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Mr. President: Why Medicare Isn’t the Problem, It’s the Solution
I hope when he tells America how he aims to tame future budget deficits the President doesn’t accept conventional Wasington 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 healthcare 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% 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 physical therapy.
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 healthcare 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.
Estimates of how much would be saved by extending Medicare to cover the entire population range from $58 billion to $400 billion a year. More Americans would get quality health care, and the long-term budget crisis would be sharply reduced.
Let me say it again: Medicare isn’t the problem. It’s the solution.
Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations; Locked in the Cabinet; Supercapitalism; and his newest, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.
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Show AllU.S. corporate tax rates are not lower than any other "advanced" nation. See, e.g., http://en.wikipedia.org/wiki/Tax_rates_around_the_world.
http://finance.fortune.cnn.com/2011/04/08/lower-corporate-taxes-wont-create-more-jobs/
From the article:
"It's true that at 35% the corporate tax rate is technically higher than most major economies. But because of loopholes and other deductions, most companies pay significantly less – so the effective rate (or the percentage of corporate profits that is paid in federal corporate taxes) is about 13% to 15%, which is relatively low even by international standards."
And more from the article.
"...what will lowering the corporate tax do?
For one, it likely won't create much more investment or create many more jobs, says Robert Lynch, economics professor at Washington College, who has done extensive research into taxation and economic development. In a 2004 study, Lynch found that firms don't necessarily relocate or expand to an area more just because it has lower taxes. What's more, while a lower tax rate reduces costs for companies and creates some positive effects on local economies, it doesn't necessarily create substantial jobs. Just take a look at South Dakota, which currently has no corporate income tax and ranks first in the Tax Foundation's Business Climate index. Even its governor acknowledges that the sparsely-populated state has had a tough time attracting household names."
So folks South Dakota has NO corporate income tax and ranks first in the Business Climate index, and the state STILL has a tough time attracting well known companies!
So if the U.S. corporate tax rate isn't lower than that of other developed nations, why should any of you listen to twirps who say it is?
Judging by General Electric, the corporate tax rate is actually -3%.
Traditional Medicare and Medicaid could actually borrow some ideas from Medicare Advantage Programs (Medicare C and D). Health Care companies make larger profits by lowering expenses. A government model could do the same.
There are health insurers who run their own clinics which are open 24 hours per day, seven days per week. Much cheaper than the ER.
Some insurers do send nurses, and even doctors, to the patient. This is a cost effective way of administering out-patient procedures. How many parents spend hours in clinics treating "pink" ear. Why shouldn't flu shots go out to the people. Why do you need to get a bandage changed at the clinic.
Life insurance companies always send paramedics to do routine and special physicals (and lab tests) They are good at making money. Why don't they use clinics? Why do we go to clinics for physicals?
Health Insurers require a call before using emergency facilities. They know that many emergencies can be treated over the phone or by sending nurses or doctors to the emergency. Much less expensive.
If most health insurers want their own prescription drug program, there must be a profit to be made. In most cases profit means an expense for the patient or for the government.
There is no reason why cooperative or non-profit plans can't compete with a level playing field. Government should not be in the health care business. It should be in the level playing field business.
This comment is painful to read in its' shortsightedness.
First of all, insurance companies have been shown to cost more to administrate than single payer. Private insurance makes more money when it takes your premium and then provides as little care as possible. In fact, private companies spend a lot of time/money refusing services and putting providers into "chasing the money" tries to re-coup. Ultimately, the cost falls on the patient. It has been said that never have consumers paid so much and gotten so little than as they do under the current system.
A doctor who has patients come to him/her at the clinic is more efficient than one that goes to the patients. You do not see the dr home visit model often. There are home visiting nurses but nurses and doctors really are not interchangeable. Registered Nurses visit to provide skilled services and are a proven cost saver.
And I think the question is not whether drug companies deserve a profit, it is how much of a profit is justified. Health care companies such as big pharma companies, providers of hot new products (cardiac stents) can make a lot of money,particularly when they play the funding research that shows that our product should be the preferred (first line of treatment) therapy.
Though Americans prefer not to think of it, there is a point of diminishing return on high tech medicine but our reimbursement systems favor it.
This reader needs to do more research and he needs to note who is providing the info he reads.
All of my comments are based on the MassHealth model which, like it or not, is the closest we will get to single payer in the foreseeable furture. Yes, Single Payer is the ideal, but not with this Congress.
Insurance companies are the problem. We must learn from the enemy or they will beat us every time. For example, insurance companies will send a nurse practitioner or a doctor and pay the doctor $200 for a one hour visit. This is much less expensive than a $1,000 visit in the emergency room.
Yes a doctor at a clinic is ideal, but, how many clinics are open late hours and on the weekends? Go to any hospital E.R. on a Sunday. It's filled with Medicaid patients at $1,000 a visit. The Medicaid patients would rather go to the clinic. There is no clinic
Medicare D does not have a fixed formulary. Most health plans and drug plans have their own formulary. In most cases, a universal formulary, with an emphasis on generics would result in considerable savings. Health plans have figuered this out and are using it to increase profits, not to help out Medicare and Medicaid,
The point is, universal health is a new concept in America. We need to learn from those who have distorted the system.
And, BTW Mary, this is not based on reading. This is based on work with non profit health plans and with the poor and underserved of Massachusetts. You should spend more time in the real world.
There is absolutely no chance that this president will adopt any progressive change and in fact he will stake out such a weak position that after all is said and done the right wing will be celebrating another victory while naive liberals will put all their energies into re-electing this craven opportunist.
Obama has moved from the field of hope to one of hopelessness.
We should all toast his re-election.
Some of the best healthcare in the country is "funded" by the government. Not "run" by the government, but "funded" by it. I worked in a public health facility for over ten years, and we had some of the best health statistics in North America. I particularly know a great deal about newborn mortality and morbidity, the field in which I worked, and Alaska is in the top ten states in the U.S. for healthy live births, a significator for overall healthcare standards. The reason? Despite being a red state and strongly Republican, Alaska has one of the strongest public assistance and Medicaid programs in the country, maybe the strongest. It also has a strong military presence, and because of the large Native population has possibly the best Indian Health Services program in the U.S.. Between the three - all government funded, and with the military also government run - Alaska has excellent newborn statistics and some of the best healthcare on the entire continent, not just the U.S. Our offices aren't as fancy as the private sector, and the waiting rooms look like the clinics they are with lots of people, but the doctors are on the whole better trained (!oh yes!), more dedicated because that's what public health attracts, and the services more evidence based - the official medical term for positive outcomes - rather than fads and trends and what the patient wants based on the latest commercial on television, what the pharmaceutical companies want based on patents and packaging, etc., etc.
Get the insurance industry out of healthcare and you will lower all the costs immediately. Most doctors want a single payer system for good reason. The insurance industry is strangling the healthcare field, as "industry" througout the country is strangling the rest of us. They are bleeding us and the entire planet dry. Putting insurance in the middle of healthcare is more of the same mistake, not a new answer.
Did I miss anything?
I dozed off after "I hope...".
Obama abdicated.
Oh wait, that was a dream I had this afternoon.
It's sad that even here we don't get an intelligent discussion of the subject.
First information needed for any discussion is what percent of this is covered by medicare taxes!
Second is why everything is on the table except NASA, the military, our 1000+/- miliatry bases, foreign aid to Israel and the continuous free market wars.
Hope ? Nope! As has been said before, we have the moderate and right wings of the corporate/ Republican party.
Next election, as usual, we have the choice between bad and psycho/fascist.
Soylent Green
"The real problem is the soaring costs of health care that lie beneath Medicare."
It's great that the author is making the connection between cause and effect to find the deeper problem. But there is also a cause/effect relationship between that deeper problem and the true radical, or root problem.
We are conditioned in this society to embrace lead leader's idea: the "problem" of Medicare, as part of elite conditioning of us to wanna be elite our selves.
If, instead of aspiring to be elites ourselves, like the elites wanna us to want, then we will naturally traverse the cause/effect chain to the true radical, or root problem. Robert Reich might want to join us on this quest, but don't hold your breath.
The real problem is neither Medicare nor the spiraling healthcare costs under that. The real problem, the root, is elite conditioning the people to wanna be elites themselves. When the people take a stand and achieve self-determination, their values change. They no longer value competition, advantage, influence, and wealth. So the healthcare costs do not rise and so Medicare cannot be labeled a problem by thugs in the whitey house.
In terms of individual choices, it's simple: Choose universal solidarity/equity/justice.
Learn how to purge the elite conditioning out of yourself, i.e. free your mind, and be your own person. A healthy human being will not seek power/wealth at the expense of others. You want health or not? Simple choice.
Reich doesn't get it: Medicare is precisely the problem because it helps so many "ordinary" people. Can't have that, you know.
"A healthy human being will not seek power/wealth at the expense of others."
Great statement, and a point that isn't made often enough.
Well said, rtdrury!
We need a jobs program for unemployed former health insurors
and perhaps another one for unemployed former health insurers.
Wow, you're really earning your pay today! Please don't let the typos hit you in the ass on your way out.
Finny-ass, you're quite a card!
Change the conversation, American health care is the only industry in the world that does not get cheaper with technology and yet we are still having the discussion that we cannot afford it. Even as a lifelong belief that capitalism works I can come to the conclusion that a new system is called for and before discussing funding we have to fix the "why" of the dysfunction.
Medicare has been fraught with problems for decades now and still the conversation is money not repair. The American way, if it's broke, don't fix it, throw it away.
There are not enough "rich" people to sustain our current levels of spending. There is not enough discretionary spending to be cut to make up for the unsustainable spending of our entitlement programs.
The attitude I see is: "If this is the last drink left on this desert island, I'm gonna bloody well drain the cup!"
What happened to our country where current generations are no longer willing to "take the hit" in order that our children won't have to? We can't both have our cake and eat it too.
"What happened to our country where current generations are no longer willing to "take the hit" in order that our children won't have to?"
Please understand that most Americans are conditioned into being "docile" and accepting more ABUSE from government and big business. We live in a society where rugged individualism and the ruthless dog-eat-dog ideology unfortunately trumps socialism, peace, love, and understanding. The sick minded attitude in the USA is to not spread the wealth but instead creating an economic porno system of allowing the monied elites to have endless entertainment watching Main Street continuing to destroy itself in the form of fighting over morsels getting smaller year after year.