The Real Reason for the Medicare Crisis

March 3, 2013

Physicians, it's not your fault that Medicare is in freefall. The federal program is failing for several reasons.

The term "scapegoat" can be found as far back as Leviticus, and the Pharmakós of ancient Greece. The abuse heaped upon physicians over Medicare shortfalls calls to mind the moment in the Oscar-winning "Good Will Hunting," when the teacher played by Robin Williams’ reassures Matt Damon’s character about years of abuse, "It’s not your fault."

This is the one message I would like to convey to physicians: the Medicare crisis isn’t your fault. It isn’t Stark Law violations or failure to properly chart or code. It isn’t physician-owned surgery centers. The fact is, Medicare has always been unsustainable. This fact simply can’t be swept under the rug any longer.

Congress, who brought us the "bridge to nowhere" has always been known for stupid spending decisions. The Medicare program on the other hand, was an altogether different animal. Congress didn’t promise to fund one bridge, one time. Medicare’s promise was to provide medical care for everyone over the age of 65, funded out of the U.S. Treasury, throughout the rest of time. Medicare is failing for several of reasons:

Globalization
The rate of medical inflation is often compared to the overall rate of inflation to illustrate that fees charged by the medical profession are out of control. But there are two numbers here. In a robust economy, the cost of everything else should have increased along with medical innovation. But it didn’t.  In 1965, we earned eight times more than workers in other countries, because we were the only ones able to manufacture anything. Europe, Japan, and much of Asia during WWII had been blown back to the Stone Age. Eventually, these countries would find their footing, and this would lead to natural overall deflation. But in healthcare, we still are the only innovators.

The Moral Hazard
A "moral hazard," in insurance parlance, exists any time the presence of insurance creates the motive for the beneficiary to use the benefits. This is a fatal defect in any insurance program. Congress figured spending would increase, but underestimated "how much." Spending doubled, then tripled, and it simply kept going up. This is to say, how much we usedskyrocketed, as opposed to the actual price of each unit.

The Medical Arms Race
If utilization weren’t enough of a problem, costs per visit also skyrocketed. Simply put, a free market that should have controlled pricesdidn’t.  As Maggie Mahar explained in "Money Driven Medicine (Harper –Collins, 2006), when the customer isn’t paying the bill, he naturally has no incentive to choose the least expensive facility. Instead, patients are driven by amenities or the facility which most resembles a five-star hotel.  Hospitals and physicians had to buy the newest gadget, even though old one worked just fine.

Advertising

"Are you tired after working a shift? You may have work shift disorder." "Does your back hurt after lifting things. You may have ankylosing spondylitis." "Do you want a free scooter? They are available at little or no cost to you." Much has been written about the efforts of Madison Avenue to convince Americans they are sick. "Ask your doctor" if there is a pill for you, hides the fact that many patients will not only ask their doctor, they will keep asking until someone gives them a prescription. See, Payer, Lynn, "Disease Mongers," John Wiley & Sons, 1992

None of these reasons has anything to do with Stark Law violations or unethical behavior. Scapegoating occurs because it is easier to cast blame, that to explain what is really going on.