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-percent 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
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.