Monday, August 13, 2012

Who cuts Medicare better?

Let's say you're a President looking to reform health care.  You come up with a scheme that will insure tens of millions of people, but now you have to pay for it.  It seems reasonable to start by asking those who would profit from more people having insurance to chip in.  Expanding insurance means lots of extra money for hospitals, as there would be fewer uninsured people potentially sticking the hospital with the bill for their care.  Doctors similarly will not feel as obligated to care for as many people cost-free, a common practice currently.  Pharmaceutical companies and device manufacturers, as previously discussed, would profit tremendously if more people are able to pay for their products.

Given that hospitals will save hundreds of billions in formerly-free care, Medicare can drop their reimbursement rates by some amount in order to pay for the system which allows those hospitals to save all that money to begin with.

This concept for hospitals/providers, along with eliminating subsidies to insurance companies to cover Medicare beneficiaries, is the origin of the $700 billion that Romney et al say Obama "stole" from Medicare.  Yes, Medicare payments to hospitals will drop, but taken in toto, the hospitals turn out ok.  Large hospital groups and the AMA supported passage of Obamacare despite the drops in Medicare reimbursements because they realized the money they were "losing" was the house's money, which they wouldn't even have if not for Obamacare.

Contrast this approach with Paul Ryan's budget, which eliminates the expanded coverage provisions of Obamacare while keeping the $700 billion in Medicare cuts.  Without the benefits to providers resulting from more people having insurance, those cuts will actually mean worse quality or increased costs for seniors, unless private insurance miraculously becomes more efficient at controlling costs than Medicare, despite decades of evidence to the contrary.

3 comments:

NWest said...

I'm confused as to why a middleman is necessary in Obama's scheme. Wouldn't it make more sense just to "expand" medicare so the money goes straight to the hospitals, instead of to insurers?

Not that I am in favor of "single-payer", but why didn't they pass that instead of something that will waste millions of dollars on "insurance" middlemen? Sounds to me like this scheme was just a giant transfer of dollars from taxpayers to the so-called "health insurance" and drug industry.

NWest said...

Also, large organizations of any kind, be they private or public, tend to be incredibly inefficient, if they are not constantly refreshed with change and innovation. The difference is that in private industry, the big bloated companies eventually *fail* (if they're not propped up by government incentives).

PoliticalDoctor said...

I definitely think that Medicare for all would have been better, but given how much Republicans freaked out about the current plan, who knows how they'd have reacted if private insurance were pushed out of the system. But I suppose the current system allowsfor the possiblility of private sector "innovation", or whatever you want to call it..