Wednesday, March 6, 2013

Don't Take My Word For It: Cutting Medicare Does Not Save Money

My last blog post was on the topic of whether cutting Medicare benefits saves any money; the answer was it does not save money unless you do not mind getting sicker or dying outright.  At about the same time a highly publicized article was published by Time Magazine entitled, "Bitter Pill: Why Medical Bills Are Killing Us."  This outstanding article was written by Steven Brill and should be required reading for all Americans.  Here is the key nugget; Americans are paying about $750million more per year in health care costs than they would almost anywhere else but do not receive better health care for it.

In the article Mr. Brill takes 6 case studies of incredibly expensive and outrageous medical bills incurred by ordinary Americans, some with health care insurance, some without.  The analyses of these bills should make you livid.  You can and should read the article at: http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bills-are-killing-us/.  

Mr. Brill does not go deeply into solutions; he does note where the major problems are, however.  First, hospitals and hospital chains, including non-profits, have pretty much cornered markets to the point where they can charge fees in incredible excess of their costs.  Since most people are not able to use just any hospital in the country because of distance and the limitations of their health insurance, there is no free market operating in this area.  For hospitals, its a seller's market, period.

Even large health insurance companies do not have enough clout, which means customers, to negotiate favorable rates.  Only one insurer does have enough clout to get a decent rate - the government, in the form of Medicare and Medicaid.

Yes, Medicare pays only a fraction of what private insurers pay, and they do it with less overhead as well.  It's simply a function of market share.  Since Medicare covers all older Americans they have enormous clout and can force hospitals to negotiate more reasonable deals on service costs.  Even though hospitals are paid only a fraction of what hospitals are paid  by private insurers or individuals, they still make money on Medicare patients.  In other words, Medicare is working.

The other area where we bleed money in health care is in drug costs.  Medicare is legally prevented by Congress from negotiating drug prices with drug companies.  Instead Medicare must pay 6% more than the average cost of any specific drug.  The rest of the world pays less, far less, than do Americans for many of the same drugs, yet drug companies are still making money on those other less excessive sales in foreign countries just the same.  With America's buying power, we should be paying the least of anyone in the world.  We can thank those in Congress who give lip service to a "free market" but either have no idea of what is going on in the real world, or if they actually do have an idea, have been corrupted by campaign contributions.

As I have written in the past, it is now time for us to catch up to numerous other countries and adopt a universal health care system that either controls health care costs via government regulations or is a single payer plan such as in a "Medicare for All" plan.  By simply instituting a "Medicare for All' system in this country, along with taming defense spending, we could go a long way towards solving our debt problems. 

Some would claim that such a system would be socialism or some form of tyranny.  The answer to these claims is this; the most free nations on earth have universal single payer or highly regulated systems.  Canada has not succumbed to tyranny because of their "Medicare for All" system.  Neither would we.
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