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Medicare’s a Fraud – And I’m the Beneficiary

Somebody else has to pay for the stent placed in one of the arteries of my heart. Apparently that's how Medicare works; it's not a pretty – or sustainable – story.

Two doctors did a great job of threading a catheter from my wrist to my heart, finding the more than 90% blockage of a big artery, puffing out the artery with a balloon, and propping it open with a stent. They worked on me directly for about two hours not including prep work, followup, and explaining to Mary that I was still alive and what they'd done to me. I went home that night; a week later I could jog three times as far as before the operation, hike uphill faster, and in general have much more energy. The only disappointment is that I didn't immediately start winning at racquetball and tennis.

Last week the doctor bill came (haven't received the hospital bill yet). The charge for the two doctors was $9,690, not at all too much from my PoV and in line with what you'd pay lawyers or other highly trained professionals. I only owe $188.77; sounds like a great insurance program until you read on. Turns out Medicare pays just $755.06; the balance of $8746.17 is called "MEDICARE ADJ". In other words, because I'm covered by Medicare, the docs have to forgive most of their bill. What this really means, of course, is that other patients are charged more to make up for what we codgers don't have to pay. Our Medicare premiums don't begin to cover the high cost of treating people in Medicare-eligible age brackets, so all you young people get stuck with the bill. The doctor's list price would be lower if they didn't know that a high percentage of their bills would be "adjusted". Sometimes (NOT in my case) doctors stint on care for those with Medicare coverage because they know they will be grossly underpaid for it.

So government pretends to pay for our medical care with an "insurance" policy and makes us happy by charging us too low a premium for the amount of care we receive. Without ever appearing on the government's books, there is a cost shift to other patients so the cost of medical care for everyone else goes up. When "everyone else" complains that the cost of medical care is too high, government's solution (or at least some politicians' solution) is to say that a Medicare-like program should cover them, too.

But, if everyone is covered by a government program, there'll be no one left to pay the doctors the amount that government shorts them. We'll really have to pay for our care through either taxes or premiums. Either the level of care goes way down, premiums get very high, or we pay lots more taxes; there's no free lunch when there's no one else to pick up the check. Before we extend Medicare, we need to recognize that it is essentially an unsustainable fraud – of which we old people are the beneficiaries.

Related posts:

Great Docs and Technology Saved My Life Thursday

We Can't Have All the Medical Care We Want

Foodstuff Benefits



Moore’s Law and Medicine: Why We Should Be Spending More

Within twelve hours of granddaughter Lily's birth, we knew she might have a hearing problem. Within two weeks we knew she did. She had hearing aids almost immediately. After several anxious months for genetic testing and many visits to specialists, we knew that the mutation causing her hearing problem was not one of those which would have also meant heart and eye problems; moreover, there is a good chance that her hearing won't degenerate further and that she won't need a cochlear implant – if she does, we'll know it in time to act before she misses any significant part of the aural world.

When we went to California last month, Lily was 14 months old; she is talking! She greeted us by name (learned on Skype, of course). Her favorite game is to repeat what you say to her. Wow! Priceless? No, all parts of this miracle cost money. It costs money whether paid for directly by her parents, paid through insurance, or paid by the state.

This post is NOT about who should pay for this care; it is about why it is entirely reasonable that an increasing percentage of our gross national product and an increasing percentage of our wallets should go for health care. Even if we didn't have the distortions of third party coverage, government participation, an artificial doctor shortage, unhealthy lifestyles, and a convoluted payment system, we would be and should be paying more for health care than we were in the past because medicine can do more than it ever could before. Medicine is a greater value than ever.

Medical technology is responsible for many of the advances in medicine and medical technology benefits from Moore's Law, which observes and predicts that the price of electronics declines by 50% every 18 months.

How did the screeners know that Lily had a hearing problem? She couldn't tell us, obviously. They made a sound in each of her ears and used an instrument to "listen" for corresponding brain waves. The non-invasive precise detection of a minute signal and distinguishing a particular neural response among the cacophony of waves in a newborn's brain would have been impossible a generation ago and unaffordably expensive a decade ago. Now the electronics are cheap enough to be part of standard screening and travel around hospitals in a small box. A generation ago Lily's parents wouldn't have known about Lily's hearing problem until she had already missed years of speech and the associated neural development. The cost to her and to society would have been much greater than what we pay today for the equipment that made this test possible and all the experimentation that allows us to interpret brainwaves. But the cost of this screening adds to the cost of medical care.

Similarly the genetic testing which made it possible to isolate the precise cause of Lily's problem is only possible because cheap computing made it possible to decode the mysteries of the human genome – another example of Moore's Law at work. A generation ago, though, there would have been no cost for genetic testing because it was simply impossible to do – its price was infinity. As genetic testing gets to be a greater and greater value, we do more and more of it. Just like we spend more on computing and communications than we used to BECAUSE the unit prices for both have gone down.

Today many men have their prostates operated on by doctor-controlled robots. The robots are expensive, but the precision of surgical robotics results in less incontinence and other side effects from the operation.

We have a drug to relieve the agony of gout. It's much more expensive than leeches. Worth more, too.

The point is that rising expenditures on medicine are an indication of the greater value that medicine and medical technology have for individuals and society and not just a bad news story. Yes, the United States spends more on health care than other developed countries, but the lion's share of advances in medicine are made here as well. When the rich and powerful need specialized care, they're very likely to have their private jets take them to the Mayo Clinic. When well-to-do Canadians get tired of waiting in line for treatment, they come across the border to the US. In a sense, the rest of the world gets a free ride on what we pay for medicine. (I know that our overall public health measures like life-expectancy and infant mortality DON'T support the thesis that our more expensive care is better – but I think these are distorted by both demographics and bad lifestyle choices).

Because medicine is so important – increasingly important – it is crucial that we keep trying to make each intervention less expensive. It is strange, to me at least, that an MRI is billed at thousands of dollars and that the cost of these electronics don't seem to have followed Moore's Law down (to be speculated on in a future post). But, as each medical intervention gets cheaper, the percentage of our budgets that we spend for medicine is likely to go up because medicine will be a better and better value. Yes, we need better lifestyles, a rational billing system, more doctors and/or less procedures which require MDs; and, yes, we will have to admit that ability to pay limits the care that we get both individually and as a nation. What would be a tragedy is a solution to the problem of who pays for medicine which means that breakthroughs like Lily's neonatal and genetic screening don't happen anymore and the cost of medicine is reduced by eliminating its potential to further improve our lives.

Related posts:

Moore's Law and the Economics of Abundance

We Can't Have All the Medical Care We Want


Foodstuff Benefits

We Can’t Have All the Medical Care We Want

Doesn't matter whether we pay out-of-pocket, buy private insurance, are "insured" by the government, or whether medical care is "free" – eg. paid for by someone else. Unless we have unlimited wealth, we can't have unlimited health care. That's just a simple fact of life and economics, which is such an unpleasant truth that it's usually ignored by all the sides in the health care financing debate. Since we need to have this debate, we need to face up to the facts.

We try to assure that no one starves to death – but we don't offer to buy unlimited food for the indigent; we issue food stamps. But it's fairly simple to know how much food money each individual will require to stay alive, so we know (subject to much abuse and imprecision) who needs food aid and how much.

Similarly we don't want people to live without shelter. But we don't offer mansions (except when compared to third world countries) for public housing. The needs of one family are very similar to the needs of another.

Ditto for fuel assistance.

But medical care is different. There is no limit to the amount of care any one individual might absorb – especially towards the end of life. Technology keeps making medical care better but the economics of medicine more difficult. There is more and more that can be done to prolong life or improve the quality of life. We don't like to think that cost limits treatment, or that we would trade off dollars for lives; but we have no choice. There are only so many dollars and there is no limit to how many dollars could be spent on any one of us.

Yes, the cost of any particular procedure can and should be reduced over time; but new expensive and sometimes crucially useful procedures will more than absorb the savings. Yes, administrative costs can and should be reduced substantially; but, even if they went to zero, the actual care options available can still absorb all the money available. No, there is no law of nature that says every doctor must be rich or even that we must pay a toll to a licensed MD for almost any health care need; but medical people need to be paid. If each of us gets an unlimited amount of care, there will be an unlimited amount of money spent on the people who provide that care. There aren't an unlimited number of health care workers available; there isn't an unlimited amount of money available for any purpose – even health care.

So the amount of care we get is going to depend on the amount of money available to pay for it.

If we all paid out-of-pocket for health care, we'd get as much health care as we had wealth and then it would stop. Most of us would ration what we spend. Bad luck (or bad behavior), however, can easily absorb whatever has been saved. So there's insurance.

Insurance means spreading the risk of bad luck across a group. If we each bought our own insurance policy, we'd decide how much we want and can afford to pay for a set amount or set categories of coverage. It's the insurance company's job to pay out only benefits which we've contracted for; that's not heartless; that's what makes insurance work. If we don't buy insurance or don't buy enough, we pay out of pocket. If we can't pay out of pocket, should we just be allowed to die? Should our families either pay for our improvidence or feel bad that they didn't? Should everybody else have to pay? What if we couldn't afford to buy insurance? On the other hand, what if we contributed to the cost of our own care through risky behavior or an unhealthy lifestyle?

If the answer is that "government ought to pay", then it's logical to assume that government ought to be able to force you to pay for insurance as we do today with Medicare – but not the full cost. Government also taxes us all to pay for care for those who are presumed not to be able to pay for insurance – Medicaid.

But the problem of deciding how much care each individual gets doesn't go away once the government becomes the payer of last resort. In fact, it gets worse because each of us is more likely to demand an unlimited amount of care if we or our families don't have to pay for it. Decisions still have to be made about who gets how much care. As nice as the slogan sounds, the decision makers can't be doctors because they are the beneficiaries of the dollars that go for care. Self-interest aside, when would they say "no" to any treatment which had any chance of success?

Here's my crack at the questions that get buried in the heat of the health care cost debate:

  1. Should the rich be allowed to buy as much health care as they want? Yes, but they should pay for all of their own health care. The treatments they pay for will help finance medicine's search for new treatments which will often become available to all. Even if their heirs would prefer otherwise, the rich shouldn't get a public health subsidy. Note that Medicare today offers a subsidy to everyone.
  2. Should the indigent get health care at public expense? Yes, but as with many welfare programs, the definition of "indigent" needs to be tightened up. Moreover, the amount of health care the indigent get needs to be rationed by government just as the amount of housing assistance, food assistance, and fuel assistance is. This means the poor won't have health care as good as the rich do. That's a hard thing to say but no point in not being honest.
  3. Should the middleclass get health care at public expense? No, there is no one to pay for our health care but us. We can pay out-of-pocket; we can buy private insurance to cover catastrophic risk and thereby get some control over how much health care we buy for ourselves. We can pay taxes to the government which it will then use to decide how much health care we can get; but it will still be us paying for it and decisions will still have to be made as to how much care we get; we'll just lose all control over how much we spend on health care as opposed to, say, food or education.
  4. Should we be forced to buy a minimum amount of insurance as we are today with Medicare, as we would still be under Rep. Ryan's proposal, and as we would be even more so under Obama's plan? I don't think so, but it's a tough call. If so, we should be able to choose the insurer and must realize that care will still be limited.
  5. What happens to those who exhaust their insurance and then become indigent? I think they go to #2 above.

It's really unpleasant to face the fact that, someday, we might be allowed to die because there isn't enough money available to keep us alive; that's one reason it's so hard to have this discussion. Some Republicans promised that we could have Medicare without rationing and demagogued about "death squads" – not helpful. Today the blogosphere and twittersphere are full of invective about Rep. Ryan's proposal - "genocide", "murder of old people", etc. etc. None of this helps decide how we want to pay for medicine and how much medicine each of us is entitled to. These are the questions we need to face up to.

Related posts:

Moore’s Law and Medicine: Why We Should Be Spending More

Read Rep. Ryan on His Budget Plan

Rep. Ryan's Budget: Change You Can Believe In

Foodstuff Benefits

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