February 25, 2013

[h/t Heather at VideoCafe]

Steven Brill has written a must-read article for this week's Time magazine about health care costs and why we really do have to be concerned about them. Following on that, he made an appearance on the round table segment of This Week to discuss those costs and why he's sounding the alarm.

Anyone who has spent even a day in the hospital knows what the problem is. When one over-the-counter pain reliever administered in the hospital costs as much as an entire bottle at the pharmacy, there's a very, very big problem.

Brill correctly points out that Medicare is an efficient program that Congress has managed to hog-tie into some ridiculous costly measures:

And it actually that bears on the conversation we're having, because a chunk of that money is paid by Medicare. Medicare is I point out in the article is very efficient at most things. It buys health care really efficiently, which is a great irony, because it's supposed to be the big government of bureaucracy.

Where Medicare is not efficient is where Congress, because of lobbyists have handcuffed Medicare. Medicare can't negotiate what it pays for any kind of drugs. It can't negotiate what it pays for wheelchairs, diabetes testing equipment. And if Congress took those handcuffs off of Medicare, you could get about half of the spending cuts that we're sitting around here talking about.

Yes, this. Of course, that assumes anyone in Congress is brave enough to stand up to the mighty PhRMA lobby, which seems to have as deep a lock on Washington as the gun lobby. Brill also makes the compelling argument for lowering the Medicare eligibility age, which I have argued over and over again here at C&L. The single biggest cost-saver for Medicare would be to drop the eligibility age, let people buy in until they actually reach retirement age, and then they would drop to the levels under the Social Security law.

By the way, Steve Brill is not by any stretch of the imagination some liberal socialist out to destroy capitalism. The man is a moderate conservative who has done quite well in the land of free enterprise, which made his declaration is a refreshing breath of intellectual honesty about health care in this country.

Brill makes compelling arguments, and I agree with every single one of them. What struck me about this exchange, however, was how George Will hijacked the conversation to talk about all the people in the whole United States who are nothing but a bunch of health care moochers! It's not the costs of health care, people! No, not at all. What we have in this country are a bunch of moochers who don't carry their own weight.

Here's Will, telling us all we mooch:

Here's an argument against that, for a different kind of reform, all the big numbers, billions and trillions, 12 cents is the most important number. 12 cents is the portion of every health care dollar paid by the person receiving the health care. Someone else is paying the rest. It was 47 cents 50 years ago when Jack Kennedy was president.

I don't know where George Will dug up this 12 cents number, but he's clearly been pumped full of fresh baloney and lost his ability to actually reason. Worse yet, Kimberley Strassel chimed in with her own flavor of ignorance, which she seems to actually believe:

No, we haven't, because we only have a small group of Americans who are doing that. We have a much larger group of Americans, like George says, who are getting their health care through their companies and it's largely paid for them and they have no skin in the game.

On what planet is it that health insurance premiums deducted from employees' paychecks and fully tax-deductible by their employers is "no skin in the game?"

If anyone wants to waste time trying to figure out where Will's 12 cents comes from, leave a comment. But here's why he and his little sidekick Strassel are dead wrong. There are three payment methods for health care in this country: Out of pocket, private health insurance, and Medicare. Each of those share one similar characteristic: They are risk pools. Those who pay for health care with their savings pool the risk within their families. Those who buy private health insurance pool their risk with other buyers of insurance at the same company. Whether or not those premiums are paid out of pocket or partly by an employer, they are still paid for by the covered individual.

Medicare is also a risk pool, albeit a high-risk pool. It is paid for with payroll deductions from workers in this country who expect to receive the same level of benefits their parents and grandparents received because they pay for them and there is absolutely no reason why they shouldn't expect to receive them.

Regardless of which pool one might be swimming in, the dollars in that pool were put there by the people who receive coverage and benefits. If George Will is trying to start another intergenerational war by saying that Medicare recipients paid 12 cents in for every dollar they take out, he's flat wrong. The numbers don't work out that way. It's more like 34 cents for every dollar. The major difference is the cost of healthcare, not the healthcare they're receiving.

Now that I've spent a lot of words explaining this, let me quote Ezra Klein, who boils down Brill's article to this one sentence:

The American health-care system does not use rate-setting.

In other words, there is no regulation on the amount providers can charge for health care goods and services. There should be. There is absolutely no reason for hospital stays to hit six figures after a few days. There's no reason for exorbitant drug prices. As Ezra also points out, we have a model for rate-setting right now in the US: Maryland.

It turns out that we don’t even have to go oversees to see this: Maryland has succeeded in controlling costs for about four decades now. It is the only state that sets rates for hospitals, with the state government deciding what every Maryland hospital can charge for a given procedure.

That system started in 1976, when Maryland had hospital costs 26 percent higher than the rest of the the country. In 2008, the average cost for a hospital admission in Maryland was down to national levels. ”From 1997 through 2008, Maryland hospitals experienced the lowest cumulative growth in cost per adjusted admission of any state in the nation,” the state concluded in a 2010 report.

There are definitely moochers in the health care system, George Will and Kimberley Strassel, but they're not Medicare recipients. They're providers.

Take two aspirin and call Steve Brill in the morning.

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