February 26, 2013

Medicare: the Hero in TIME's Healthcare Exposé

The heated debate over healthcare reform has focused on who pays the bills. That's like rearranging the deck chairs on the Titanic, says Steven Brill, author of Time magazine's cover story "Bitter Pill: Why Medical Bills Are Killing Us."

This 36-page article, Time's longest ever, asks the question largely ignored in the debate and unaddressed by the Affordable Health Care Act ("Obamacare"): Why are our medical costs higher than those of the next 10 biggest spenders combined?

The article is chock full of facts. I'll focus on just one theme in Brill's report: when it comes to healthcare delivery and cost control, Medicare beats private coverage every time.

The villain in Brill's article is something I hadn't even heard of before. "Chargemaster" is the price list every hospital uses for its charges. Brill says it doesn't make sense, and can't find anyone willing or able to explain it.

But the hero in Brill's report is Medicare.

Medicare Outperforms the Private Sector on Cost Savings
Republicans and insurance industry lobbyists contend that Medicare should be turned into a kind of voucher program by which seniors would shop for private insurance. Brill shows that Medicare has been most effective in controlling cost and optimizing efficiency.

Brill traces actual hospital charges to demonstrate just how crazy our system has become. Chargemaster's mysteriously high prices are most likely levied only on the poor and uninsured. Those covered by private insurance plans will receive discounted prices. But Medicare pays much, much less, since the law mandates that it pay only the approximate cost of care.

Medicare collects lots of data on hospitals' actual costs for treatments, tests and other services. Under the law, Medicare is supposed to reimburse hospitals not just for direct costs, but also for expenses like overhead, executive salaries, insurance, differences in regional costs of living, capital expenses, and even the education of medical students.

Hospitals may grouse about Medicare's fee schedules, but they accept Medicare patients, often encourage doctors to refer them, and even advertise for them.

Medicare Is More Efficient
Medicare is usually fast, accurate, customer friendly, and impressively high tech. Sure, it makes mistakes. But I've spent a lifetime dealing with private insurance companies and 17 years with Medicare. For efficiency and accuracy, Medicare wins hands down.

Contrary to the image generated by its opponents, Medicare is not run by a bloated federal bureaucracy. Its staff includes more people employed by private contractors (8,500) than government workers (700).

How Medicare Can Reduce Costs Even More
Unfortunately, Congress -- pressured by Big Pharma lobbyists -- has specified that Medicare cannot use its clout to negotiate prescription drug discounts.

We will spend more than $280 billion this year on prescription drugs. All other developed countries set drug prices. If we paid what they do for the same products, we'd save about $94 billion a year.

Although he realizes the issue is a political non-starter, Brill says we'd reap giant healthcare savings if we opened up Medicare to younger people and charged them hefty premiums. Healthcare costs would drop dramatically.

The Bottom Line
What's wrong with our healthcare system is not Medicare. It's the private sector.

Our healthcare is absurdly expensive for one main reason: the federal government doesn't regulate the prices that healthcare providers can charge.


Nancy Sedmak-Weiss said...

Excellent, John. Thanks for this, and I am going to share.

Kelly said...

Hugh used to say, it is the billing and its management system that needs to be overhauled in order to contain the high cost of medical care. I see the parallel between his comments and Brill's enlightening reporting. Having been exposed to hospital environment for several years, I saw added cost related to inefficient use of hospital supplies that could really add up. Thank you John for bringing this important issue to our attention.

Richard said...

I do agree that the one to blame here is not the federal funded programs but the way how the government regulates the cost of healthcare coverage. Instead of purchasing private insurance for their services for ltc, they just rely on Medicare or Medicaid. And because of this, the benefits of the said programs are becoming limited.