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Is Low Medicare Overhead A Myth ?
One thing that has been mentioned in the debate over health care reform is the idea that Medicare has a much lower overhead than private insurance companies so to switch over to a government system would save money. But one of the problems is that this assumes the current overhead would remain the same if millions more joined the system.
As has been pointed out by some of the opponents to a government system, part of the reason that overhead with Medicare is low is because the costs of treatment are high. Most people on Medicare are older and thus have more health problems, accordingly it costs less as a percentage of those costs to manage the overhead.
For example consider two people, Charlie and Grandpa Joe.
Charlie is 25 and on private health insurance, Grandpa Joe is on Medicare.
During a given year it costs $ 50 in overhead for both men to cover the basic record keeping.
Charlie has $ 1,000 in medical services and it costs $ 100 for the overhead. So his total cost is $ 150, his percentage though is 15%.
Grandpa Joe has $ 20,000 in medical services and it costs $ 550 for his overhead. So his total cost is $ 600, or four times higher than Charlie. But as a percentage of total services he comes out at 3%.
If you put Charlie and his friends on a Medicare style system, the costs are likely to rise.
Obviously this is but one point, but is is one worth considering as we continue in the health care debate this fall.
142 Responses to “Is Low Medicare Overhead A Myth ?”
CS
“And why are you so wedded to public option anyway? What is the selling point that you feel makes it nonnegotiable as part of the solution?”
The reason is simple. The public option is an economic gun held to the heads of companies only concerned with selling insurance, not providing health care. I believe our current economic system has demonstrated time and again that private companies quickly work in concert to rig the system for their profit margins instead of dedicating themselves to providing the service for which they are in business.
The “proof” lies in the fact that gas prices no longer mirror supply and demand, but are tailored to fit the requirements of the company. How much did your gas go up around labor day? How about Memorial Day? The supplies at both times were absolutely normal, yet retail prices spiked. This is not capitalism, this is corporate manipulation. Other examples abound if you turn that analytical mind against the corporate mind set you are wedded to.
Health care, as in the Mayo clinic model, can be made more effective while actually lowering costs and thus prices. There is no PI model out there that even attempts to reduce costs unless denial of care and pre-existing conditions is factored in. That may be one way to maximize profits, but it's no way to elevate health care. Fee for service is an economic model, not a medical methodology. Health care is not a market, it's life and death; so treating it like it was shoes or milk misses the point altogether.
I can't change the distorted system we have, but I can steer it in the “right” direction. If your coops and small business model works, the public option becomes superfluous. If your model is in fact the perfect solution, the public option won't factor into the economic equation you seem to believe in. 93% of health care providers accept Medicare payments, where's your faith in this system you defend?
The public option is an economic gun held to the heads of companies only concerned with selling insurance, not providing health care.
How so?
private companies quickly work in concert to rig the system for their profit margins instead of dedicating themselves to providing the service for which they are in business.
When there's inadequate competition in the market. Which is why I think we should reverse the trend that has led to the current conditions of inadequate competition in the health insurance industry.
Health care, as in the Mayo clinic model, can be made more effective while actually lowering costs and thus prices.
So first off, why aren't current proposals attempting to duplicate what they're doing? And even if an attempt was made to do so, I think it would only have limited success. Mayo clinics can't be duplicated in every community where healthcare is needed, for a variety of reasons (economy of scale, as well as the 'excellence' factor which allows them to attract the best physicians and pay them well even though they're on salary instead of fee for service.)
93% of health care providers accept Medicare payments, where's your faith in this system you defend?
I don't get the question. Faith in what system?
But as far as acceptance of Medicare patients, it's increasingly becoming a problem especially in certain areas. If we add more patients to a similar system, we're going to quickly see more and more doctors rejecting new patients. The only solution to that will be to mandate them to accept all patients, which amounts to price fixing. That's worked well every time it's been tried, hasn't it?
CS
Reverse the trend as you had stated, but leave the public plan as a persuader. Until you can point to where competition has grown in an existing market, you don't have anything but hope to buoy your optimism.
Competition is existing markets are dominated by select few that drive the price points ever higher. Where is an example of an American exception to this fact?
Dr J
Please try to define your glittering generalities. Do you want the government to stop enforcing laws against monopolies? How about limiting the over sight of securities on Wall Street? How about food and safety issues, want to get government out of that part of your life?
CS
“How so?”
i'll repeat:
If your coops and small business model works, the public option becomes superfluous. If your model is in fact the perfect solution, the public option won't factor into the economic equation you seem to believe in. 93% of health care providers accept Medicare payments, where's your faith in this system you defend?
If your faith is not justified however, the public option is there for people to get care otherwise denied them as it is today. That's pre-existing and systematic termination for starters.
Competition is existing markets are dominated by select few that drive the price points ever higher. Where is an example of an American exception to this fact?
You've lost me. Competition drives prices up? Huh?
I'm guessing what you are saying is that the reality in recent history has been increasing monopolization which decreases competition and drives prices up. Even that's not exactly true in all cases, Walmart being the most prominent example…but if that's what you are trying to say then you're basically repeating what I've been saying is a big part of the problem- lack of competitive environment.
Reverse the trend as you had stated, but leave the public plan as a persuader. Until you can point to where competition has grown in an existing market, you don't have anything but hope to buoy your optimism.
From what I understand, that's what Snowe proposed as far as triggers.
And the problem with public option is the unfair advantage it has over other insurers. You are acting as though it's an equal competitor, so that if my 'faith' in private insurers is justified they'll be able to offer products that consumers will prefer and the public option just fades away or exists side by side. But the premiums for public option insurance are automatically starting at a lower point because of the govt subsidization, no taxation, etc- and that's even if the plan is written to prevent tapping into taxpayer funds in the future if needed.
Gotta go out for a while…and anyway, Disqus is driving me batty. It takes way too long to carry on a discussion when you keep having to log back in for each comment…and then the system seems to be timing out on me too. So, I may be back later but will need to limit my commenting if this isn't fixed (I guess I need to email TSteel and see what the problem is.)
“Do you want the government to stop enforcing laws against monopolies? How about limiting the over sight of securities on Wall Street? How about food and safety issues, want to get government out of that part of your life?”
No, yes, and yes. Regulation should focus primarily on ensuring healthy competition and keeping companies from getting too big (ie, too few) to fail.
CS
The problem with triggers is that they have a way of never being pulled due to a sticky lobby laden requirement that never quite is hit. Let the option exist, and let privates beat it.
“so that if my 'faith' in private insurers is justified they'll be able to offer products that consumers will prefer and the public option just fades away or exists side by side.”
So, the public option offers a complete health care package that privates can under cut be offering scaled down no frills offerings; or the public provides a minimal package that privates can counter with a more comprehensive package. Take your pick, privates have plenty of room to maneuver.
See you when disqus works for you. FYI, I'm using Mozilla and get automatically logged back in with a mouse click.
Dr J
Yeah, there's no need to oversee wall street as they torch our economy. And that tainted food thing really has no effect on you or yours.
Your lack of concern for the amoral in business is noted. Laughed at, but noted.
HemmD, you're a trooper. But no minds are ever changed here, especially CS and DJ. Look at how they view the unfunded obligations of private insurance (they don't). Private insurers can't possibly pay for the coverage they've promised. They gamble that they can keep more customers who pay but don't cost them, drop those who cost them or are likely to, and they are excused by Medicare from having to pay out for the later years of their customers. What a sweet deal.
Reform won't happen until the crushing cost of private insurance bankrupts the country.
Reform won't happen until the crushing cost of private insurance bankrupts the country.
We're at the point where we are now because Medicare and other public entitlement obligations already are bankrupting us (at least within a few short years.)
For what it's worth, I would have answered no to all three of your questions, although I'd qualify them. Oversight of Wall St. depends on what you mean by that, and food quality oversight should mostly mean general safety inspection and disclosure to consumers- not, for instance, banning ingredients or more nanny state taxes.
But regardless, I find it mind boggling that we can't all agree that there should be a freeze on govt growth (particularly creation of new obligations and programs) until the govt's house is cleaned up.
So, the public option offers a complete health care package that privates can under cut be offering scaled down no frills offerings; or the public provides a minimal package that privates can counter with a more comprehensive package. Take your pick, privates have plenty of room to maneuver.
Am I to assume you're talking about our fantasy legislation that you and I are negotiating here? Because this bears no resemblance to the public option in the Congressional bills.
because Medicare and other public entitlement obligations already are bankrupting us
CS, that is simply not true. If you add back in the money stolen by Republicans for tax cuts for billionaires, Medicare will be solvent WAY longer than private insurance. If Medicare didn't exist and private insurance had to pay for 65+ year old Americans, they would have been bankrupt 20 years ago, or we would be paying double what we do now.
“not, for instance, banning ingredients”
Oh? You oppose banning carcinogens, mutagens and other toxins? That's weird.
Oh? You oppose banning carcinogens, mutagens and other toxins? That's weird.
Overinterpreting a brief, off topic comment, GD. I was referring to banning of things like trans fats (although I also feel strongly about not eating them, personally- but the govt's role should be to enforce disclosure of ingredients and let the consumer decide.)
Hemm, Wall Street's problem was the financial firms were too big and too few to be allowed to fail. Government definitely should have prevented that. See above.
And what “tainted food thing” are you talking about? Food manufacturers have a very strong incentive to maintain quality and avoid a reputation for poisoning people. Problems are rare, and when they do happen (despite those government regulations you're touting), they react swiftly and decisively. You will speculate that problems would be much more frequent without those government inspectors, but I haven't seen much data on that and am skeptical.
In any case I'm far from a dogmatic let's-not-have-roads libertarian, but in general I think government's role should be to make sure markets are working well so that people can meet their own needs, not to try to tend to every need directly itself.
“Medicare will be solvent WAY longer than private insurance.”
The problem is not how long either remains solvent, it's how long it continues to operate after it's insolvent. I think a few insurers going bankrupt and closing their doors would be a terrific development.
If you add back in the money stolen by Republicans for tax cuts for billionaires, Medicare will be solvent WAY longer than private insurance.
And I'm the one being accused of making false statements.
CS
” Am I to assume you're talking about our fantasy legislation that you and I are negotiating here?”
Ask any conservative on this blog, I only deal in fantasy solutions.
In truth my feelings about any legislation is tainted by the presence of lobbying efforts to cut deals for a select few. I was hoping that we could reach a working exchange free from that “votes for bucks” government we now face.
In this case, though, the provisions that disallow the kind of flexibility that you referred to would not be the ones that would result from such 'taint', though- in fact quite the other way around.
What I'm talking about is the provisions that require all companies to compete within govt proscribed exchanges, so that the rules would NOT allow private companies to find their niche to exist alongside the public option.
The insurance companies undoubtedly oppose the legislation because of those kinds of requirements, and the legislators probably purposely set it up that way because they really do intend to starve private insurance companies out of business as time goes by.
So, which way do you prefer it? Earlier, when we were talking about our own actual preferences, you seemed to indicate that you wanted an innocuous public option that wasn't designed to compete in such a way that the PIs would have to fold. Do you still stand by that?
Because if you do, then you are siding with the Blue Dogs, even though you've repeatedly claimed that their only motivation for opposing the public option is that they've been bribed.
CS
” for what it's worth, I would have answered no to all three of your questions, although I'd qualify them.”
Wall street – clearly cannot be trusted to look out for the benefit of the US, only their own profit lines. Here's where anti-trust could really do some good.
Food and drug – do you know that only through government “nanny laws” product contents must now be clearly labeled. Know anybody whose kid is allergic to peanuts? There are plenty of specific things they do now we would regret not having going forward.
So you really sure you can make that broad statement when these examples are clearly functions someone must do. The devil is clearly in the details.
So you really sure you can make that broad statement when these examples are clearly functions someone must do. The devil is clearly in the details.
That was my point- the devil is in the details, which is why I said I'd answer no but with qualifications. It was your questions that were overly broad- and I was trying to quickly note examples of how I'd qualify my answers, without getting too far off on tangential discussions. Your example of listing ingredients which are potential strong allergens was along the lines of what I said I support- disclosure of ingredients to allow consumers to be better informed.
” And what “tainted food thing” are you talking about? “
Fantasy pronouncements about the food. Have you already forgotten the peanut butter of a few months ago? I won't even include the catch of Chinese adulteration you've also blanked out to maintain a pure state of capitalist nirvana.
Peanut Butter Recall Moves to Criminal Accusations
http://www.associatedcontent.com/article/143102…
Like I said, Hemm, obviously that happened despite government regulation, so it doesn't offer a data point about what would happen with less. We might see dramatically more such incidents, we might not.
Even without the government stepping in, markets tend to evolve their own quality control mechanisms. Consumer Reports and Yelp are two examples for consumer goods and services. Or look at illegal drugs, a completely unregulated market teeming with unscrupulous suppliers. People at all stages of the distribution chain tend to work with suppliers they trust and avoid those they don't.
I'm not saying either of these is the right model for peanut butter, just that how much benefit we get from the regulation we have and whether that outweighs its cost are not clear to me.
CS
” So, which way do you prefer it? Earlier, when we were talking about our own actual preferences, you seemed to indicate that you wanted an innocuous public option that wasn't designed to compete in such a way that the PIs would have to fold. Do you still stand by that?”
There you go again, putting words in my mouth.
A public option, like Medicare, must have the ability to “threaten” PIs into competitive bids. Currently, that is not the way it's done. It's as GD cited, 93% of providers take Medicare payments and nobody is broke because of that price structure. You can say this increases private insurance costs(I'm anticipating), but there is no proof that hospitals shift costs except for the people who present with no insurance at all.
The blue dogs don't give a hoot about fiscal conservative values, they do care about lobbyist money to help keep them in office. If they were so worried about government expenditures, where were they for Medicare part D? Nowhere because there was no lobbyist money in play to rouse their righteous indignation. Retail drug prices for a government program was just fine by them and the Republican party. Did you miss how easily the right gave up their values for that sweet heart deal?
You keep believing the conservative talking points instead of “your lying eyes.”
There you go again, putting words in my mouth.
Not trying to do that. I'm just completely baffled at how this:
So, the public option offers a complete health care package that privates can under cut be offering scaled down no frills offerings; or the public provides a minimal package that privates can counter with a more comprehensive package. Take your pick, privates have plenty of room to maneuver.
Didn't essentially mean this:
you seemed to indicate that you wanted an innocuous public option that wasn't designed to compete in such a way that the PIs would have to fold. Do you still stand by that?”
What I was getting at is that you described a scenario that wouldn't exist under the current legislative proposals for public option- one where the public option plans could offer certain things, but the private insurers could compete by offering a different array of plans. The provisions in the bills will not permit that. Instead, the private insurers will have to offer only the same kinds of plans, and include everyone, just as the public option will. But the public option does it with built in advantages of govt subsidization and no taxation.
Dr J
I'm sorry to use your own words against you, but I'm dedicated to helping the amnesiacs:
And what “tainted food thing” are you talking about? Food manufacturers have a very strong incentive to maintain quality and avoid a reputation for poisoning people. Problems are rare, and when they do happen (despite those government regulations you're touting), they react swiftly and decisively. You will speculate that problems would be much more frequent without those government inspectors, but I haven't seen much data on that and am skeptical.”
Except when they can make a buck and threaten people's lives.
“Even without the government stepping in, markets tend to evolve their own quality control mechanisms.”
Don't then turn around and try to say private business would take of this problem, they are the ones that caused both examples I cited. Your glittering generalities about the noble economy fall completely flat when someone gives you two examples of why the government must watch these fools like a hawk.
Don't try to ignore the facts. Private business is amoral, it only sees profit by its own self-definition. The government is the only way to keep their avarice and stupidity from hurting the general public.
Spout your platitudes about market self-regulation if it makes you feel secure, but don't buy a ford pinto, or suvs with known roll-over problems, or milk substitute for your kid., or even dog food for your favorite pet. That damn intrusive government you want to swelch may not have the wherewithall to save you from that kool-aid you like to drink.
CS
70 million out of 320 million, that leaves 79% of the US population for PIs. Insert slippery slope argument here, but that's not realistic when you look at the numbers.
“What I was getting at is that you described a scenario that wouldn't exist under the current legislative proposals for public option- one where the public option plans could offer certain things, but the private insurers could compete by offering a different array of plans. The provisions in the bills will not permit that. Instead, the private insurers will have to offer only the same kinds of plans, and include everyone, just as the public option will. But the public option does it with built in advantages of govt subsidization and no taxation.”
Did I not say that the current legislation is a devil's brew of special interests designed to keep real competition from the health care market? I must be getting forgetful.
Of course the BS being cobbled together at the behest of lobbyist money doesn't make sense. Any ideas that have a chance of making any real difference are neutered in committee. It's almost like someone doesn't want true health care reform to take place.
BTW
I'm about out the door. Don't take any wooden credit default swaps and don't eat the peanuts.
“I don't see any reason to distrust MedPac.”
I do. The increasingly bad conduct of the Dems who run (and effectively define) Washington this year, and their results (including that the taken-over GM and Chrysler will probably not repay all the taxpayer money they got) generate increasing distrust as well as concern and opposition. It's not a surprise nowadays to note that some of the more unflattering information about the future we face in this country with Social Security and Medicare (that these programs and Washington would reach historically unprecedented proportions and sizes in the future) were removed by the current people, from the Trustees' Report Summary, for example. Treasury has been identified as needing to be more transparent about what it is doing (which is not limited to GM and Chrysler, but also with global regulatory changes being sought now, to name another example). These people are untrustworthy.
“Don't then turn around and try to say private business would take of this problem, they are the ones that caused both examples I cited. Your glittering generalities about the noble economy fall completely flat when someone gives you two examples of why the government must watch these fools like a hawk.”
Hemm, I've got work to do. If you're not going to read what I'm writing, I'll stop wasting my time.
Again, those examples don't vindicate government oversight, since they obviously happened despite it.
DJ, you need to dust off your copy of “The Jungle”. Food safety regulation is essential because business cannot be trusted with the health and safety of our food and drugs. Companies will always care more about their profits than your health, just like private insurance companies. Market forces have never been sufficient to make them behave–just the opposite. Market forces are why we have melamine in food, salmonella in chicken and coliforms in beef. It's cheaper not to care about your customer. It boosts the bottom line. If you're sued, you settle and include a gag order. If you're busted you hide it, or you change the name of your company, or you say “we fixed that”.
But I know believers in the supernatural power of “the invisible hand” of the market can never be convinced that oversight is needed. Your point that even with regulation they cheated and hurt people, is meaningless. We have speed limits, but people still speed. Should we just eliminate police because laws are still broken despite them?
“Should we just eliminate police because laws are still broken despite them?”
In some cases, yes. If marijuana were legal, would we have more problems than we have now, or fewer? You can talk about how your stoner cousin is a slacker who wasted his life, and you can claim that but for the grace of our drug laws we'd all go the same way. Or you can claim that the drug laws are ruining society by landing otherwise productive citizens in prison, and we'd have just as many slackers either way.
But the fact is no one has any data points. We know what level of social ills we suffer with marijuana laws in place and some people toking up anyway. We know how the urban Dutch get on with their laws. Maybe you can dredge up some more industrial revolution data points too. How things would change for us Americans in the 21st century under looser laws or tougher laws is still a matter speculation.
I really can't explain it any better than I already did, and you're not getting it so I'll probably have to leave it at that. Basically you have said that insurance companies would be able to compete with a public option by providing different types of coverage. I'm pointing out that under the legislation as written, that wouldn't be the case and I tried to get you to answer as to whether or not you were just expressing what your preferred policy would be vs. what the actual public option is going to be like.
Now you are saying that your preference differs from what the actual legislation is because the legislation has been tainted by lobbying money (am I paraphrasing you correctly there?)
But that makes no sense because in this instance, your stated preference is actually what the insurance lobbyists would want, and what is written in the legislation is what they don't want.
I hope you could follow that, but like I said, I can't explain the point any better than that. I'll probably have to end the discussion there anyway because I'm signing off for the night and won't have much time tomorrow.
Again, those examples don't vindicate government oversight, since they obviously happened despite it.
Dr J, I think what Hemm is telling you is that you're contradicting yourself, because on the one hand you say that private business tends to evolve its own quality controls, and on the other you are saying, as above, that the examples Hemm gave happened despite government oversight. If they happened despite government oversight, that means they happened because of decisions made (or not made) by those private companies. Right? So then where is the evolution of quality control by private companies?
Kathy, we Americans eat nearly a billion meals every day, and 8 people dying of food poisoning is rare enough to make national news. That very small number is a credit to the controls in place thanks to some combination of manufacturers' diligence and government prodding. I don't know what the combination is–maybe government deserves 90% of the credit, manufacturers 10%, maybe it's the other way around.
That 8 people nevertheless died is obviously a failure both of the manufacturers and the regulators overseeing them, but it doesn't give us any data about who is more to blame. It certainly doesn't prove what HemmD is claiming, that manufacturers in general do nothing to ensure quality, while regulators do all the work. Nor does it prove the opposite, that manufacturers would do a great job on their own, and the regulators add no value.
Few debate that Medicare is efficient at paying bills submitted on the behalf of “patients,” both real and imagined. The elephant in the room regarding Medicare is the high rate of fraud with little to no government eforcement. Once you factor in fraud, Medicare is even more expensive than the private sector.
Want an idea of the scope of the problem? Have 15 minutes?
CBS 60 Minutes
The $60 Billion Fraud (14 minutes)
http://www.cbsnews.com/video/watch/?id=5419844n