Health Care Honesty

Cost savings from Medicare are claimed as one of the major sources of finance for the new medical entitlement program making its way through Congress, a claim that is astonishing in its brazen disregard of history.

President Obama talks about eliminating waste and inefficiency in Medicare, then turns around and reassures people there won’t be any Medicare cuts. The savings are to come entirely from making Medicare more efficient and paying only for quality service. This notion is not new. It’s been around a long time. Medicare, from its inception in 1965, has been a bottomless pit where money silently disappears into the coffers of the medical-industrial complex. There’s been attempts over the decades to control costs, using a variety of methods.

In the 1990s, when health management organizations slowed down the growth of private medical spending, Congress enacted a law to apply managed care to Medicare. “The program was authorized by the Balanced Budget Act of 1997 with the intent of expanding health care options to Medicare beneficiaries by savings generated through what advocates assumed would be the efficiencies of managed care,” says a 2001 report.

Savings to be used to expand services—sounds familiar. Well, the efficiencies did not materialize. Managed care can be an effective cost containment and quality control method in private settings, but in the Medicare setting it added to spending. The government demanded that HMOs provide a wide range of additional services to Medicare beneficiaries, which increased the cost. So the managed care option became more expensive than traditional Medicare.

In response, payments to managed care providers were reduced, but that caused HMOs to leave the program. Beneficiaries then moved to fee-for-service options that cost more than managed care. Given this precedent, it is hard to take seriously the claim that new entitlements will in part be paid for by savings.

But there’s a simple way supporters of the bill can prove they’re sincere—make the spending on the new program conditional on the savings. If indeed money is wrung out of the colossal Medicare budget, then it can be allocated to the proposed system of subsidies. If not, the new entitlements are no go. The current batch of reformers sound so sure they will achieve savings that they should have no objection to making the new package conditional on that outcome. Let the savings come, let the waste be eliminated.

Ah, but the industries signing on expect to get goodies in return for supporting the bill. The reason they’re willing to promise to pitch in with savings is the expected revenue stream from taxpayer-supported new entitlements—-every dollar goes to someone’s pocket, however obscured from view.

Now that’s “the same old Washington game of bribes, backroom deals, profiteering and protectionism” that Michael Cannon describes. By the way, Hillary Clinton and Mr. Obama were the two Presidential candidates that received the most donations from the healthcare industry.

Unlike fantasies about making Medicare efficient, the political class giving and receiving favors on the backs of the rest of us is all too real. No problem believing that.

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About Chidem Kurdas 58 Articles

Chidem Kurdas is a financial journalist, analyst and writer.

Throughout her career she has held numerous positions, including: Research Analyst at Thomson Reuters, New York Bureau Chief at HedgeWorld, News Editor at Infovest21, Senior Associate Editor at Medical Economics Publications at The Thomson Corporation. She is currently Editor at Opalesque Futures Intelligence.

She holds a PhD in Economics from New School University.

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