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    "When many cures are offered for a disease, it means the disease is not curable" -Anton Chekhov

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    Monday, February 12, 2007

    The Problem with Government-Funded Healthcare: When the government thinks too much money is being spent on healthcare, they decide there are too many providers, not too many beneficiaries:

    Some of the institutions affected most would be hospitals, nursing homes, home health agencies and other providers, whose Medicare payments would be more than $61 billion lower than anticipated over five years (although still higher overall). Bush also proposes automatic across-the-board cuts in provider payments if Medicare spending reaches certain levels for two consecutive years. His budget would not forestall a planned 10 percent cut in Medicare payments to doctors next year.

    Decreasing those payments has consequences:

    Bruce Yarwood, president of the American Health Care Association, said the 9,000 nursing homes he represents would receive about $10 billion less than anticipated over five years.

    "We'll squeeze, cut and trim administrative costs," he said. "You take a look at your staffing patterns, and rather than four people on the night shift you have three. And rather than seven or eight on the day shift you have six. You take a look at your maintenance crew; you say, 'Rather than mow the lawn every week, I'll mow it every two weeks,' so you lay off a maintenance guy."

    Laying off the maintenance man will only hurt the maintenance man (and his family), but cutting the nursing home staff is going to affect the care of every nursing home resident. And we'll see the same thing happening in hospitals. (Yes, I know, hospitals could stop building multi-million dollar heart centers and cancer centers, etc., but they see those things as future income enhancers. They see staff salaries as a drain on resources.)

    The huge prescription drug benefit increased Medicare spending significantly, but there is some indication that the government is aware of the true cause of increased Medicare spending:

    A little-noticed section of that law, however, for the first time required the more affluent to pay higher premiums. Starting this year, about 1.5 million beneficiaries with incomes of more than $80,000 annually ($160,000 for couples) pay monthly premiums of $106 to $162.10 for Medicare Part B coverage for physician services, up from the standard premium of $93.50.

    The Bush budget would no longer adjust the income thresholds annually by inflation. And it would tie drug benefit premiums to income starting next year, a move that would affect 1.1 million beneficiaries, the Centers for Medicare and Medicaid Services calculates. The changes would save more than $10 billion over five years.

    The retirees don't like that, but a retired person making over $80,000 a year really is doing very well- and those premiums are bargains compared to what they would be in the private insurance sector.

    Arnold Kling has some thoughts on fixing the system.

    posted by Sydney on 2/12/2007 06:51:00 AM 3 comments


    Non-Medicare patients also pay a price for this policy. In an effort to make up this lost income many doctors feel they have the right to game the system. I have been shocked at the interest in my personal insurance and income levels when speaking with a doctor or nurse.

    Time and again I have been physically blocked from leaving an exam room with the demands that I sign off on test or treatments. I have been told I am wasting insurance dollars and in one case the doctor told me I was taking food off his children's table. The battle cry has been: We need to get you medicated so that we can get you in here more often.

    Doctors have a large investment in their education and in the initial cost of setting up a practice. They should have the opportunity to make an income reflective of that investment. The current situation is demeaning to them and their profession and has created an atmosphere that is not conducive to good medical practices.

    Steve Lucas

    By Anonymous Anonymous, at 10:16 AM  

    I was pretty interested in Mr. Kling's argument until I got to the point where he said he would rather self-insure. At that point, I quit reading because nothing else he could say really could be trusted as a reasonable solution to our financing problems.

    Self-insuring is no different that putting all your money into one stock. If you do great, super. If not, you are in some serious trouble. We're not talking about a trivial warranty on a household appliance (I can't believe he used that example). We're talking about something that could bankrupt you. The question isn't- how much money could we save if we didn't insure ourselves? Rather, it's- How much loss can we afford? As with any insurance, the amount you need depends upon if you can cover your losses. I have, in fact, taken care of several wealthy people who forgo health insurance, and life insurance, too. They can all cover their losses. So, Mr. Kling must be wealthy, or completely in the dark about the real cost of serous illness.

    For an economist, he's also not so good at estimating risk. Mr. Kling has forgotten that past performance doesn't indicate future returns. Actually- it's worse than that. He admits there is serious disease in the family. What he's doing is engaging in magical thinking. Many, many non-medical people truly believe that they won't get sick if they just have healthy habits. That is what the media harps on- but that is magical thinking. It just doesn't draw readership to talk about all the awful stuff that can happen to a person if there's nothing that can be done to prevent it. The media wants to give folks useful information (i.e.advice). They want to be relevant. And medical people also contribute to this perception- it's only logical we tell folks what they can do to improve their chances- why talk about all the things that can kill a person no matter what they do? The problem is, people come away with the idea that all risk is manageable, when it isn't.

    I recently read an editorial in a major magazine where the author was just stunned that her mother could have an MI, with her healthy lifestyle and all. Her mother was 70 years old! And no, the article wasn't written by Mr. Kling.

    By Anonymous Anonymous, at 3:39 PM  

    "At that point, I quit reading"

    ... but you are fully confident in your ability to criticize the thinking contained in the article past the point where you stopped reading.

    Pretty good trick. You must practice a lot.

    John Fembup

    By Anonymous Anonymous, at 8:35 PM  

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