2009 June 09 Tuesday
Medical Care Costs And Nationalized Health Care

Medical care costs vary greatly from city to city.

Nationally, according to the Dartmouth Atlas of Health Care, Medicare spent an average of $8,304 per beneficiary in 2006. Among states, New York was tops, at $9,564, and Hawaii was lowest, at $5,311.

Researchers at Dartmouth Medical School have also found wide variations within states and among cities. Medicare spent $16,351 per beneficiary in Miami in 2006, almost twice the average of $8,331 in San Francisco, they said.

The Senate Finance Committee recently suggested that one way to pay for health care overhaul would be to reduce geographic variations by cutting or capping Medicare payments in “areas where per-beneficiary spending is above a certain threshold, compared with the national average.”

Local differences in how medicine is practiced accounts for a large chunk of these differences. Some doctors and hospitals provide a lot of care that yields little benefit. I've seen this up close and personal with a close relative whose oncologist wanted to continue treatment for months beyond the point where the treatment was providing any benefit. But that treatment was doing a serious ka-ching on the doctor's bank account. In some areas are doctors just more ethical? Or are patients less realistic about potential treatment benefits?

The US government has done a poor job of reining in growth of Medicare spending - see Miami above. It has cut pay-outs for various treatments and the result has been fewer doctors willing to treat Medicare patients. Given the poor record of the US government with Medicare it seems kinda cheeky for the Obama Administration to propose a bigger government role for funding health care for those not yet retired as a way to cut costs and make health care more affordable.

But Obama's not looking at cost cutting so much as he's looking at tax the rich to pay for the poorer folks.

“He made a very strong case for the proposal that he put on the table, which was to cap deductions for high-income Americans, and he urged them to go back and look at that,” Axelrod said on the CNN’s “State of the Union.” Goolsbee, appearing on “Fox News Sunday,” said Obama is “mindful” about how “ordinary Americans are able to foot the bills” and never proposed taxing employee benefits.

Taxes aside, what disturbs me is that people wanting individual health insurance policies will have to go thru some some of federal exchange. What is the exchange? How does it affect what sorts of medical insurance policies we will be able to choose?

The outline suggests consumers who have individual health insurance policies that they like could keep them. Still, it says that “by and large” the nation’s market for individually purchased health insurance policies would move to a new federally operated exchange. It would permit both individuals and employees of small firms to buy policies at less expensive group rates.

I do not want a government getting near to messing with my own ability to make choices about medical care.

Share |      By Randall Parker at 2009 June 09 03:09 AM  Economics Health


Comments
Ned said at June 9, 2009 6:29 AM:

"Some doctors and hospitals provide a lot of care that yields little benefit."

True. I've seen some doctors do this, whether from zeal or greed. But more often, in my experience, the push to "do everything" comes from patients and their families. It's very hard to be sure on the front end that a particular treatment or procedure will not benefit a particular patient. The chance may be small, but it's not zero. Only in retrospect will it be obvious that "too much" was done. And, of course, since Uncle Sam is paying most of the bills, the family wants everything possible done for Grandma. That's how government health care works.


"The Senate Finance Committee recently suggested that one way to pay for health care overhaul would be to reduce geographic variations by cutting or capping Medicare payments in “areas where per-beneficiary spending is above a certain threshold, compared with the national average.”

This is the typical government approach - just cap everything. This certainly controls expenditures, but when fewer and fewer doctors are willing to accept Medicare patients, well, don't call us, we'll call you.


"Given the poor record of the US government with Medicare it seems kinda cheeky for the Obama Administration to propose a bigger government role for funding health care for those not yet retired as a way to cut costs and make health care more affordable."


Actually, the growth in "excess" Medicare spending has been rather modest lately. From the Congressional Budget Office:

The rate of so-called “excess” growth in Medicare spending per beneficiary has varied
widely over the last several decades, and growth has slowed substantially in recent years.
(Excess growth is defined as growth beyond the combination of the general rate of
economic growth and the rate of change in the age composition among beneficiaries.)
The annual rate of excess growth fell from 5.5 percent over the period from 1975 to 1983
to 0.9 percent over the period from 1992 to 2003. Changes in provider payment policies
might help explain the observed slowdown. Those changes include the implementation of
a prospective payment system for short-stay hospitals, and, more recently, the imposition
of mechanisms to control aggregate Medicare physician spending. Possible alternative
explanations—increases in managed care enrollment, changes in Medicare cost sharing,
and a system-wide spending slowdown—do not account for the slowdown in Medicare
spending. The slowdown is of an economically important magnitude and deserves further
study.

http://www.cbo.gov/ftpdocs/74xx/doc7453/2006-08.pdf

So most of the growth in Medicare spending is coming from demographics - the aging Baby Boomers. Payment to hospitals and especially to doctors has stagnated, which is why fewer and fewer doctors accept new Medicare patients. This is what the CBO means by "to control aggregate Medicare physician spending." Because of this, for example, it is difficult to interest young physicians in geriatrics.


Medicare is well on the way to becoming the new Medicaid for older Americans. Few physicians will participate, and care will be provided with quotas and caps. Those who can afford to go elsewhere will do so.

kurt9 said at June 9, 2009 10:55 AM:

A very simple, low-cost approach to maintaining your health for the next few decades is to take Resveratrol (250mg per day). This is what I do. I also take CoQ-10, and Carnosine as well. Check out the LEF website for these. Both the FDA and the AMA publish "study" after "study" claiming that supplements don't work when, in fact, they do. The LEF ones are the best. One of the issues concerning government regulation of health care is to keep such regulation away from supplements. Also, to keep such regulation away from alternative therapies. One such therapy that has worked well for me is chelation using alpha lipoic acid. I did this for 18 months (3 days a week) and the result is that my asthma has gone away completely and much of my allergies have gone away as well.

The big problem with medicine is that it is a giant bureaucracy that operates in a fascistic top-down manner. State medical boards tell MDs what they can and cannot do and they create lots and lots of regulation in an attempt to keep people from going outside the system to solve their medical problems. Any increase in government regulation or other intervention in medicine will only entrench the existing system and reduce outside competition. This, of course, is very bad.

Truth said at June 9, 2009 11:17 AM:

Will the government limit the legal liability of hospitals and itself for medical decisions made and not made?

How does the government expect to reduce these costs without limiting legal liability?

Sickly said at June 9, 2009 12:19 PM:

"Will the government limit the legal liability of hospitals and itself for medical decisions made and not made? How does the government expect to reduce these costs without limiting legal liability?"

Details, details...I have no doubt that part of The Bestest Health Plan Ever will the waiving, voluntary of course, of your legal rights.

Truth(er) said at June 9, 2009 8:46 PM:

What about limiting the profits of lawyers?

Rob said at June 10, 2009 10:51 AM:

I'm fine with letting the all the un-insured become insured -- but only if the entire required amount is paid for by taxing those with incomes over $250,000 per family or $150,000 singly.


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