Medicare Sets 6 Billion Prices Across the Country; Is There Any Chance Those Are the Right Prices? NO
From John Goodman's blog post today "How Doctors Are Trapped":
"Medicare has a list of some 7,500 separate tasks it pays physicians to perform. For each task there is a price that varies according to location and other factors. Of the 800,000 practicing physicians in this country, not all are in Medicare and no doctor is going to perform every task on Medicare’s list.
Yet Medicare is potentially setting about 6 billion prices across the country at any one time. Is there any chance that Medicare can get all those prices right? Not likely.
What happens when Medicare gets them wrong? One result: doctors will face perverse incentives to provide care that is costlier and less appropriate than the care they should be providing. Another result: the skill set of our nation’s doctors will become misallocated, as medical students and practicing doctors respond to the fact that Medicare is overpaying for some skills and underpaying for others.
MP: These problems sound a lot like the deficiencies of Soviet-style central planning in general when the government, rather than the market, sets prices, see Economic Calculation Problem.
56 Comments:
Meanwhile, according to the NY Times,
The Obama administration said Thursday that rate increases sought by a health insurance company were unreasonable, and it ordered the insurer to rescind them or justify its refusal to do so.
All true, although private insurance companies often do roughly the same thing. Set a price for a service or procedure.
The real problem is that Medicare reimburses health care providors to keep people alive past their expiration date.
The GOP, ever since Terri Schiavo (when the GOP Congress held a special session and President Bush jr. left his vacation to attend to try to keep Schiavo's body in stasis) has maintained that every carcass be kept "alive" as long as the tubes can do it.
Medicare will spend the money; health care providers are happy to take the money. Some guy's carcass is kept pumping for a few weeks for month past his due date.
The free enterprise system would solve this problem, by encouraging aggressive euthanasia. In free enterprise, health insurance for anyone more than 65-75 years or so would be very expensive, unless it had clause allowing the insurer to halt coverage if it is determined (by insurer) "that quality of life was no longer being preserved."
The GOP, ever since Terri Schiavo (when the GOP Congress held a special session and President Bush jr. left his vacation to attend to try to keep Schiavo's body in stasis) has maintained that every carcass be kept "alive" as long as the tubes can do it.
Really? Do you have a shred of evidence this is the official position of the GOP? Amazing how in every post you see the speck in the GOP's eye, but ignore the log in your boyfriend's.
The only way Medicare is going to work is to have a voucher to pay for senior health insurance based upon income.
I like how, when the government wants to get involved in medical care, it's government-run death panels and when the private sector wants to get in, it's insurance-run death panels. Either way, it's the same tactic: who's gonna kill grandma? Either way, it's the same, stupid, false argument. The government isn't setting up death panels to kill grandma, and neither is the insurance company.
Jon,
There's one difference - the government can kill competition by making competing with government illegal. That's the case in Canada.
If insurance companies pay for care, they can deny payment, but can't prevent grandma's family from paying out of pocket (my bet is if grandma's old enough, they won't, but that's their choice).
If the government pays for care, it has the power to rob you of paying out of pocket. Currently Medicaid effectively does just that. Canada does that explicitly, for just one example.
In the end, life kills grandma. How many options grandma and grandma's family has while she's alive is what's at issue.
Is there any chance that Medicare can get all those prices right? Not likely.
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Probably about the same as the chance the Market will get ll those prices right.
The Market, after all is only a bunch of people making decisions on the best available data (which often means none), same as the people at Medicare. If anything, the people at Medicare have more power to get the informatiion they need than the aveage consumer.
and it ordered the insurer to rescind them or justify its refusal to do so.
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How is that all that difference from what a consumer does? A consumer might demand, for example, that a certain cost be covered under warranty, and that the vendor rescind that protion of the bill or justify its position not to.
Yes, Benjamin, we need to learn to distinguish between health care and death care.
It is wrong to lay this problem at the feet of the GOP, though.
And I disagree that the free market would resolve this problem by pushing aggressive euthanasia: I don't see the markt proposing euthanasia on 12 year olds in order to reduce health care costs, although that would certainly work.
More likely the market would find a balance between costs and benefits. This is a little tricky though, since the costs wind up affecting the survivors, whether or not the benefits occur. Someone who inherits from uncle Fred is probably not the best person to be looking out for Freds interests.
The only way Medicare is going to work is to have a voucher to pay for senior health insurance based upon income.
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Most simple answers are wrong.
the government can kill competition by making competing with government illegal. That's the case in Canada.
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And competition has worked so well in American Health care.
"Probably about the same as the chance the Market will get ll those prices right. The Market, after all is only a bunch of people making decisions on the best available data (which often means none), same as the people at Medicare." -- Hydra
It's clear that you lack even a basic understanding of how the market works. Please, do not pollute every comment thread with your ignorance.
"And competition has worked so well in American Health care."
Indeed it had. Look at the Health Care Spending as percentage of GDP over the past century (or at least though the 50's, if centennial data isn't available). You can pinpoint exactly where the government began it's foray into "cost control" with medicaid and medicare because the % skyrockets.
"The Market, after all is only a bunch of people making decisions on the best available data (which often means none)"
That is absolutely, positively, 100% incorrect. The market is a bunch of people making decisions based upon their costs and benefits of the actions, and then determining their individual course of action based upon the analysis. A Medicare administrator is basing a national price upon his/her perception of what the price should be and then forcing that price on everyone. Not the same thing (not even in the same ballpark).
On this same note, check out The Wisdom of the Crowds. Multiple experiments have shown that, when given a jar of coins, and asked how much money was in the jar, the median answer of the crowd was closest to the actual count in the jar. That's how the market works.
There's one difference - the government can kill competition by making competing with government illegal.
You are correct, Methinks. I was just pointing out the rhetorical device being used on both sides.
By the way, good to see you again. I've not talked with you since the Cafe comments were shut down. I hope you are well
"And competition has worked so well in American Health care"...
Well hydra you've made some incredibly silly comments in the past but this one has to be one of your silliest...
Just how long you thinl the federal government been inferring in the medical marketplace hydra?
Consider the following: Health care in the twentieth century: a history of government interference and protection
April, 1993
by Terree P. Wasley
"Most simple answers are wrong."
WTF? Shall we call that pearl of wisdom "Hydra's Razor?"
"The GOP, ever since Terri Schiavo (when the GOP Congress held a special session and President Bush jr. left his vacation to attend to try to keep Schiavo's body in stasis) has maintained that every carcass be kept "alive" as long as the tubes can do it." -- Benji
No, the GOP has maintained that douche bags, like you and your leftist friends in the government, should not be allowed to make the decision to end life support. That decision properly belongs to the family. And with good reason:
"It’s an event being called a “modern day miracle” and the best Christmas present “ever ever ever”. Sam Schmid, a 21-year-old University of Arizona student, awoke from a coma just hours after the doctors broached the subject of taking him off life support and organ donation with his parents." -- The Blaze
"Doctors told her that the accident had triggered a series of strokes. A CT scan revealed a blood clot pressing his brain stem. Surgeons operated that night to remove the clot and Lawrence slipped into a coma. The next day, as Beth waited outside the intensive care unit, a doctor approached. He said her husband was brain-dead and she should consider taking him off life support. After the surgery, Lawrence remained in a coma, hooked to a ventilator and a feeding tube. By Christmas Eve, he was breathing on his own, tracking her with his eyes. That night he kicked off his blankets. She asked him if he was cold. He nodded. Surprised, she asked again. Again he nodded." -- LA Times
"A car crash victim has spoken of the horror he endured for 23 years after he was misdiagnosed as being in a coma when he was conscious the whole time. Rom Houben, trapped in his paralysed body after a car crash, described his real-life nightmare as he screamed to doctors that he could hear them - but could make no sound. Doctors used a range of coma tests before reluctantly concluding that his consciousness was 'extinct'." -- UK Daily Mail
"A Polish man has woken up from a 19-year coma to find the Communist party no longer in power and food no longer rationed, Polish TV reports." -- BBC
"Rob Graham, a popular high school boys basketball coach who suffered cardiac arrest while on the court last month, apparently emerged from a coma Friday afternoon ... Doctors had braced the family for the worst, saying there was less than a 1 percent chance of a full recovery. Guzzi said Rob Graham was in a "very dense, dense comatose state."" -- Orlano Sentinel
If it makes you feel any better, I support "aggressive euthanasia" for leftist trolls.
There may be some confusion arising about markets and their role because of one common misconception: there is only one price.
In reality, if economics teaches us anything, there are, quite literally, billions of prices. Each person determines the price s/he is willing and able to pay based upon their benefit of the good or service received. Each supplier determines the price they are willing and able to sell at based upon their costs and their benefits. Taken together, these arise in what we mistakenly call the equilibrium price (as if we can possibly know what that price is and it is static).
What the market does is take into account the billion different demand curves and supply curves and provides at some meeting point between the two. When George agrees to sell to Bill for $XX, then that price is where the transaction occurs.
What happens when you get this price setting is an imbalance. The market cannot correctly account for those who would be excluded from this market (usually the poorest of individuals) when price controls are enacted. Instead of allowing individuals agreeing to prices based upon their costs and benefits, price controls force prices upon individuals based on one person's costs and benefits. This usually results in too few goods/services being supplied (in the case of a price ceiling) or too many (price floor). In these cases, those who value the good/service more highly than the price will consume more than they would have before, thus forcing those who value it less out of the market. Since the costs and benefits aren't properly aligned, the resources are misused and abused, and you get skyrocketing costs (like health care) shortages (such as the gas crisis of the 70's), or more unemployment (as is the case with minimum wage).
When attempts are make to control prices, it always results in the group trying to be helped made worse off.
There is no one "price." Equilibrium exists in theory only. In reality, there are billions of prices (one for each person) and no one being, save God Himself, can comprehend enough information to make an intelligent choice for every person.
One final point, Hydra: in a market system, not everyone has to know everything about everything for the market to work. In a bureaucratic system, they do. Check out "I, Pencil".
Che-
I am actually a right-wing troll---but to be a honest right-winger (or libertarian) is not the same as being part of the confederacy of grifters and poltroons that make up today's GOP.
If you read what I wrote, I support a free market for health care, but I accept that means euthanasia. I don't make excuses for it or hide from it.
This is different from the GOP, which supports a quasi-public system, and want to pretend that euthanasia is not necessary.
Your post, full of ad hominem, and laced with fairy tales about miracles, is exactly the sort of GOP sentimental hogwash that will make sure our health care bills will continue skyrocketing.
"How is that all that difference from what a consumer does?"
You seriously don't understand the difference?
I am actually a right-wing troll---but to be a honest right-winger (or libertarian) is not the same as being part of the confederacy of grifters and poltroons that make up today's GOP.
An "honest right-winger" in Benji's world means you can be one of the morons who voted for Obama, but still somehow call yourself a right-winger.
"I support a free market for health care.."
You routinely call for socialist health care on this very website.
To be fair, Paul, Hayek also argued for government-run health care.
Jon,
But did he say he supported free market health care in the next breath?
It's in the Road to Serfdom, so take it for what it's worth.
For the record, I agree with you, Paul. I was just showing that someone can be considered a "right-wing troll" and still be in favor of government controlled markets.
"The free enterprise system would solve this problem, by encouraging aggressive euthanasia. In free enterprise, health insurance for anyone more than 65-75 years or so would be very expensive blah blah blah"...
Well pseudo benny I don't think you're quite grasping what 'free' in free enterprise really means...
It also means the 'consumer' and not just the vendor are free to make choices and not be dictated to...
"If you read what I wrote, I support a free market for health care blah blah blah"...
So does that mean you are volunteering to become a Soylent Green cracker?...:-)
Hello, Jon Murphy. It's very nice to see you as well. Always enjoyed your comments at Cafe Hayek and I'm glad to see you at Carpe Diem.
I think you make a very good, insightful point. The importance of rhetoric is underestimated and you're right to point it out. I was adding a related point rather than disagreeing with you.
Che: ice ad hominem. You have anything to add to the conversation? What evidence is there that the market gets this any more right than a bunch of professional negotiators? (Who are working within the market.)
Jon: you are barking up the wrong tree. Given my personal experience with insurors, no amount of statistics is going to convince me they aren't crooks.
Methinks: If insurance companies pay for care, they can deny payment......
Huh?
If the government pays for care, it has the power to rob you of paying out of pocket.
Huh?
If the companies pay, then fine. If the government pays, then fine.
Right now, neither one of those things is happening.
I paid premiums for decades. When I needed health insurance, I had none.
Twice.
Unless you can convince me that can never happen to anyone again, you can take your plan and stuff it.
"I paid premiums for decades. When I needed health insurance, I had none"...
Even here in the middle of the country I can hydra waving his BS flag...
There's got to be a lot more to this hydra soap opera than what we've seen posted here...
Gee! I wonder what the insurance company's story is?
Juandos: I have several friends who either pay their routine health costs, or have insurance with very modest coverage. They are British and Canadian citizens. Their catastrophic health plan is to get on an airplane and go home.
As far as I am concerned, there is zero competition in health insurance, because no company in my state will offer me insurance, of any kind at any rate.
When I was young and healthy, they were happy to take the money.
I hope you don't have to go through what I did, store your eyes are opened. The system we have is broken.
On this same note, check out The Wisdom of the Crowds.
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You don't think there are enough govt employees to represent a good size crowd?
You want to run that experiment again, using a jar with a big dimple in the bottom, so You have assymetric knowledge?
I bet the crowd would be wrong, and some outlier would be right.
That is also how the market "works".
There is no one "price." Equilibrium exists in theory only. In reality, there are billions of prices ...........
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Precisely why the Medicaid prices are as good as any other.
They are probably better than millions if prices accepted by the uninformed.
Gee! I wonder what the insurance company's story is.
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Pretty simple really.
You got too sick to work? Your insurance is cancelled, as soon as government mandated COBRA runs out.
You want to buy new insurance? Sorry, you now have a brand new pre-existing condition.
Juandos:
Trust me, even at my advanced age and decrepit condition, there is almost nothing I would like more than ten minutes alone with three or four insurance executives.
No amount of market theory will change my mind about what happened to me, and by extension, many others.
Che: yep, even experts make bad decisions. What makes you think that on average, family decisions are any better?
Is it the family decisions or the doctor decisions that drive up costs?
Do you know that a favorite doctor tattoo is one they put on their chest? No Defib.
Why? They have seen too many bad results.
I realized that my former insurance company had a gold plated business plan. So I bought some stock, which returned me 356 %.
Probably at the expense of some other people that got screwed over like I did.
And you think I don't understand the market.
I Support free market health insurance too, I just don't see much hope for it. My experience is all bad. But, my friends with socialist insurance e seem quite happy with it.
"Probably about the same as the chance the Market will get ll those prices right.
The Market, after all is only a bunch of people making decisions on the best available data (which often means none), same as the people at Medicare. If anything, the people at Medicare have more power to get the informatiion they need than the aveage consumer."
What nonsense! Learn some economics.
Apparently you don't understand how supply and demand determine the correct price.
The market is people selling and people buying goods and services. They reach agreement at *the price*.
Precisely why the Medicaid prices are as good as any other.
They are probably better than millions if prices accepted by the uninformed.
Incorrect. Again, you are assuming one price. In the marketplace, there is no one price. Transactions occur at many different prices and the average is what we call "the price".
What I am talking about is billions of people making their own choices about what price is too high or too low and acting upon that for themselves. What you are talking about is one person deciding what price is too high or too low and forcing that price upon everyone.
You are assuming that a small group of people with more "knowledge" is better to make decisions than billions of people with decentralized knowledge. Again, that is simply not true. Check out The Wisdom of the Crowds. To address your earlier concern, the jar experiment has been done many times with many different types of jars and the outcome is still the same. Each individual brings his experience and expectations into the process and formulates an answer. All these answers are averaged together to become the "price" and that is close to the actual amount in the jar. But don't take my word for it. Run the experiment yourself. Or, if you don't have the time (which I wouldn't blame you. It can be time consuming), watch the stock market. Follow the price of 1 company and see how it does over the long run.
There is no Hydra soap opera. Soap operas are fantasies, what happened to me is just the facts of life in American health insurance.
I have no problem with the care I recieved: American health care seems to work just fine, except for rampant costs.
Health insurance, and insurance in general, is another matter. My experience is that it is one of the few products you buy, and then sue to get.
you are assuming one price. In the marketplace, there is no one price.
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I am assuming nothing: if there is no one price then the medicare price is as good as any other.
Hey, it is YOUR argument.
Soap operas are fantasies, not necessarily. You know any of the story of the Russian Revolution and WWI? Talk about a real life soap opera!
But back on point, I happen to agree with your point about insurance companies. They are crooks. However, the difference between a private one and a government-run one is you can opt not to do business with the private one.
billions of people making their own choices about what price is too high or too low
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If I do not get my medicine, I cannot walk. If I don't get mey other medicine, I die.
Don't talk to me about "choices". The word choice in this context is in idiotic choice.
There are only around 350 million people in the US. Hyperbole isn;t getting you anywhere.
Russian Revolution and WWI? Talk about a real life soap opera!
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What channel is it on, and who are the sponsors?
What has the Russian Revolution got to do with US healthcare, other than it was a story about the haves and have-nots?
But back on point, I happen to agree with your point about insurance companies. They are crooks. However, the difference between a private one and a government-run one is you can opt not to do business with the private one.
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That doesn't exactly solve the problem, does it?
It is a really big help if I can "choose" not to do business with the insurance company that just kicked me out.
No, the difference between government health insurance and private health insurance is that with government health insurance you (your doctor) might get paid.
Now, my disability insurance worked just fine. When I needed it I stopped paying them and they started paying me. Why can;t health isnurance work that way.
Of course, the disability claims to pay 66% of your prior salary, but that isn't really the case. Combined with government SS disability they pay 66%.
But back on point, I happen to agree with your point about insurance companies. They are crooks. However, the difference between a private one and a government-run one is you can opt not to do business with the private one.
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That doesn't exactly solve the problem, does it?
It is a really big help if I can "choose" not to do business with the insurance company that just kicked me out.
No, the difference between government health insurance and private health insurance is that with government health insurance you (your doctor) might get paid.
Now, my disability insurance worked just fine. When I needed it I stopped paying them and they started paying me. Why can;t health isnurance work that way.
Of course, the disability claims to pay 66% of your prior salary, but that isn't really the case. Combined with government SS disability they pay 66%.
You are assuming that a small group of people with more "knowledge" is better to make decisions than billions of people with decentralized knowledge.
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It is not necessarily true. The Delphi decision process works for a reason. But it depends on the quality of the knowledge.
When I asked my insuror why they rescinded my wife's policy retroactively, they refused to tell me. Their answer was, "because we are allowed to".
In order to get an answer, I had to go through the state insurance commisioner. When she asked, she got an answer. So, she had a better quality of knowledge than I was able to get.
I suspect that my insuror has a better chance of negotiating the cost of my medicine than I have, so if there are thousands like me, it really makes little difference what decision the many make.
If it were a market whare both sides had equal power and equla knowledge, and if there were actually alternative choices, then you would be correct. But my experience still tells me that theory and practice diverge in the real world.
Nothing you can say will change my experience, so there is no point in talking to me about theory or statistics. The only thing that matters is how we take what we have and make it better, given that it is not and never will be a fair market.
What you are talking about is one person deciding what price is too high or too low and forcing that price upon everyone.
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Why is that? They can still "choose" not to get their medicine and die.
What we are talking aobut is one person negotiationg for many people. It is a commpon practice, just like the CEO negotiates wages on behalf of the shareholders. He comes up with a price, and the workers can take it or leave it.
Follow the price of 1 company and see how it does over the long run.
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Over the long run, the company changes substantially: it is not the same company, even though it has the same name.
Besides, the analogy is seriously flawed. I am indifferent as to which share of stock I get, and I can wait to get it. If Joe won;t part with his shares today, maybe tomorrow I can get a better deal on the same product from Mike (Mike may have a medical emergency that cannot wait). And if that doesn;t work I can get another stock in another company with just as good a chance of payoff.
But I canot take aspirin instead of antibiotics and get the same result, so the same level of "choice" does not exist.
Hydra,
If you want some good reading on the Russian Revolution, check out Nicholas and Alexandria by Robert Massie. It's written like a novel and very entertaining to read. They made a movie based on the book in the 70's that's very good, too. If you check it out, you'll see the "soap opera" thing I mean.
As for your other points, I'd roll my eyes, but those muscles are tired.
"Of course, the disability claims to pay 66% of your prior salary, but that isn't really the case. Combined with government SS disability they pay 66%."
LOL, Did you think you would make more on disability than working? I bet if you read the policy, you will understand that it's working exactly the way is is meant to. Your government provided benefits will always be primary, with your private insurance making up the difference.
Of course it works exactly as the policy says, and I have no problem with that.
I have a problem if it is advertised to pay 66% and it doesn't.
So here is a question. Suppose you are legitimately disabled, but social security disability is denied to you?
Would the insurance pay the full 66%?
I have read Nicholas and Alexandra.
Nicholas was a man of no imagination. He reminds me of Romney: patrician without a clue.
"So here is a question. Suppose you are legitimately disabled, but social security disability is denied to you?"
SSDI is denied so rarely that I doubt you can find many cases. What does legitimately disabled even mean if SSDI doesn't recognize it?
"Would the insurance pay the full 66%?"
I can't imagine the insurance company finding you legitimately disabled if Medicare doesn't, so no, they will likely deny your claim also.
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