The Washington Post Saves $458 Billion in Medicare

And that’s without reducing fraud and without any fundamental reform. They almost make it sound easy. All numbers refer to the next 10 years:

  • Gradually raising the premiums that beneficiaries pay for physician and other outpatient services to cover 35 percent of the programs’ costs [instead of 25%], while imposing no additional burden on the poorest 18 percent of seniors: $241.2 billion.
  • Establishing uniform cost-sharing and restricting Medigap plans [from offering first-dollar coverage]: $92.5 billion.
  • Reducing reimbursements to providers for their patients’ unpaid deductibles and co-payments and reducing the overcompensation of teaching hospitals for treating Medicare patients: $46 billion.
  • Imposing a 10 percent co-pay — about $600 on average — for each 60-day episode [of home care]: $40 billion.
  • Replacing administered prices for such items as durable medical equipment and orthotics with competitive bidding: $38 billion.

Comments (15)

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  1. Ken says:

    It does sound easy.

  2. Neil Caffrey says:

    These are a couple of very interesting and reasonable solutions to close the discrepencies.

  3. Buster says:

    Many of these ideas sound interesting — especially for seniors currently enrolled in Medicare. I have another idea the NCPA has written about in the past [See A Framework for Medicare Reform].

    How about Medicare imposing, say, a $5,000 deductible on future enrollees — all those currently under a certain age. Working-age adults would begin to deposit a percent of payroll — maybe 4 percent — into an account controlled by each senior once they turn 65. These funds would be used to pay for medical care below the deductible. This isn’t really draconian. Seniors already pay nearly $5,000 combined in Medigap premiums, Medicare Part D premiums and in cost-sharing.

  4. dennis byron says:

    I am virtually positive that the author of this post has his tongue planted firmly in his cheek but sadly the commenters are taking this seriously. The Democratic party solution to Medicare reform is — drumroll, please — to raise premiums, deductibles and co-pays and reduce benefits. You’d almost think the Democrats were a blood-sucking insurance company.

    (The one change that should be firmly opposed at all costs is the Medigap first-dollar coverage change. Only in the Obamaworld would the government force people under 65 to buy healthcare insurance in the private market that they don’t want while forbidding people over 65 from buying healthcare insurance in the private market that they do want.)

  5. Jordan says:

    +1 Buster

  6. Jonathan says:

    Music to our ears!! However, easier said than done.

  7. Afton says:

    All these options sound reasonable, the problem will be getting politicians behind them.

  8. Sebastian Alexander says:

    These proposals are all cribbed from other sources, even President Obama. Although they do not comprise fundamental reform, as prices are still administered, they are a step forward.

    With respect to competitive bidding, I urge caution, because not all medical devices are commodities. Competing products have different features that doctors and patients value, but central planners cannot. The fiscal benefits of competitive bidding accrue to the government, not doctors or patients. It’s as if the government decided that the best way to lower the price of cars was to have the US DOT run a competitive auction to determine the sole supplier of automobiles to the people.

    And that would be problematic if the auctions were run properly, which they are not. Prof. Peter Cramton of University of Maryland has studied this (http://www.cramton.umd.edu/papers/health-care/).

    I think the best lever here is the proposal to reduce Medicare’s covering patients’ bad debts to hospitals. The February 2012 “doc fix” was somewhat paid for by reducing this coverage from 100% to 65% by 2015. If we are ever going to achieve patient-centered reform, hospitals will have to become more adept at determining the credit-worthiness of patients and how and when to collect. Reducing Medicare’s coverage of bad debts is a good way towards this.

  9. Sebastian Alexander says:

    Sorry about the typo above: Policy until 2012 was to cover 70% of bad debt, and the 2012 law reduces it through 2015.

  10. Bob Hertz says:

    Over the next ten years, based on current trends, Medicare will spend about $8 trillion.

    $458 billion is only a 5% reduction, which is OK but no big wupp, as they say.

    And I am afraid that I wildly, arm-wavingly disagree with Sebastian Alexander on his praise for lowering the Medicare bad-debt reimbursement.

    I do not see how measuring a patient’s credit-worthiness can do anything whatsoever to improve medical care.

    Do we really want to push Americans to slowly save up $20,000, and then have the whole sum disappear for 3 days of surgery and tests in a hospital?

    We do not ask fire departments to assess the credit worthiness of people who suffer fires. We do not make fire departments depend on cash payments from fire victims.

    I think we need to make hospitals much more into public goods, not private enterprises at all.

    If I have missed something in Mr Alexander’s argument, I do not mind being corrected.

  11. Gabriel Odom says:

    “Indeed, the past three years have seen an unexpected and so far unexplained slowing in Medicare spending’s rate of growth.” – From the Post’s article

    I am interested in seeing how much if this decrease in spending growth is due to advancements in medical technology and electronic health records. The New York Times has reported that cost have gone up in association with EMR implementation (http://www.nytimes.com/2012/09/22/business/medicare-billing-rises-at-hospitals-with-electronic-records.html?pagewanted=all). If this is the case, then where is the decrease in spending growth coming from?

  12. Bob Hertz says:

    I believe that what commentators are referring to is the per person spending on Medicare.

    The average amount in 2010 was right about $11,000.

    The ‘slowdown in growth’ means only that the average grows to about $11,300.

    This is not a very big deal. Because of baby boom retirements, the number of people on Medicare is going to grow by almost 2 million persons a year for the next decade.

    Therefore total spending on Medicare will go up dangerously, no matter what.

  13. Sebastian Alexander says:

    @Bob Hertz: No, you haven’t misunderstood my argument.

    No need to scrape together $20,000 because private insurance for catastrophic only illness would cover hospitalization. To be sure, some people would not have such insurance.

    Nevertheless, I think we might disagree on how to get the hospitals to care for these people. Let’s remember how these hospitals started: They were mostly founded in the 19th century as non-profits with religious affiliations. The leading Catholics or Episcopalians or Jews or whoever in a community sponsored the construction and operation of a hospital.

    Indeed, hospitals’ fundraising from philanthropists is huge today. And yet we have more and more government in the mix, leading the hospitals to be bloated and overly expensive.

    With respect to the fire department: Leaving aside libertarian arguments for private fire departments, the fire department puts out your fire in order to ensure it does not jump to other buildings in your community. It does not rebuild your house or reimburse you for lost furniture and effects. That is what private insurance and private contractors do.

  14. Bob Hertz says:

    Why not impose a catastrophic ‘pay or play’ mandate, as follows:

    -anyone who cannot show evidence of a catastrophic policy will be assessed an extra 2% of taxable income.

    - this 2% will enroll them ‘like it or not’ in a catastrophic medicare plan, with an income- or asset-based deductible.

    This will capture any of the uninsureds who file a tax return. Which is not everyone, but a good start.

    If 20 million adults are uninsured, the number of them under 65 who have a serious hospitalization claim in any year would probably be about 4 per cent, or 800,000 citizens.

    Comments welcome!

  15. Vanessa Elizebeth says:

    Subsidizing the paid premium does nothing to mitigate the underlying cost. It simply means it is being paid for by taxpayers rather than by the insured.

    http://www.medicaremaryland.com/