Medicare Needs an Overhaul

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Recent articles about Medicare point to double-ended problems: insufficient compensation for doctors, while the overall cost is breaking the (taxpayers’) bank.

Proper control of Medicare costs is essential if we are to reduce the deficit, and reducing the deficit is a key factor in handing over a better world to our Grandchildren.

Some recent articles that I’ve read about Medicare indicate a serious disconnect.  While many doctors say compensation is insufficient (and there’s evidence to support this) the overall cost is on course to breaking the (taxpayers’) bank (Federal budget).  The AP reported on Monday, Nov. 28, 2011 that unless congress revises a 1990’s budget law by Jan. 1, 2012, Medicare fees for doctors could be cut by 27%, and doctors are already reluctant to take Medicare patients. A case in point comes from my home town paper, the Northern Kittitas County Tribune, Nov. 10, 2011, serving a rural Washington State area with a population of around 5,000.  The headline reads: “Alpine Lakes Family Practice closing.” Dr. Sam Schneider is closing his two-person office. – Think Dr. Joel Fleischman of Northern Exposure filmed in Roslyn, WA. about three miles from Dr. Schneider’s real office. –  Dr. Schneider cites the cost of bookkeeping for Medicare and insurance as his reason for closing, “It actually cost me about $30 for every 15 minutes I spend with a Medicare patient.”  In the article the doctor explains that with over 15,000 billing codes in the Medicare system, he needs more than his single administrative staff person to assure that he gets paid.  [Related anecdote, this is not a new problem: about twenty years ago I was in my family physician’s office and the conversation turned to Medicare.  She stated that she often didn’t bill Medicare patients because for some ailments/injuries, she would lose up to $15 on the cost of billing versus the fee reimbursed.]

The Wall Street Journal, 9/13/11, reports that the new federal diagnosis codes coming in two years will number about 140,000 to provide better precision of the ailment or injury, i.e.  “nine for Macaw mishaps”.  The Patient Protection and Affordable Care Act (HR 3590) is 1,928 pages long.  That’s the law itself.  My experience as a Federal Government contractor is that the documents explaining and describing how to execute the law will be several times that large.  This volume of paperwork is a major contributor to the cost of medical care:

  1. Administrative costs. -Both doctors and the Federal Government need a large administrative staff to understand, prepare, and review the documentation.
  2. The additional cost of money (interest) for the medical providers – Doctors and hospitals have to pay their staff, their suppliers, and the rent while all the paperwork is winding it way “through the hoops”.  This equates to some form of short-term loans, i.e. interest payments.  [Second anecdote:  When my wife was being treated for (terminal) cancer, it seemed that the typical bill had to be submitted twice.  Some bills were paid on the first submission, but some took three and four rounds with the insurance company due to errors claimed by insurance. Sometimes the error was in the doctor’s bill and sometimes it was an error by the insurance company staff not understanding their own guidelines, “Our error, yes we will pay that now”. ] In both cases the insurance company held their money longer and made a profit (interest) while the medical provider bore the time cost of money.   Medicare has similar paperwork issues. In the long run these costs are passed on to you and me, in the fees that we pay directly or as taxes that support Medicare and Medicaid.
  3. Honest errors and fraudulent charges that lead to over payments. – The huge amount of detail which is intended to increase accuracy and reduce fraud actually creates more opportunities for error and fraud.

In the 2010 federal budget, Medicare and Medicaid accounted for 23%, ($790 Billion) of a $3.5 TRILLION budget with a $2.2 federal income.  Our budget exceeds our income by 60%, and these expenses will increase with the Affordable Care Act.  We have learned from studies looking at medical costs (Mayo Clinic versus McAllen, TX) that more medical treatment is not necessarily better medical treatment.  We must get the spending under control.  One way to reduce costs is reduce the administrative burden; simplifying the laws and regulations would help that.  We need to write our congressmen & women to change this.

We must start shrinking the deficit to give our Grandchildren a better world. And we have to start optimizing what we spend on Medicare and Medicaid if we want to reduce the deficit.

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