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Home Publications Blogs Beat the Press Medicare Doesn't Make Health Care Industry Lobbyists Disappear

Medicare Doesn't Make Health Care Industry Lobbyists Disappear

Monday, 11 March 2013 04:11

The Washington Post once again left its readers stumped. It printed an op-ed column by David Goldhill, the president and CEO of the Game Show Network, the main point of which seems to be that Medicare must still confront rent-seeking by health care providers.

Goldhill apparently is arguing against the merits of expanding Medicare or adopting a single payer type system in the United States, telling readers:

"Single-payer advocates contend that other nations have managed to better control health-care spending — volumes and prices — by enforcing a true budget for cost. But any review of how our Medicare system actually works illustrates why a single-payer system would be so difficult here: Our government has a pervasive inability to say “no.” Only in the United States is public health care an unbudgeted entitlement: Our government promises to pay for any care seniors need and providers respond by relentlessly expanding the definition of need. It’s no coincidence."

This statement implies that Medicare somehow does worse in containing costs and preventing unnecessary procedures than private insurers. The data does not support this claim. According to the Center for Medicare and Medicaid Services (Table 3), the per person cost of Medicare has consistently risen less rapidly than for private insurers. Over the whole period from 1969 to 2011, costs in Medicare rose by an average annual rate of 8.6 percent compared to 9.9 percent for private insurers. For common services the gap was even larger, 7.9 percent compared to 9.3 percent. (Medicare has expanded services, most notably the prescription drug benefit. This expansion reflected the fact that prescription drugs were a trivial expense when the program was created in 1966 and therefore were not covered.)

In the most recent period, 2007-2011, the gap was even larger with annual costs rising 3.6 percent in Medicare and 5.3 percent for private insurers. For common benefits the numbers are 2.8 percent and 5.6 percent.

While lobbyists of providers will certainly try to push for higher payments for their clients, the evidence is that Medicare is still more effective in containing costs than the private sector. To bring costs in line with those in other wealthy countries it will be necessary to impose more market discipline on doctors, drug companies, medical equipment suppliers and other providers, but it seems clear that Medicare is better equipped to do this than private insurers.

Comments (6)Add Comment
More rumination on medicare costs
written by David, March 11, 2013 4:56
Posted on the previous post's comment least, but relevant here as well:

Wait a second...
written by LSTB, March 11, 2013 7:22
any review of how our Medicare system actually works illustrates why a single-payer system would be so difficult here: Our government has a pervasive inability to say “no.”

I thought the argument against socialized medicine was that it'd lead to death panels. Now people are saying that it's not?
Volume, Price and Death Panels by Very Serious People Against Single Payer
written by Last Mover, March 11, 2013 7:55
Amazing what can pulled out of the hat to bash single payer over the massive market failure of private health care. If it's not phony shortages from prices too low that cause underuse, then it's framed as excess volume that will result in overuse and excess government spending.

For example, when government attempts to step in and control unnecessary expenditure volumes of Medicare it's called death panels, as if private sector insurers weren't already wielding far more deadly restrictions on what is to be covered after the fact under extortionist bait and switch plans loaded with fine print and oppressive micromanagement. Call them Paul Ryan death panels by way of bankruptcy.

Then when death panel restrictions are lifted for something like Medicare, there is an outcry in the opposite direction against the inability to say no to unlimited volume of expenditures as made by David Goldhill, claimed no less to be driven by lobbyists rather than patients and doctors themselves.

Does Goldhill really believe for example, that if twice as many MRI scans are made at half the price that the same amount of economic rent is collected? Rather than a shift of more benefits to patients? And this is the result of lobbyists pushing volume at lower prices because price itself cannot be pushed up under single payer?

The argument against single payer is about maintaining the ability of the private sector to maintain huge non-competitive extractive prices, whether collected from government or assessed directly to consumers through insurance and patients through providers.

To blame single payer for excess volume because it can already resolve the excess price problem is a bogus strawman by Goldhill designed to preserve excess prices themselves, particularly when the "excess volume problem" is targeted only to the USA that would cause it to fail compared to other countries where single payer is a mysterious success with no "excess volume problem".

To his credit Goldhill does acknowledge the price-volume problem in regards to catastrophic health care insurance and market failure. However, to claim that single payer like Medicare cannot address this due to volume overuse is no different than claiming falsely as well, that single payer results in underuse problems of shortages. It's just another ideological stand against government just because it's government, even when it's more efficient than the private sector.
written by skeptonomist, March 11, 2013 9:02
Obviously "free market" advocates, meaning mostly those who control big business, have greater political influence in the US than in Europe and other places, where there may actually be Socialist or socialistic political parties. This means that the US government and perhaps even more state governments tend to be friendlier in principle (ignoring such things as graft and other corruption) to big health-care industries, and even to the AMA and other professional organizations. The idea of health-care reform is to reduce this overall influence, and break the cycle of high profits leading to more political power, and more political power leading to more favorable treatment and higher profits. Free-market economics just does not work well in health care - no one expects it to apply to police, fire and defense services either.
it's really not that complicated
written by Jennifer, March 11, 2013 9:21
Anybody who knows anything about healthcare costs knows that Medicare pays less then private insurance, and has much stricter rules about what is and is not covered. You don't need a chart to surmise that it's cheaper then private health insurance--the idea that it is an "unbudgeted entitlement" is not true and such a statement really shouldn't be printed in a serious paper.
written by FoonTheElder, March 11, 2013 11:39
Why is it that so many can get away with the obvious lies on health care in America. It is the worst health care system in the developed world, hands down.

We ALREADY pay over $1 trillion per year more than any other developed country ($3200 per person per year x 312m). For this extra trillion we have 25% uninsured or underinsured and 40,000 dead each year. Every other developed country has everyone covered.

Of course the reason for this is that we have a corporate owned government that is completely beholden to the price gougers and money wasters who control health care in this country.

Romneycare and Obamacare are 50 years behind. Tried and failed Republicancare is 100 years behind. Only in Dumbmerica can we continue to spew the same healthcare lies and have such a high level of mass delusion.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.