Medicare: Unsustainable, Unexplainable, and Unobtainable

Let markets do what only markets do well.

John C. Goodman, PhD, President and CEO of the National Center for Policy Analysis, “Three Simple Ways Medicare Can Save Money,” Wall Street Journal, August 11, 2011

August 13, 2011 – John C. Goodman, an economist with impeccable conservative and academic credentials, believes market competition will save Medicare more money and provide higher quality care than Obamacare, or any other government-run scheme.

Sustaining the Unsustainable

Like other economists, left and right, Goodman regards the present Medicare structure as unsustainable. With 78 million baby boomers entering Medicare, this massive entitlement program will surely go bankrupt or add trillions more to the national debt unless restructuring takes place. Medicare is the single biggest driver of that debt, more than Social Security or the military.

But how does one slow Medicare costs to save it for future generations? Pay hospitals and doctors less, save money by jamming them together into Accountable Care Organizations, move the Medicare entry age to 68 or 70, means test Medicare recipients on basis of income and assets, shift costs to recipients using vouchers or health savings accounts, or leave it to market forces and market competition to lower costs and improve quality?

Explaining theUnexplainable

The government is having a hard time explaining why government-dominated care isn’t containing costs. Goodman says one big reason is that Medicare generates more than one billion transactions based on 7,500 codes that vary with location, procedure, and other factors. Government not only sets prices. It regulates them.

Given the billions of transactions and the varying circumstances that surround them, it becomes impossible to explain, justify, and control every transaction and its price.

Government can never know what goes on or explain what occurs in the billions of human transactions between individual patients and doctors. Government cannot explain the unexplainable because it will never have enough information of what occurs at the level of the market.

And, in its ignorance and its bureaucratic bungling, government may create injustices. Goodman points out the cumbersome coding system is paying opthalmologists 15 times more for a routine 15 minute cataract procedure than a 25 minute office visit with a primary care physician, Goodman asks "Is there any wonder why the shortage of primary care is reaching crisis proportions in many parts of the country, while cataract removal is available at the drop of a hat?"

Obtaining the Unobtainable

Goodman suggests three ways Medicare can cut costs.

• Medicare should let enrollees shop for care at walk-in freestanding emergency care clinics, where prices are posted and where quality care is usually delivered. The fees of these clinics are “well below what Medicare would have paid at a physician’s office or or hospital emergency room.” Medicare should pay the fees offered at these clinics. It would save money and please constituents seeking access to convenient or emergency care.

• Second, Medicare should allow enrollees to take advantage of commercial telephone and email services. He says, for example, “Teledoc offers telephone consultations with physicians at a price probably lowe than the same service delivered by a nurse at a walk-in clinic. Teladoc doctors, he points out, use electronic medical records and prescribe electronically – two goals of the Obama health law.

• Third, Medicare should encourage doctors physicians to repackage and reprice their servies in a ways that are “good for the doctor, good for the patient, and good for Medicare.” Medicare should encourage concierge doctor arrangements, which for about $1500 per patient per year, offers patients free telephone and email consultations, same or next day appointments, EMRs, and electronic prescribing. For these services, he says, “Medicare should be willing to throw its 7,500-item price lists away, pay some portion of the concierge fee, and let the marketplace handle everything.”

Memo to Goodman

The Obama administration’s anti-market mindset and its sentiment that its experts know more than doctors and patients, will never allow your suggestions to see the light of day. Your suggestions will never fly as long as Obama is President. Medicare may be unsustainable. Its policies may be unexplainable to millions seeking lower costs. The desired results of these policies may be unobtainable. But the administration’s belief in its principles of redistribution and social justice is unshakable, even if those principles defy the laws of simple economics.