Medicare's not the problem. It's the solution.
I hope when he tells America how he aims to tame future budget deficits the President doesn鈥檛 accept conventional Washington wisdom that the biggest problem in the federal budget is Medicare (and its poor cousin Medicaid).
Medicare isn鈥檛 the problem. It鈥檚 the solution.
The real problem is the soaring costs of health care that lie beneath Medicare. They鈥檙e 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鈥檚 almost two and a half times the average of other advanced nations.
Yet the typical American lives 77.9 years 鈥� 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鈥檚, and then refer patients to orthopedic surgeons who often do even more costly surgery. Why? There鈥檚 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鈥檙e back there within a month. You wouldn鈥檛 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鈥檛 nurses do home visits to Americans with acute conditions? Hospitals aren鈥檛 paid for it.
America spends $30 billion a year fixing medical errors 鈥� the worst rate among advanced countries. Why? Among other reasons because we keep patient records on computers that can鈥檛 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鈥檚 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 鈥渂illing clerk.鈥� A third of nursing hours are devoted to documenting what鈥檚 happened so insurers have proof.
Trying to slow the rise in Medicare costs doesn鈥檛 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 鈥� whose clout will grow as boomers are added to the ranks 鈥� demand the limits be increased. (If you thought the demagoguery over 鈥渄eath panels鈥� was bad, you ain鈥檛 seen nothin鈥� yet.)
Paul Ryan鈥檚 plan 鈥� to give seniors vouchers they can cash in with private for-profit insurers 鈥� 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鈥檚 the answer? For starters, allow anyone at any age to join Medicare. Medicare鈥檚 administrative costs are in the range of 3 percent. That鈥檚 well below the 5 to 10 percent costs borne by large companies that self-insure. It鈥檚 even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums). And it鈥檚 way, way lower than the administrative costs of individual insurance (40 percent). It鈥檚 even far below the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.
In addition, allow Medicare 鈥� and its poor cousin Medicaid 鈥� 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鈥檛 the problem. It鈥檚 the solution.
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