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Medicare for everyone?
Medicare spends billions of dollars each year on products and services that are available at far lower prices from retail pharmacies and online stores, according to an analysis of federal data by The New York Times. A comparison of Medicare figures with retail catalogs reveals dozens of instances of the program’s paying above-market costs.
For example, last year Medicare spent more than $21 million on pumps to help older and disabled men attain erections, paying about $450 for the same device that is available online for as little as $108. Even for something as simple as a walking cane, which can be purchased online for about $11, the government pays $20, according to government data.
These widespread price discrepancies, including those for oxygen services, have been noted in dozens of regulatory reports.
But when officials and politicians have tried to cut these costs, they have often encountered a powerful foe: the companies that sell these devices, who ask their elderly customers to serve, in effect, as unpaid lobbyists, calling and writing to their representatives in Congress, protesting at rallies, and even participating in political attacks against individual lawmakers who take on the issue.
Here is the full story. You are correct to think that not all versions of a single-payer system need discourage innovation. You are also correct to think this is what they look like.
Posted by Tyler Cowen on November 29, 2007 at 09:21 PM in Medicine | Permalink
Comments
so does this mean that medicare is encouraging innovation by overpaying? or is that something specific for chemicals in bottles?
Posted by: yoyo at Nov 29, 2007 9:31:08 PM
The whole health Care industry is a total mess. There are so many other things that are not getting that much attention.. There are a lot of elderly people who cant even pay their premiums because they continue to increase. This is exactly why AARP has set up http:// www.thisissoridiculous.com so that we can sign a petition to make our voice heard. They also have updated news, video and while your there you can e-mail your congressman to let him know how you feel! Medicare is an important issue in the US right now, and we really need to be heard on this, or it’s just going to get more and more out of hand!
Posted by: Kevin at Nov 29, 2007 9:49:52 PM
Actually, all forms of government interference encourage innovation. But I'm not sure that's what you mean.
Posted by: M. Hodak at Nov 29, 2007 10:31:07 PM
For example, last year Medicare spent more than $21 million on pumps to help older and disabled men attain erections, paying about $450 for the same device that is available online for as little as $108.
There's another way to provide the necessary suction ...
Posted by: Peter at Nov 29, 2007 11:15:16 PM
Peter
Hey-oh! Nice.
Posted by: CT at Nov 30, 2007 12:18:20 AM
Shocking! a government pricing scheme that encourages waste and abuse! As far as I can tell, direct government payment for healthcare leads to two possible situations (1) failure to provide care through lines or outright denial (eg. Britain), (2) massive cost overruns, expensive waste and abuse (eg. Medicare in US), or (3) both.
A government bureaucracy has never been able to systematically distinguish, on a case by case basis, between what is both cost effective and medically helpful and what is not. They either cover nothing, or everything. Government fails at everything in between.
Posted by: mgunn at Nov 30, 2007 3:08:42 AM
this post would make sense if medicare was allowed to negotiate its prices and/or didn't have other restrictions placed on it. see here: http://blog.wired.com/wiredscience/2007/04/medicare_negoti.html
a much greater number of republicans are against allowing medicare to negotiate than are democrats. so on one hand you don't allow medicare to negotiate for the cheapest price and on the other hand you complain that medicare is not paying the cheapest price. if you guys were robots, the logical paradox would make your head explode.
Posted by: the negotiator at Nov 30, 2007 4:37:42 AM
"Libertarians invented outrage over government waste, bureaucracy, injustice, etc. Nobody else thinks they are bad, knows they exist, or works to stop them."
Posted by: Mike Huben at Nov 30, 2007 5:09:26 AM
from
Posted by: Mike Huben at Nov 30, 2007 5:10:53 AM
The report compares prices paid by Medicare for goods and prices charged by vendors on the internet. Comparison to costs paid for the same good by private suppliers would be informative.
If anything, points brought up in this article point to one reason why Medicare is beneficial in the long run. A single supplier is more vulnerable to public scrutiny.
Posted by: Mark at Nov 30, 2007 8:49:04 AM
a much greater number of republicans are against allowing medicare to negotiate than are democrats. so on one hand you don't allow medicare to negotiate for the cheapest price and on the other hand you complain that medicare is not paying the cheapest price. if you guys were robots, the logical paradox would make your head explode.
There is no paradox, you are offering a false choice. Medicare does not have to negotiate lower prices, all they have to do is comparison shop.
Posted by: 8 at Nov 30, 2007 8:58:15 AM
a much greater number of republicans are against allowing medicare to negotiate than are democrats. so on one hand you don't allow medicare to negotiate for the cheapest price and on the other hand you complain that medicare is not paying the cheapest price. if you guys were robots, the logical paradox would make your head explode.
There is no paradox, you are offering a false choice. Medicare does not have to negotiate lower prices, all they have to do is comparison shop.
Posted by: 8 at Nov 30, 2007 8:58:59 AM
a much greater number of republicans are against allowing medicare to negotiate than are democrats. so on one hand you don't allow medicare to negotiate for the cheapest price and on the other hand you complain that medicare is not paying the cheapest price. if you guys were robots, the logical paradox would make your head explode.
There is no paradox, you are offering a false choice. Medicare does not have to negotiate lower prices, all they have to do is comparison shop.
Posted by: 8 at Nov 30, 2007 8:59:36 AM
True enough, the bureaucrats who run Medicare could, at least in theory, negotiate lower prices for some items (but note that what Medicare pays doctors and hospitals is usually well below what other insurers pay and requires cost-shifting to make up the difference). The point is, why should the bureaucrats care? What incentive do they have to do so? Answer: none. Bureaucrats are bureaucrats - they get their checks every two weeks, come hell or high water, and they receive no reward for doing a good job or penalty for doing a bad one. They are completely insulated from the discipline of the market. The Medicare bureaucracy doesn't care whether Medicare pays too much for some items, any more than the British NHS bureaucracy gives a damn if you have to suffer for two years before you get your arthritic hip fixed - what difference does it make to them? When the consumer of the service is removed from the payment decision, you have a prescription for fraud, waste and delay. This is the case in every government-run health care system in the world. Look at the mess we have here in the US with government health care - Medicare, Medicaid, the VA, the Indian Health Service, military health care (Walter Reed, etc.) Which of these programs should serve as a model for a national health care plan?
Posted by: Ned at Nov 30, 2007 9:18:01 AM
The Medicare bureaucracy doesn't care whether Medicare pays too much for some items, any more than the British NHS bureaucracy gives a damn if you have to suffer for two years before you get your arthritic hip fixed - what difference does it make to them?
Using hip replacements to illustrate the difference in waiting times between America and countries with socialized medicine is common but misleading as most hip replacement surgery in America is paid by Medicare and hence is a single-payer deal.
Posted by: Peter at Nov 30, 2007 9:22:31 AM
Does any country use health care vouchers, and competing HMOs?
Posted by: just asking at Nov 30, 2007 9:32:31 AM
"Libertarians invented outrage over government waste, bureaucracy, injustice, etc. Nobody else thinks they are bad, knows they exist, or works to stop them."
It's more that libertarians more consistently than others note the structural incentives to create waste, bureaucracy, injustice, etc. Others seem to believe that wise men in regulatory roles are a solution of some sort.
Of course, the internet's oldest anti libertarian knows this ...
Posted by: JasonL at Nov 30, 2007 10:43:51 AM
Let's be careful so we don't compare apples to oranges. Take oxygen supply. The in-town oxygen supplier will often make deliveries even in very bad weather conditions if the need is dire. I don't know how online oxygen is supplied, but if something goes wrong (like the wrong stuff delivered, a defective tank), there may be no one local to correct the problem. This can easily cost a life. Don't get me wrong, the government system is practically designed to overpay, but simple price comparisons overstate the amount of overpayment.
Craig
Posted by: Craigq at Nov 30, 2007 11:37:11 AM
Mr. Negotiator,
Can the federal government negotiate? Or do they simply make a number of random rules and threaten you with auditing?
http://thehappyhospitalist.blogspot.com/2007/11/shifting-of-bell-curve.html
Posted by: Xmas at Nov 30, 2007 11:49:34 AM
Now can anyone find a study showing that private insurance companies do not have the same problem?
Isn't the methodology that for profit insurance firms and Medicare use to establish the price they will pay virtually identical?
What is the difference?
Posted by: spencer at Nov 30, 2007 11:58:43 AM
Hmmm...a group of people who spend their entire day lying and avoiding detection from the Man, but they will tell the truth during a hospital visit.
Maybe I'm missing something.
My girlfriend, a nurse case manager, deals with a lot of cases where ID is not forthcoming and false information is given. These all become part of the "free healthcare pool" in the People's Republic of Massachusetts.
Posted by: Brutus at Nov 30, 2007 12:54:00 PM
Opps-wrong comment section!
Posted by: Brutus at Nov 30, 2007 12:56:49 PM
Spencer,
Medicare is such a large health care buyer that it distorts the whole health care industry. I am a psychiatrist and in general reimbursement rates from private insurance companies are derived directly from Medicare rates. My father worked for a medical device company and said that his company lobbied to get devices and proceedures approved by Medicare because once Medicare approved it, other companies had to follow suit.
I don't know of a specific study that documents this, but that's my experience.
Posted by: Joe at Nov 30, 2007 1:01:41 PM
There is no incentive for employees of government programs to limit costs. Private companies that deal with that bureaucracy know that and charge accordingly. When buying supplies for may classroom, I had to buy from an approved list of vendors. A stapler cost me $22 - down the street at Staples - $12!
SC offers all B students in the state $5000 scholarships and colleges substantially raise tuition by double digit percentages over 3 years that ultimately, negate the cost saving scholarships. Why? Parents have an extra 5 grand! Go figure...
My daughter was under 2.5 lbs. at birth and was eligible for every federal program/handout...no test was considered unnecessary...but my son, who was 2 lbs. 11 ounces...the doctors were more careful...he was not eligible.
Pay for an accident with your car out of pocket? $400 - use insurance - $1200!
I see a pattern.
Posted by: Mike at Dec 1, 2007 1:32:18 PM
@"just asking":
> Does any country use health care vouchers, and competing HMOs?
The Swiss have something in that direction: mandatory health insurance by competing, private providers with subsidies for the poor to buy insurance. Moreover, regulation that makes the insurance offerings genuinely comparable to ensure a functional market.
Their problem remains the price monopolies on the health care provider side. But in total their system works much better than any other I've seen.
Posted by: oreg at Dec 3, 2007 12:23:35 AM
