Rep Pete Stark chairman of the House Ways and Means Committee’s health panel is once again on the warpath. The California Democrat delivered his latest zinger last week, saying he wouldn’t negotiate with insurance companies on a health-care overhaul. “I think their intention is to see the Democrats fail, regardless of what it does for health care in this country,” Rep. Stark told reporters. He went on to say that Medicare has lower overhead than the private insurers . Stark is a true believer and like all true believers he admits no possibility of error and is recklessly intolerant of contrary views.
Stark’s attitude towards health care reform reminds me of Richard Feynman’s quip about the universe: “The universe is not only stranger than you think; it’s stranger than you can imagine.” If we can get just one issue straight we might have a chance of getting on the right path. Medicare says that their overhead costs are 2 – 5%. When they say this they are being disingenuous. Their overhead is low because they don’t count all of it. It’s like congress spending money and then putting the costs off the books. If Medicare were a private insurance company Patrick Fitzgerald would be taping their staff meetings.
Medicare imposes an almost infinite number of unfunded mandates, rules, and regulations on medical providers. These mandates consume vast swatches of time and impose huge costs. Costs which of course are passed on to patients and taxpayers, but which Medicare doesn’t count. Talk to your doctor and ask him about Medicare’s regulatory regime. Be prepared for a lot of frustration. Why do some doctors favor a government run single payer health care system? There are a number of reasons, but likely most prominent among them is that most of these doctors don’t spend a lot of time taking care of patients.
The total cost of all this federal regulation is not known by anyone, but my guess is were it counted by Medicare as part of its overhead, which it really is, that it would put Medicare equal to or ahead of the insurance companies. Anyone who thinks that Stark and Medicare have the answer of our problems with health care should deeply contemplate Feynman’s quip. Medical care is almost as strange as the universe. Is Pete Stark the guy who’s figured it out? The government can do a lot of things, but it can never save money.
Finally, a majority of Americans are satisfied with their health care coverage. Will this still be true after Rep Stark has his way. I think we’re about to find out.
You commentary is more than a little one-sided.
First, consider the overhead to employer’s of providing employer sponsored health care. Yes, some of that, as I am all to familiar with, is a result of “unfunded mandates” by CMS. But you can just as glibly pin the blame on the “unfunded mandates” of a fragmented financing/insurance system that is more focused on avoiding responsibility for paying for health care.
So if both sides have external diseconomies, then Medicare still comes out ahead.
Second, the Gallup survey you cite only compares satisfaction with the cost of insurance among the 60% of those who have private insurance. Fifty seven percent of sixty percent hardly translates to a majority. It does not translate to satisfaction with the outcomes. Nor does it have any bearing on the relative administrative expense of private vs public plans.
By most international comparisons, US does not fare well except in the category of high tech expensive care to those who can afford it.
If we are to move to a more rational system, it will require removing prejudices as well as wasted administrative burdens.
Thanks for the comment. My point is that Medicare’s stated overhead cost of 2 – 5% is inaccurate. Subtracting this imaginary 5% from the 25% overhead of commercial health insurance and coming up with a 20% saving which will then fund a national health care system is magic, yet such a calculus is often made supporting a national health care system. A national system regardless of whatever other merits it might have will not save money. There is one big problem with American medical care; it costs too much. Adding 47 million more people to whatever system we adopt will only make the cost of medicine even more than it is now unless we do something to make medical care less expensive. I have discussed the issue of cost in several earlier posts.
How you calculated that Medicare’s true overhead is still lower than those of the insurance companies is not stated; it likely is unknowable.
If we are to reduce costs we must understand why they are so high. Villainy or more greed than characterizes ordinary human interactions are not the cause. We have a system that lacks any incentive to control costs. In fact, all the incentives are to increase them. Any successful cost regime will have to ration medical care. The government can do it by delay (this is how most countries do it), by fiat (almost impossible in a democracy), or by price. The latter is the best way to do it, but is almost as difficult as the second. So what we’ll likely get is the first.
Ask yourself why technology makes things so expensive in medicine and so much cheaper everywhere else. Consider computers, every year they get better and cheaper. There’s price competition among computer vendors. There’s no reason why there can’t be price competition in medical care. There are myriad ways this can be done without having a patient bargain in the ER about the cost of his care when he presents with crushing substernal chest pain.
Some think we have a competitive system already. Not when the biggest customer is the government, when every provider charges the same price for the same service, when neither the seller nor the buyer knows the price of the service, and where you are penalized for lowering your price by having your reimbursement lowered even more by insurers and the government.
It’s the FISCAL INTERMEDIARY!!!!!
WHEN is anyone going to admit this. I am just a small town private practice physical therapist, and it’s not that hard to figure this is where they HIDE thier true administrative costs. We need to call them on the carpet before it’s “medicare for all.”
It’s a weird home base for the petition — but just read the petition, sign and pass on if you even agree slightly. Thanks
“There’s no reason why there can’t be price competition in medical care.”
Perhaps not, but there are plenty of reasons why there shouldn’t be price competition when people’s lives are at stake.
Take the airlines as an example. Price competition resulted in pilots, in whose hands are the lives of hundreds, getting paid less than some retail clerks. You get the competence and dedication you pay for, as the crash in Buffalo demonstrated.
Like with so many challenges facing real world societies, when it comes to providing health care we can either suck up the cost of doing things right or bumble and hope our way to failure. It would also be nice if we could achieve national security without it costing human lives, but that ain’t happening either. Real life challenges have real costs.
There’s no conflict between price competition and safe medical practice. Doctors, nurses, etc are licensed, credentialed, and subject to sanction with bad practice. No one I know of wants a totally unregulated medical system. The current system manages to be both over-regulated and inadequately regulated. There’s no connection between the latter and price competition.
Just looking at costs, with a for-profit insurance middleman’s primary concerns, would you rather have 10% of a dime or 10% of a dollar? So, cutting cost are out, unless it is to cherry pick the clients and deny coverage, thus effectively prescribing care for patients by insurance companies.
[…] on Medicare’s Administrative Costs I’ve previously written on how Medicare drastically underestimates its administrative costs. Benjamin Zycher, a senior […]
Consumers should be free to pick any health insurance they want. The insurance companies should compete among themselves for customers. Look at what has happened with Medicare Part D – drug coverage. The insurance companies compete for Medicare participants. This competition has caused the program to cost less than was initially thought. The only way to control medical costs without government rationing is for the patient and the provider to negotiate the price of services face to face and to encourage price competition among providers.
As far as insurance companies “cherry picking” goes, could they do otherwise? Should a life insurance policy for a 70 year old cost the same as that for a 20 year old? This problem can be solved by having insurees band together in groups such as happens when you’re employed by a large company or organization.
There are constructive actions the government can take here. But to provide government run health insurance is to ensure delay and increased costs. Note that the rate of increase in medical costs in every economically developed country is the same as in the US. Government run medical schemes have yet to slow the rise in medical costs. Only true price competition will control costs.
If Medicare’s unfunded mandates and paperwork are so onerous, why do many physicians favor a “single payer” system? Further, why did the AMA even consider singer payer at all, even now to remain ambivalent on it?
They don’t. Very few doctors in practice want a single payer plan. The AMA represents less than a third (and shrinking) of America’s physicians most of whom consider it a relic. If you subtract students and doctors in training, who get virtually free memberships, almost of whom drop the membership when its no longer almost free, the fraction is much smaller. More and more doctors refuse to take new Medicare patients who don’t have supplementary insurance. Medicare’s rates don’t cover the expense of an office visit.
I’m a fellow nephrologist and all I do is see patients. The lucky ones have Medicare, those less fortunate, but still lucky, have Medicaid (MediCal.) And there are some even less fortunate who are “insured” under the category, in Orange County, CA, of “MSI,” Medical Services to the Indigent. We don’t have a county hospital. These are the people with “insurance.” Then, for those who don’t have “insurance” there are community clinics that are funded by charity. I have been seeing these patients in this location for 42 years. In 1973, nephrology exploded when the NKF, through extremely effective lobbying, convinced congress that hemodialysis was no longer the “experimental procedure” that many insurance companies classified it as, in the attempt to provide their shareholders with the profits they expected. Do you remember those days, Dr. Kurtzman?
Medicare, a Single Payer, suddenly smiled on, no longer only the old and lame, but anyone with a need for dialysis, and nephrology was well on its way to becoming a profit center in health care. A single favored organ and the wizards who made its substitute work helped to prove what Medicare and Single Payer could do in a defined situation.
Weren’t we nephrologists lucky, and our patients? Not so lucky if you just had diabetes and needed regular doctors visits to avoid the complications that lay ahead. If you didn’t get the care, it was no consolation that now you could be rescued from death from uremia, but just in the nick of time. Why not apply universal coverage to the victims of other organ system malfunction? If you wish to cast aside Single Payer, which insurance companies would you like to see compete for the lucrative End Stage Renal Disease market? Not a lot of takers. Not much profit in it, at this point.
Bottom line: there isn’t enough money to take care of all of the wonderful devices, medicines and tests that science brings to bear on disease. In a democratic society, in the 21st century, health care is a right of citizenship. Flushing money down the drain is a luxury that we can no longer afford. Health care can no longer be looked upon as a sector to be thought of as a profit center for entrepreneurs and profit-making corporations. Single Payer lowers administrative costs, stretching that % of the GDP that is spent on health care and the savings can be directed to cost-effective therapies and prevention.
It isn’t easy, but someone of your stature should have more creative inspiration than obfuscation. Come on over to my blog, and continue the discussion.
You raise a lot of issues all of which I think are off target. So I’ll respond to what I think is your main point – the ESRD program. Medically the program has been a huge success, financially it’s a catastrophe. You ask “Why not apply universal coverage to the victims of other organ system malfunction?” Congress has been repeatedly asked to do so and has repeatedly refused. The cost of the ESRD program is what scares them away – north of $20 billion, about 10 times what Medicare spends on coronary artery disease. Congress was assured by my colleagues when HR 1 (the bill that created the ESRD program) was under discussion that it’s cost would be modest. Its runaway cost has poisoned the ground for any similar federal program. And you think this program is a financial model for the rest of medical care?
If flushing money down the drain is not an option than a single payer medical system should also not be on the table. Calculate your dialysis unit’s administrative costs, all of which are paid by Medicare. I’ll bet they’re more than 2 to 5%, little or none of which is counted as an administrative cost by Medicare. There is no evidence to support your claim that a single payer system will save money by reducing administrative costs.
Is medical care any more of a right than food? The government pays for food for poor people without having a single payer food delivery system. It uses coupons and lets people choose their own food from their own vendor. It pays for drugs under Medicare Part D without having a single payer drug industry and competition for senior’s drug business by providers has lowered the cost of the program from that originally projected, though it’s not a frugal plan.
There are three possibilities for American medical care. Some sort of single payer program which will ration medical care by delay and bureaucracy. Continue on the current path – the system collapses and we rebuild it. Last and least likely, ration medical care by price the same way everything else that’s essential in life is rationed. This lowers costs and allows more people to get better care. The government can assure that everyone has access to basic and essential medical care without running the system.
If this offends you, you must think that limitless medical care is a right. If it’s not limitless, how should we limit it and by what means?
Students and residents-in-training do not get free AMA membership. They do get discounted memberships.
I disagree with your fundamental thesis, that the additional mandates imposed by medicare increase the amount of effort required to provide service and thus makes Medicare more costly.
I do the billing for my wife’s practice, and I can assure you that all back-office activities related to Medicare are either less than or equal to the level of effort required for private insurers.
Until you can come up with some actual numbers from actual studies showing actual dollars, I think that this sort of unsubstantiated FUD is counterproductive to this debate.
Are you sure you’re following all the rules? Did you count the mandatory training sessions – HIPAA, Billing Compliance, etc?
Look at this http://www.cms.hhs.gov/mandatoryinsrep/
and this http://www.morganlewis.com/pubs/EB_MedicareSecondaryPayer_LF_12sept08.pdf and this http://hcca-info.org/AM/Template.cfm?Section=Home&CONTENTID=7737&TEMPLATE=/CM/ContentDisplay.cfm and this http://www.bakerdonelson.com/ContentWide.aspx?NodeID=200&PublicationID=606 and… well, you get the idea.
Our department has one billing clerk for every two physicians. Each clerk spends the vast majority of her time on Medicare billing, though Medicare is responsible for less than half our billing.
Also see this article http://gregmankiw.blogspot.com/2009/07/does-medicare-have-lower-administrative.html
And finally what’s your evidence for believing that Medicare’s administrative costs are lower than private insurance? You just offer an anecdote.
I will agree with you, that in the frustration of a career fueled by passion, I did get off target. This being your blog, and I a visitor, I accept your criticism. The target I was responding to was Single Payer Health Care, and I was using my experience in our common field, nephrology, and my specific experience in a solo practice, then a group sub-specialty practice, back to a solo-practice, a 20 year career as the medical director of a dialysis clinic which I founded, one of the first to leave the expensive hospital setting for the cheaper overhead of an industrial park. I guess one could call that medical entrepreneurship. And, I never left the foxholes of direct patient care. And I never turned away a patient who couldn’t pay for care. I work at non-profit community clinics, as well as accept a limited number of patients in a farce of a program entitled Medical Services to the Indigent, the last ditch effort to substitute a “safety net,” for the abolished county hospital. All, off target.
Target: “Very few doctors in practice want a single payer plan”
17,000 Members of Physicians for a National Health Plan want a single payer plan http://www.pnhp.org/ What do you think these doctors do for a living? Are 17,000 physicians supporting a plan, as members of an organization with an avowed purpose, very few? And do you think that they are the only physicians who want a single payer? And what about Doctors for America, who want a public option, or the current polls that say 54% of Americans want the plan with features proposed by President Obama?
ESRD is indeed a medical success, and a financial catastrophe unless you’re DaVita, or Amgen, or Fresenius, or the medical entrepreneurs who’ve done quite well at the taxpayers’ expense. But that, is way off target.
In not sure which poll you are citing. This one http://www.healthcare-now.org/another-poll-shows-majority-support-for-single-payer/ from Feb 2009 show 59% of Americans supporting national health insurance. We’ve had a vigorous debate since then. Rassmussen (who has the best accuracy rate of any pollster I know) says that 47% favor the president’s plan while 49% oppose it. This was taken right after the president’s speech and is an increase from before. Whether it will last is uncertain.
“Physicians for a National Health Program is a non-profit research and education organization of 17,000 physicians, medical students and health professionals who support single-payer national health insurance.” How many doctors belong is hard to tell. It’s a far left single issue group that’s not representative of the country’s nearly one million doctors.
But none if this matters if national health insurance were a good idea. Of all the alternatives available I think it’s the worst. My reasons for thinking so are presented in my numerous posts on the subject here so I won’t repeat them.
Finally, we’re talking about the president’s plan. Where is it?
Polls are only as good as the questions asked, and from a brief look at Rasmussen and the political commentary on the same site, it appears to have a rightward bias… Tony Blankley, for example.
The Huntington Post had a different view from an acknowledged left funded source, “In asking its question SurveyUSA used the same exact words that NBC/Wall Street Journal had used when conducting its June 2009 survey. That one that found 76 percent approval for the public option: “In any health care proposal, how important do you feel it is to give people a choice of both a public plan administered by the federal government and a private plan for their health insurance–extremely important, quite important, not that important, or not at all important?”” http://www.huffingtonpost.com/2009/08/20/new-poll-77-percent-suppo_n_264375.html
Doctors for America is an acknowledged Obama support group, numbering more than 14,000. The comments of these doctors are interesting and opposed to yours. http://www.huffingtonpost.com/2009/08/20/new-poll-77-percent-suppo_n_264375.html
The president, as an executive, doesn’t write a health plan. He just says what he wants, what he will or wont sign. He’s made it pretty clear to those who listened to his Wednesday speech.
You are an intelligent, informed physician, and engaging in a discussion with you has helped me to clarify my own views. Thank you for your responsiveness. I wonder if the ASN has ever taken a poll amongst its members, or the NKF. In any case, it has been a pleasure. Thank you for your many contributions to our field.
Presidents have been writing plans and sending them to congress since George Washington was in office. There is no Obama plan because he has yet to come up with one.
Thanks to NPR and the New England Journal of Medicine, there is a latest word.
“September 14, 2009
Among all the players in the health care debate, doctors may be the least understood about where they stand on some of the key issues around changing the health care system. Now, a new survey finds some surprising results: A large majority of doctors say there should be a public option.
When polled, “nearly three-quarters of physicians supported some form of a public option, either alone or in combination with private insurance options,” says Dr. Salomeh Keyhani. She and Dr. Alex Federman, both internists and researchers at Mount Sinai School of Medicine in New York, conducted a random survey, by mail and by phone, of 2,130 doctors. They surveyed them from June right up to early September.
Most doctors — 63 percent — say they favor giving patients a choice that would include both public and private insurance. That’s the position of President Obama and of many congressional Democrats. In addition, another 10 percent of doctors say they favor a public option only; they’d like to see a single-payer health care system. Together, the two groups add up to 73 percent.
When the American public is polled, anywhere from 50 to 70 percent favor a public option. So that means that when compared to their patients, doctors are bigger supporters of a public option.” http://www.npr.org/templates/story/story.php?storyId=112839232
The latest Rassmussen poll finds that Support for the President’s health care proposal has been increasing daily over the past week. However, today’s tracking results show support falling for the first time since the speech. Forty-five percent (45%) now favor passage of the Congressional health care reform plan, a figure that’s up just a single point since the speech. Fifty-two percent (52%) are now opposed. Those figures include 23% who Strongly Favor the plan and 41% who are Strongly Opposed. .
The poll you cite from NPR and NEJM says When the American public is polled, anywhere from 50 to 70 percent favor a public option. Rassmussen’s polls have consistently been the most accurate. At the very least somebody’s wrong.
Other than the NPR article and its epigones I have not been able to find the NEJM online publication of the poll. When I do I’ll comment on it. But note that only 10% of physicians want a single payer system which totally supports what I have said all along. Doctors do not want a single payer system. The doctors seem to believe that a public plan can peacefully coexist with private insurance. A naive view that’s likely to get them what they don’t want. I’ll expand on this issue later. The public plan is the proverbial camel’s nose under the tent.
[…] according to this source, Medicare’s claim that their overhead costs are only 2%-5% is clearly disingenuous since they […]
[…] sense. Here is another article again that you will attack the messenger instead of the message Medicare’s Overhead Medicine and Opera The problem you have and continue to have is there is no evidence that the Federal govt. can do […]
This is to keep awake this controversial issue:
State-Based, Single-Payer Health Care — A Solution for the United States?
NEJM | March 16, 2011 | Topics: Insurance Coverage
I love Dr. Maldini’s response………
You do realize that dealing with a number of private companies also places a financial burden on the medical industry as well, correct? All of the different health plans that your patients are on means different billing procedures and codes for each company, plus wrangling with the insurers for pay. So it’s not like Medicare is alone in being a pain in the a$$. Your argument about Medicares “regulatory regime” holds little water.
Did you stop to think about insurance company profits? For every dollar that goes into Medicare, patients see 95 to 98 cents worth of care. For private insurers, AT LEAST 15 cents of every dollar were going into someone’s pocket. Is that really the most efficient way to get medical care?
Are you against insurance companies making a profit? If so then we should nationalize the food business and the energy business both of which are just as important as medical care. Medicare’s overhead is not 2-5% as it claims and which you believe. Ask you doctor how much he spends on complying with it rules. This high cost, which is not reimbursed, is why so many doctors will no longer take new Medicare patients who don’t have supplemental insurance. With Medicare alone they lose money on every office visit. Do you think that the government, should it assume full responsibility for medical care, can do an efficient job? And if you do what experience supports that belief?
It seems everyone has to sacrifice, doctors, patients, facilities, except the government. Its about time the government puts its money where its mouth is. It owns vast tracts of land that could be leased to private concerns (who PAY taxes) and earmark that lease & tax money for an efficient health method, and NEVER to be used for anything else. Like yet another non ending war, bloated government, or other follies. Not really an answer, but would postphone the inevitable for a while………