk about stool.
Maggie – I work in the executive offices at the Inova Health System in Northern Virginia. Dr. Cleve Francis, President of our Medical Affairs Council, requested that I contact you to see if you were available for speaking engagements. I can be reached at the e-mail above or at 703-289-2023. This is probably not the right venue to reach you – just could not find another way.
> It would be surprising if the most ardent supporter
> of evidence based medicine would ever advocate a
> randomized trial for an intervention in which an
> observational study showed remarkable efficacy in
> preventing a near death situation.
He wouldn’t say “stop doing that because it hasn’t been scientifically proved” or “do whatever the hell you want to because no treatment for that has been scientifically proved” or “don’t do anything for that patient because no treatment for that has been scientifically proved”. But he might nevertheless advocate a randomized trial.
Sometimes the obvious beneficial effects are less beneficial and obvious than first thought/hoped. Didn’t I just read/hear a story about where a trial of a “standard” treatment for ARDS has happened, and the team figured out that an aspect it was harmful? The treatment included forced inflation of the lungs, and apparently this does more harm than good. Something about a teenage girl flown from there to where this trial was going on. She lived, but ended up somewhat disabled. Maybe someone will remember where I saw this [grin].
So long as a treatment is “standard” I think I’d like to see it done, and done right every time it is indicated. If there are a couple “standard” treatments, take your pick: in some kind of consistent way. If somebody is in a position to compare a “standard” treatment with something else in at least a systematic if not quite ideal way — great! This is how knowledge advances.
If you’re looking at two or three simultaneous train wrecks, then you gotta do what you gotta do — we all know that. But best I can tell, “textbook medicine” ought to be the 85% case at least. Too often apparently, it isn’t what we get.
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In regards to evidence-based medicine, it is a trial and error process to see what might appear to be correct or improved. It is the mindset of rewarding academic achievement and publication over all else. There is this aurora that organizations, government agencies, scientists, researcher and even practitioners work together, sharing information for the benefit of patients.
Each group has its own priorities and its own agenda. Moreover, the image of cooperation between these different groups only gives the illusion that reform isn’t needed. The present system exists to serve academic achievement and publication, but not to serve the best interests of people.
Evidence based medicine, since the 1970’s, depended upon the randomized, controlled trial. It rests upon the assumption that evidence should be determined and applied as a basis for medical decision-making.
Evidence is based upon quantities, similarities, populations, and averages, rather than qualities, idiosyncracies, individualization, and specifics. It would be surprising if the most ardent supporter of evidence based medicine would ever advocate a randomized trial for an intervention in which an observational study showed remarkable efficacy in preventing a near death situation.
Many major medical advances have never been subjected to a prospective randomized study before being introduced into routine management because their beneficial effects have been obvious.
Brian–
Thanks for your comment.I agree with much of what you say about the need for evidence-based medicne, the need for healthcare IT, and a move away from fee-for service medicine in order to control costs.
But there is no reason why this could not happen under Medicare.
To call the idea of universal Medicare “laughable” from the point of view of anyone with “real world experience” is to ignore the “real world” experience” of people like Bruce Vladeck (former head of Medicare in the 1990s), Dr. George Lundberg (former JAMA edtior-in-chief and now editor-in-chief of Medscape, Lundberg believes that “Medicare for All” could turn out to be the most likely and feasible reform–see my editorial on national health insurance in Medscape’s peer-reviewed medical journal this July).
Many health care professionals support “medicare for all.” Consider a June 7, 2006 press release from the California Nurses Assocation announcing that:
“California nurses will lead patients, doctors, consumer advocates and healthcare activists on a walking tour of California’s broken health care system today as part of a national day of action in support of Rep. John Conyers’ (D-MI) HR 676, establishing national Medicare for All, and a statewide day of action in support of Sen. Sheila Kuehl’s SB 840, The California Health Insurance Reliability Act.”
These are “real” nurses working in “real hospitals,” a job which gives them “a real-word view” of U.S. healthcare. Indeed, my guess is that they consider their world as real as yours.
Speaking at the Nation Press Club the begininng of 2005, Senator Edward Kennedy also backed Medicare for All, noting the savings in administrative costs, and observing that passage of the bill will not be easy because “powerful interests” that “profit from the status quo” oppose it.
Kennedy is probably as aware as you are of the power of lobbyists in Washington.
Of course lobbyists lobby for wasteful healthcare spending. We know that.
But Medicare is no more vulnerable to healthcare providers and manufactuers who overcharge than other private-sector payers. (See the many news stories about how the Pharmacy Benefit Managers who are supposed to act as middlemen between private insurers and drug-makers to negotiate better prices are actually taking kickbacks from the drug-makers. The private sector is no more immune to corruption than Congres.)
If anything, private insurers are more likely to agree to cover unproved procedures and over-priced under-tested drugs if they are popular (like Vioxx) because they don’t want to lose market-share by refusing to cover something people want (whether or not they need it).
(It’s interesting that three major not-for-profit payers stopped using Vioxx two years before Merck took it off the market: Kaiser Permanente, the Mayo Clnic and the Veterans’ Administration. Their reserach showed that the benefits did not justify the higher cost. And wihtin each of these organizations, physicains decide what drugs and treatments to use, based, not on what patients think that want, (or what advertisers tell them they should want) but based on what medical evidence shows that they need. All three make excellent use of infomration technology to gather that evidence.))
You’re quite right that Medicare needs to be tougher in resisting lobbyists and insisting that there is clinical evidence supporting the value of what it covers. Medicare needs to follow the VA model–a model which shows that government-financed healthcare can resist lobbyists, and negotiate for bigger discounts. (The VA pays about half of what both Medicare and private sector insurers pay for drugs) and use information technology to gather the data needed to make head to head comparisons of various treatments, devices and drugs. I plan to post about the VA’s use of IT later today)
Sometimes the coverage decisions Medicare needs to make are tough decisions. For instance, Genentech has a new cancer drug which costs $100,000 for a course of treatment. On average, patients who take the drug live 5 months longer.
Is this a cost-effective use of health care dollars? Do we even want to put the question that way?
Private health insurance companies make these decisions about what to cover behind close doors–and ultimately, they are marketing decisions. (Will we lose more customers-and more money by refusing to cover it? )
By contrast,when government-financed healthcare systems in other countires make these decisions, they are made out in the open–and are subject to public debate. (In the U.K, for example, they have decided exaxctly how much they will pay for each additional year of “quality life” that a drug or treatment will provide.)
Do we want to put a price tag on a year of life? This is something that we need to debate– openly and publicly. If Medicare is financing health care, we have a forum for doing that. Otherwise, private insurers will continue to make these decisions on grounds that have little to do with scientific evidence and much to do with generating profits for their shareholders.
The LA Times had a very good article about this in which it talked about how, in a for-profit setting where shareholder’s interests must be weighed, “benefit decisions don’t happen in a vacuum in which good medicine and good science always win out.” (story by David R. Olmos, LA Times, June 7, 1998).
One HMO executive expressed his uneasiness about making public policy in a setting where his first allegiance is (by law)to his shareholders: “We find ourselves [becoming] private regulators and making public policy by HMO ” said Alan Hoops, then CEO of PacifiCAre. “We’re in the business of constantly passing judgement on the society value of a given protocol.”
The article offered an example: if a chld suffers from severe facial disfigurement, should insurance ocver reconstructing the entire face, or simply improving it?
Then the LA Times asked, “As health care is increasingly dominated by large, publicly traded corporations intent on mazimizing profits for shareholders, should insuers be taking the lead on issues of such importance to society?”
Barry– I really don’t make these numbers up– honest. Regarding Gulf War Veterans, the most recent Bureau of Labor Statistics report on veterans and unemployment states that “In August 2005, 23.4 million men and women in the civilian noninstitu-
tional population had served in the U.S. Armed Forces at some time in the past. About 3.9 million served during the Gulf War era . . .”
Secondly, Rick is right: most of our health care dollars are spent on the chronically ill, not on the elderly. I realize that, intuitively, this seems wrong, but the fact is that many of the people who make it to 70 are pretty healthy (usually from a good gene pool) and go on for another 20 years,rarely seeing a doctor, until their final, fatal illness.
You just need to look up the numbers: “about 80% of health care spending can be traced to spending on patients who are chronically ill.” (Kenneth E. Thorpe, “The Rise in Health Care Spending and What to Do About It (Health Affairs, 24, no. 6, 2005) (Chronic illness refers to long-term conditoins like diabetes).
Meanwhile, you are right that taxpayers pay for more than 50% of all healthcare (actually closer to 60% if you include subsidzing employer-baed insurance).
But Medicare (for the elderly) accounts for only 17% of health care spending.(This from the Centers for Medicare and Medicaid Services, 2005 Report on National Health Expenditures).
How then, do taxpayers cover more than 50% of our healthcare bill? 17% of all health care spending is for the very poor (people cover under Medicaid) and children (covered under SCHIP–a govt. program for poor children). Taxpayers also fund veterans progams, public hosptials and school health programs, which account for another 12% of the our total healthcare spending. In addition, taxpayers buy private health insurance for goverment employees (another 6% of the total tab.) See pie-chart at the beginning of my book: Money-Driven HealthCare, The Real Reason HealthCare Costs So Much.
Posted by: Maggie Mahar at Jun 16, 2006 11:26:55 AM
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Maggie,
While I admire your enthusiasm, I doubt anybody who has actually worked with Medicare and commercial health plans actually believes that Medicare is more efficient. This is true, even now, when few health plans do any actual management of care processes.
For a real world view, I’d suggest you first visit the DC lobbying arms of major health care vendors, like Medtronic, Pfizer or GE, where armies of their representatives are allowed to both obtain patents and then set the price of their products through Medicare. Clinicians in the field, knowing that they can bill Medicare for a very wide range of services independent of their appropriateness or necessity, do just that. And there is no scrutiny because powerful associations lobby against it.
There is no question that the private system actively abuses the system and is inefficient in many ways. But public financed health care has a different flaw that you appear to willfully ignore. It is extremely susceptible to perverse influences from throughout the private sector. Companies lobby, because it works. The fact that Congress, at the behest of the drug lobby, effectively blocked pricing negotiation at the level of CMS in favor of the less robust leverage by drug plans, is a sterling example, although there are literally tens of thousands of examples throughout all of health care, and a not insubstantial percentage are focused on Medicare.
Finally, there’s no question that Medicare has been a wonderful social program that has dramatically improved the lives of millions of American seniors. But to argue that it is somehow so efficient that it should be the model for a new universal coverage is preposterous, outright laughable, especially to anyone who’s spent any real time in health care.
The fact remains that, without the cost controls that can only come through management infrastructure – standards of measurement and reporting, compatible IT platforms, greater pricing/performance transparency, a transition away from fee-for-service and toward reimbursement tied to outcomes, evidence based medicine and management – a Medicare For All system would simply break the national bank. And this supposes that the commerical health plans would simply step down, which they of course will not.
Brian R. Klepper, PhD
The Center for Practical Health Reform
904.246.9643, bklepper@cphr.com
Rick,
While I appreciate the high cost of treating chronic disease, the roughly 50% of healthcare that is financed by taxpayers (federal and state) is spent overwhelmingly on the elderly. Certainly virtually all of Medicare dollars (except for some dialysis patients perhaps) is spent on people over 65 while more than 70% of Medicaid is spent on the elderly and disabled with nursing home costs accounting for a large portion of that. For Medicare, the sickest 5% of the population accounts for about 50% of the cost, and, until this year, very little of that was for drugs which account for much of the spending on chronic disease management. United Health, for all of its huge size, insures fewer than 400,000 people via Medicare Advantage plans. By contrast, Uniprise, its large employer unit that administers self-insured plans, serves over 10 million people. An even larger population is served by the United Health unit aimed at individuals, small and medium size employers.
Maggie,
While your figure of 2.7 million Viet Nam era vets is correct (I am one and pay some attention to the matter), it includes people who served between 1961 or thereabouts and the end of the war in 1975. By contrast, the Gulf War was extremely brief, and I think we only had a little over 1 million active duty soldiers in the entire military at the time. I suspect your 3.9 million figure for that war may be off by a factor of at least 10.
Barry, the thing you’re missing is that age has nothing to do with what you cost the system. It’s how sick you are. You, as I once did, believed that as you get older, the cost of treating you goes up in a steady slope. In fact, the sickest and most costly folks to treat are not in their 80s and 90s (though some of them are). The sickest and most costly folks are those people in their 50s and 60s with chronic conditions like diabetes, CHF, COPD and whatnot. Most of these folks die, however, before they reach their 80s and 90s. Folks in their 80s and 90s aren’t as cheap to treat as those in their 20s and 30s (death is still expensive, even if you are healthy as a horse when it occurs). But I was amazed by a chart I saw at a recent conference that showed what it costs to treat each age cohort in 10-year increments. It was not a steady slope upward, but more like a leaning camel’s hump. It’s counterintuitive, I know, but the chart was being shown by a guy from United, and they didn’t have $4.5 billion in profits last year by being wrong.
By the way, I love your Post Office model. It never ceases to amaze me that there’s this one postal delivery route in Alaska where the last stop is something like 7 miles from the next-to-last one, and I can mail a letter to that guy for the same 39 cents that I can mail something to my next door neighbor.
Eric–
First, I agree wholeheartedly that if “Medicare for All” legislation were passed and made it possible for 55-64 year olds to voluntarily sign up for Medicare, we would then have a real basis for a solid comparison of Medicare to private-sector healthcare.
Secondly, with regard to the number of veterans who need healthcare, what you’re “missing” is Vietnam and Korea– 2.7 million Vietnam veterans and 3.9 million veterans from the Korean War.
Those two groups replace the WWII veterans that have died. Moreover, they’re aging, which means they need more and more medical care. in 1986, the average Vietnam vet was roughly 40; now he’s 60.
Add on vets from the Gulf War (an amazing 3.9 million) Afghanistan and the current war in Iraq (I don’t have up-to-date numbers) and you can see why enrollments at the VA are up.
In addition, ten years ago many Vets avoided the VA healthcare system. because it had a bad reputation.
But since the revamp in the mid to late 90s, it’s far more popular among Vets. And the care is cheaper, in part because the VA– unlike any other health care organizaiton in the U.S. — is allowed to bargain with drug-makers, and as a result, pays about half what private-sector HMOs, Medicare and patients pay for drugs.
I’ve enjoyed the debate.
Maggie
Maggie,
I have two questions.
First, with respect to VA Healthcare, my understanding is that World War II vets are dying off at the rate of 1,000 per day or thereabouts. Not that many years ago, there were 13 million World War II vets, and now we are down below 4 million, I believe. Even with casualties in Iraq and Afghanistan, it seems that it should have enough capacity to treat its remaining eligible population without drastically increased funding. What am I missing?
Second, regarding the enormous administrative savings we could reap from a single payer Medicare for all system, you expressed confidence that Medicare could beat private insurers in serving the under 65 population. Do you think it could do it with complete pricing transparency for all hospital, doctor, equipment and other charges, and do you think it could do it if it were required to at least breakeven from revenue collected in “premiums” — payroll taxes, beneficiary premiums (including replacing the current Part B general revenue component with a premium support voucher), co-pays and deductibles, and, if it were available to the under 65 population, employer and self-pay premiums? If the model were similar to the breakeven rules that the U.S. Postal Service operates under, which requires them to raise rates as necessary to assure breakeven operations, do you think Medicare could succeed on that basis?
I think it would be a worthwhile real world test to try it out with the 55-64 population.
Eric–
You assert that the private sector always does a better job than govt, and “that government interference in healthcare over the past 40 years” is responsible for our healthcare crisis.
But you don’t offer any evidence
I’m afraid you’re letting your ideology get in the way of the facts.
The fact is that the government-run U.S. Veterans healthcare system is now considered signficantly more efficient than private-sector healthcare according to The New England Journal of Medicine (“Effect of the Transformation of the Veterans Affaris Health Care System on the Quality of Care, May 29, 2003)The Annals of Internal Medicine (“Diabetes Care Quality in the Veterans Affairs Health Care System and
Commercial Managed Care: The TRIAD Study,” August 17, 2004) U.S. News & World Report (America’s Best Hospitals, Military Might, July 18 2005); the American Journal of Managed Care (“The Veterans Health Administration: Quality, Value, Accountability, and Information as Transforming Strategies for Patient-Centered Care,” 2004,10; part2); Washington Monthly (“The Best Care Anywhere,” January/February 2005)and The Washington Post (“Revamped Veterans Health CAre Now a Model,” August 22, 2005).
A number of these articles and studies note that people have had a hard time realizing just how good the revamped Veterans’ health care system is (both in terms of quality and efficiency) because they are blinded by an ideology which says that the government can never do anything better than the private sector.
There is just one drawback to the Veterans’ system: As Bloomberg News pointed out (August 18, 2005) as the Veterans system improved and attracted more and more veterans who wanted care (combined with “greater-than-expected demand for services from soldiers returning from Iraq and Afghanistan”) Republicans in Congress have refused to fund the VA system “to keep pace with health care inflation and rising enrollments.”
Bloomberg points out that “in the seven years after the Veterans Healthcare Reform Act was enacted in 1996, enrollment grew 141 percent to 7 million and funding increased 60 percent, according to a 2004 report by the Harvard/Cambridge Hospital Study Group.”
The VA system is, according to these many articles and studies, more efficent than the private sector–but it can’t be that much more efficient. It needs funding.
Lacking the funding, there are long lines and long waits in many parts of the VA system. And, as of 2000, Congress stopped providing healthcare for all veterans. Now, they have to be either very poor, or their medical conditoin has to be directly related to their time in service.
Finally, with regard to your last point about Merck–Merck is down 30%, not becuase drug stocks are inherently risky, but becuase Merck lied about the risk vs. benefits of Vioxx, and so, like Enron, it watched its stock plummet.
As for how Medicare is funded, this is not the issue. As I noted in my post, Medicare needs to–and can– contain healthcare inflation, first, by negotiating with drug-makers and device-makers.
Secondly, Medicare needs to re-examine physicians’ fees.
Some physicians are underpaid (notably pediatricians, internists and those in family practice) while others are overpaid (surgeons in some specialites.) In “Piecework” (The New Yorker, April 4, 2005), Dr. Atul Gawande, himself a surgeon, points out that: ” in 2003, the median annual income for primary-care physicians was $156,902. For general surgeons, like me, it was $264,375. In certain specialties,the income can be a gooddeal higher. Busy orthopedic surgeons,cardiologists,pain specialists,oncologists,neurosurgeons,hand surgeons,and radi-ologists frequently earn more than half a million dollars a year.” They may study longer an internist– but not 6 or 7 times longer. Somehow we seem to pay more for the most invasive care, or care that requires the most brute strength,than we pay for what some doctors call “thinking medicine”–listening to a patient, talking to him, the way an internist, a pediatrician or a palliative care specialist does.
Some of these fees need to be re-examiend–more importantly, Medicare needs to get away from the peverse incentives of “fee-for-service” which rewards physicians for doing more–and when, in many cases, less care woudl be better care.
Recent studies published in the New England Journal of Medicine and the Annals of Internal Medicine suggest that one out of every three of our health care dollars are wasted on unnecessary tests, unproved procedures, and over-priced new drugs and devices that are no better than the drugs and devices they replaced. A fee-for-service system encourages that waste.
Sorry this comment is so long. Becauase I spent hte last three years reseraching these problems (while writing Money-Driven Medicine) I’m passionate about them (and thus, long-winded!)
Maggie Mahar
Competition for health care plan yeilds lower costs. A great example is a healthia.com where you can get different companies offering different health savings account plans to fit your needs.
Maggie- while giving a long explanation as to why you believe medicare is much more efficient than the private sector, you fail to comment on the central theme of my post: saying that medicare’s overhead is 3% when compared to private insurers is, in fact, a myth.
Also in my post, I say that in spite of all the inaccuracies inherent in the ‘3% myth’, medicare might have lower overhead than private insurers.
Where you and I differ is that you believe that the government can better plan, manage, anticipate, and adapt than I can. The role of government ought to be to facilitate the functioning of the private sector.
I am no apologist for bad corporate behavior, but it is exactly the extent of government interference in healthcare over the past 40 years that has helped to bring the state of the healthcare system to where it is today.
And so I ask you: Do you support the funding scheme for Medicare part A (payroll taxes) with increases based upon the medical economic index (avg increase 3%/ yr lately)? Do you support the funding scheme for Medicare part B (25% premiums and 75% general revenues) with changes based upon the SGR (planned cuts of over 30% in next 5 years? Do you recognize that government planners when Medicare was passed estimated medicare costs of $9 billion in 1980 and the actual costs were nearly 10x the estimates?
PS- you conveniently left out Merck from your drug companies as their stock is DOWN 30% over the last 18 months.