Why Medicare Isn’t the Problem, It’s the Solution

April 14, 2011 by  
Filed under Single-Payer News

By Robert Reich for RobertReich.com

I hope when he tells America how he aims to tame future budget deficits the president doesn’t accept conventional Washington wisdom that the biggest problem in the federal budget is Medicare (and its poor cousin Medicaid).

Medicare isn’t the problem. It’s the solution.

The real problem is the soaring costs of health care that lie beneath Medicare. They’re costs all of us are bearing in the form of soaring premiums, co-payments, and deductibles.

Americans spend more on health care per person than any other advanced nation and get less for our money. Yearly public and private health care spending is $7,538 per person. That’s almost two and a half times the average of other advanced nations.

Yet the typical American lives 77.9 years — less than the average 79.4 years in other advanced nations. And we have the highest rate of infant mortality of all advanced nations.

Medical costs are soaring because our health care system is totally screwed up. Doctors and hospitals have every incentive to spend on unnecessary tests, drugs, and procedures.

You have lower back pain? Almost 95% of such cases are best relieved through physical therapy. But doctors and hospitals routinely do expensive MRI’s, and then refer patients to orthopedic surgeons who often do even more costly surgery. Why? There’s not much money in physical therapy.

Your diabetes, asthma, or heart condition is acting up? If you go to the hospital, 20 percent of the time you’re back there within a month. You wouldn’t be nearly as likely to return if a nurse visited you at home to make sure you were taking your medications. This is common practice in other advanced countries. So why don’t nurses do home visits to Americans with acute conditions? Hospitals aren’t paid for it.

America spends $30 billion a year fixing medical errors — the worst rate among advanced countries. Why? Among other reasons because we keep patient records on computers that can’t share the data. Patient records are continuously re-written on pieces of paper, and then re-entered into different computers. That spells error.

Meanwhile, administrative costs eat up 15 to 30 percent of all health care spending in the United States. That’s twice the rate of most other advanced nations. Where does this money go? Mainly into collecting money: Doctors collect from hospitals and insurers, hospitals collect from insurers, insurers collect from companies or from policy holders.

A major occupational category at most hospitals is “billing clerk.” A third of nursing hours are devoted to documenting what’s happened so insurers have proof.

Trying to slow the rise in Medicare costs doesn’t deal with any of this. It will just limit the amounts seniors can spend, which means less care. As a practical matter it means more political battles, as seniors — whose clout will grow as boomers are added to the ranks — demand the limits be increased. (If you thought the demagoguery over “death panels” was bad, you ain’t seen nothin’ yet.)

Paul Ryan’s plan — to give seniors vouchers they can cash in with private for-profit insurers — would be even worse. It would funnel money into the hands of for-profit insurers, whose administrative costs are far higher than Medicare.

So what’s the answer? For starters, allow anyone at any age to join Medicare. Medicare’s administrative costs are in the range of 3 percent. That’s well below the 5 to 10 percent costs borne by large companies that self-insure. It’s even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums). And it’s way, way lower than the administrative costs of individual insurance (40 percent). It’s even far below the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.

In addition, allow Medicare — and its poor cousin Medicaid — to use their huge bargaining leverage to negotiate lower rates with hospitals, doctors, and pharmaceutical companies. This would help move health care from a fee-for-the-most-costly-service system into one designed to get the highest-quality outcomes most cheaply.

Estimates of how much would be saved by extending Medicare to cover the entire population range from $58 billion to $400 billion a year. More Americans would get quality health care, and the long-term budget crisis would be sharply reduced.

Let me say it again: Medicare isn’t the problem. It’s the solution.

Robert Reich is the author of Aftershock: The Next Economy and America’s Future, now in bookstores. This post originally appeared at RobertReich.org.

Comments

12 Responses to “Why Medicare Isn’t the Problem, It’s the Solution”
  1. Janet Foster says:

    Unfortunately, doctors are starting to refuse to treat Medicare patients, limiting the caseload to those who are not using Medicare (or, I’d guess, Medicaid). The argument is that the doctors don’t see their costs as being reimbursed enough, and they prefer to cut their caseload, or, if necessary, retire, rather than take what Medicare decides they can be paid.

    My question is for the details of what “Improved, Expanded Medicare” would be. It sounds hopeful, and I know that other developed countries with single payer healthcare do a vastly better job of healthcare for much less than the USA does, but we need to know the details so we can argue towards what will really work. Using Medicare as the symbol for a better healthcare system is scaring doctors, and others, away.

    Thanks

  2. Peter Shapiro says:

    Excellent article which deserves wide circulation. The insurance industry is an obvious target and so we tend to fixate on it, but the truth is that market incentives distort every aspect of our health care system, so Reich’s broader focus on delivery as well as financing issues is important.

    Re. Janet Foster’s comments: Doctors opt out of Medicare because they can get more money from private insurers, who then pass the cost on to their customers in the form of higher premiums and deductibles. If we were all in the same system, fair prices could be negotiated for everybody, and doctors would not be cherry-picking their patients the way insurance compoanies cherry-pick their customers.

    There needs to be some discussion of how Medicare has been undermined (and its costs significantly increased) by piecemeal privatization measures like those instituted during the Bush administration.

  3. Elizabeth Rosenthal says:

    Just returned from a fact=finding trip to Toronto to see how their system works. There may be some shortcomings but no one in Canada has to worry about medical expenses. Everyone gets the same care for serious illnesses. It is amazing but Canadians are so used to that, (it has been in place winde 1968) that they all take if for granted and no politician would dare take it away. Medicare for all is definitely the solution and not the problem as Robert Reich says.

  4. Sonia says:

    Unless doctors are mandated to accept Medicare–if they want a license, they will continue to do what anyone in business does and that is go where they can get the most money. That would be with private insurers or self pay patients. My husband is a surgeon and his practice does not accept or participare with ANY commercial insurance carriers. The practice fees, however ar lower than for those surgeons who particiapte and contract with every insurance carrier under the sun. If you doctor does not accept your insurance , then it is useless. I can tell you that Medicare for all is the way to go and I have been saying it for two years or more.
    As long as Medicine is a for profit business we will see more of the same –only worse!

  5. Sonia says:

    Unless doctors are mandated to accept Medicare–if they want a license, they will continue to do what anyone in business does and that is go where they can get the most money. That would be with private insurers or self pay patients. My husband is a surgeon and his practice does not accept or participare with ANY commercial insurance carriers. The practice fees, however are lower than for those surgeons who participate and contract with every insurance carrier under the sun. If your doctor does not accept your insurance , then it is useless. I can tell you that Medicare for all is the way to go and I have been saying it for two years or more.
    As long as Medicine is a for profit business we will see more of the same –only worse!

  6. DRoberts MD says:

    Take out Medicare Advantage, eliminate the Law against Medicare for bidding for pharmaceuticals, increase pay to primary care physicians, slightly reduce pay to Surgeons, increase preventive care, pay for counseling elders on their desire for end of life treatment, allow healthy people to be on Medicare, prevent fraud, abuse, and overcharging, and eliminate clearly unnecessary procedures, and educate patients and MUCH of the cost of Medicare can be reduced. Also use academic center guidelines to assist in delivering care, i.e. appropriate care that is not too much and not too little, and is effective. This will be an improved, more efficient, high quality Medicare, and you will basically have the physicians you choose, and the same nurses and care providers. Also including mental health, vision, and dental will be important, and much prevention goes on in these areas. David L Roberts MD

    • Bill Armbruster says:

      I completely agree with Robert Reich.
      Medicare for All is the answer!
      Why can’t we have as good a healthcare system as other industrialized countries — one that would cover everybody — and at a lower cost. Do away with the private health insurance companies.
      Dr. Roberts has great advice.

  7. raptor says:

    I highly recommend these two books.
    “Europe’s Promise” by Steven Hill
    and “Erasing Iraq” by Michael Otterman and Steven Hill

  8. jolene says:

    The reason doctors don’t want to get involved with Medicare is the mountain of paperwork, time, regulations and bureaucracy involved and with “Universal Health Care” it would only get worse. Oh, did I mention waste, fraud and abuse, like you see when 60 minutes does an investigation. Multiply that by thousands, like you get with any government boondogle, and you have a recipe for bankrupting America. Oh, did I mention the waiting lists. Canada is moving away from theirs by allowing more for-profit private doctors and if you read the horror stories of the UK medical system, you’ll see that when ‘big government’ gets involved in something, it becomes more expensive and falls apart.

    • John Barker says:

      Jolene, I think you made a typo–delete Medicare and replace it with for profit medical care in the US for those under 65, because that is what you are describing. Mountains of paper work generated by an insurance company bureaucracy, spriraling for profit costs whenever any government service is privatized, thousands of bankruptcies, horror stories of sick people denied health care in the name of profit, and propaganda about how the poor Canadians just can’t wait to adopt the U.S system. Jolene get a job in an industry with a moral compass.

  9. Sandy says:

    To Jolene: My husband is on Medicare and it is far superior to my private insurance. Paper work?? His Medicare has far less paper work than my private insurance. Our Doctor was much more eager to take him as a patient on Medicare, than he was me with my private Golden Rule Insurance. You lost me at boondoggle, that is such a John Boehner,Repulican, over used word.

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