Monday, August 24, 2009

Obama's Doctor and Medicare Cost Controls

Obama’s doctor for 22 years, George Scheiner, 71, a general internist, practices in Hyde Park, a Chicago suburb. Medicare covers many of his 5000 patients. He says, unnlike private health plans, Medicare never interferes or contradicts his decisions. He favors a Medicare-for-all system.

He dislikes his famous patient’s health care proposals because “he has no cost controls,” doesn’t jettison private plans, and is “too piecemeal.” Which is precisely the problem with Medicare for all. If the past is prologue, it will be unlikely to have price controls.

The Political Dilemma

Therein lies the political dilemma. Medicare is a political plan designed to protect and please the elderly, and Democrats hesitate to further displease the elderly, the only voting bloc to vote for McCain. Moreover, seniors are among the most vocal at town hall meetings.

Medicare has a lousy record of cost control. Medicare, and its sister program, Medicaid, will cover nearly 100 million Americans this year, and its costs will exceed $1 trillion. In 1965, the year of inception of Medicare and Medicaid, LBJ promised costs would never exceed $9 billion. Cost inflation is now running 34% higher than the private sector, and the twin federal programs are hurtling towards bankruptcy in 7 or 8 years. With Medicare, Democrats have a financial tiger by the tail, and they cannot dismount for fear of being eaten by the tiger and the voters.

Administrative Costs

True, Medicare “administration costs”, at roughly 4%, are lower than private plan administrative costs, which average 10-12%. But this is misleading. What administration costs does the government have? Medicare simply gathers data, and pays bills. It does not have utilization review, marketing, negotiation expenses, and it doesn’t need to set aside money for a rainy day. It can always print more money to cover excess costs and budgetary shortfalls. Besides, a dirty little secret is that private plans, particularly the Blue, does the administrative heavy lifting for Medicare.

Small Wonder

Small wonder, then, that critics find promises of federal cost control. hollow. How? '

• By preventing illnesses and delaying their onset to later in life? Not likely. End of life diseases are very costly. Some say the final illness consumers 30% of all Medicare costs.

• By putting electronic medical records and paying only for treatments and diagnostic procedures that “work,” based on comparative research? Or by installing electronic medical record systems to instruct doctors in the rudiments of evidence based medicine and to encourage them to follow federal cookie-cutter protocols. Again unlikely.

The United Kingdom has had a program called NICE (National Institute of Comparative Effectiveness) for 5 years, and its costs have been prohibitive, it is still 5 years behind schedule, two major IT vendors have pulled out in frustration,k and the English have found NICE not nice, igniting protests across the land, especially for not providing drugs to cancer patients. In America, the Obama proposal to cut $500 billion from Medicare to help pay for universal coverage has created Tea Party protests and Town Hall free-for-alls.

The Public Option

Then there’s the public option, the darling of liberal Democrats. The idea is that a public option, run like Medicare , would save money by providing a lower cost plan, estimated at 30% to 40%, below private rates.

This proclaims Obama, would keep private plans “honest” and create a “competitive environment.” Well, maybe, but it would also likely destroy exising private insurance plans in an insurance industry that employs several million Americans. It would probably reduce choice, since employers would likely drop their coverage for employees, and the public option would likely quickly rise to dominance, since private plans could not compete.

It might make more sense to simply allow the insured to shop across state lines for private plans – plans without mandates for all sorts of benefits, like chiropractic care, autism, fertility treatments, and medical equipment. Now that would be “fair competition.”

The Government Bottom-Line

The bottom-line for government cost control boils down to two options.

• One, paying doctors and hospitals less, thereby reducing their numbers and those who would accept Medicare and Medicaid patients and driving many hospitals out of business ;

• Two, rationing, making patients wait for care, restricting care to procedures “that work,” and limiting access to expensive procedures like cataracts, joint replacements, stent placement or bypass surgery, MRIs or CT scans, or expensive biological drugs for cancer or rare diseases.


This might not work well politically. Although America health costs has high costs and covers only 85% of its citizens, it also ranks number one in the world in”responsiveness,” the ability to deliver prompt access to life saving and function restoring medicine, and the freedoms to chose what one wants and to behave how one pleases.

Miles to Go, Promises to Keep

The Obama promises of sweeping health care overhaul with universal coverage, more choice, and lower costs will be hard to keep, given the past federal performance. The administration has miles to go on cost-cutting, and promises to keep – the subject of my next blog.

No comments: