If you are a regular reader of this blog, you will realize that I didn’t think much of the last so-called health reform law and I certainly am horrified by the so-called Medicare for All concept. Aside from the real stupidity of the policy proposals in terms of doing anything to make health care less expensive, more accessible or of better quality, I am deeply offended by the typical lying of politicians and political candidates in regard to the concept. A recent report from the Manhattan Institute debunks many of the so-called facts which are spouted by knuckleheads like Bernie Sanders, a candidate who has never had a real job in his life and understands zero about economics and how improvements in peoples’ quality of life come about. (MI Report) One of Bernie’s big whoppers is that private health plans spend 12% to 18% (presumably of premiums, although he isn’t clear) on administration and that we could save $500 billion in administrative costs alone by going to his plan; a number he apparently gets to by assuming that it will cost nothing to administer his program. Uhh, might want to check your facts on that Bernie.
First of all, he is including profits in that administrative expenses but they aren’t expenses, although he of course objects to anyone (other than himself and his wife) making money. Private health insurers have a relatively low rate of profits among all industries and have much lower profits than many so-called non-profit hospitals and health systems. Secondly, the actual administrative costs are much lower than Bernie’s numbers, and in a more accurate analysis, insurance company expenses, including profits on which they pay taxes, are around 7% of all US healthcare spending. Third, a lot of those administrative costs are actually related to managing medical care and have a payoff by reducing those medical expenses. Even if his numbers were accurate, and they aren’t, 12% to 18% of $1000 in premiums is a lot better than 10% of $2000 in premiums. Over the years, private health plans have done a superior job to Medicare in managing medical care and expense, which keeps premiums and total health spending lower. The only way Medicare keeps spending down is by using its fiat power to dictate prices, which in turn causes private plan prices to go up, and by now having over a third of beneficiaries in private plans. If Medicare prices were the same as private ones, Medicare spending would be higher than private spending for an equivalent person and would be growing faster. Fourth, the biggest part of administrative expenses, 30%, is actually taxes levied by the federal and state governments and another big chunk of expense is caused by regulations imposed by those governments, regulations that are often stupid and needlessly burdensome.
Of course Bernie thinks we could simply pay providers the Medicare rate for everyone. Most hospitals would be out of business or forced to drastically lower the quality of care and wages for workers. Physicians would see massive income cuts. I make this point over and over–do you really, really think that will improve care? And don’t let Bernie and Fauxcahauntus lie to you about what is in the bill–it is actually pretty short and easily available on line. Read it and think about the implications and the real consequences. It covers everything for everyone with no cost-sharing and does indeed say providers get paid at the Medicare rate. As such, it will cause a massive jump in utilization, especially since the fee-for-service Medicare program has shown itself to be completely inept at either utilization management or detecting most fraud and abuse and will at the same time cause a drastic reduction in available supply. I don’t think the best and brightest will want to be physicians anymore. A realistic analysis would reveal that enormous tax increases would be necessary to pay for the program. This is one of the stupidest ideas ever and why would anyone think that a government bureaucracy can either design or operate a health program effectively. Why do you think both Medicaid and Medicare have turned to private plans to help control costs and improve quality?
I am going to keep railing on this as loudly and as long as I can. Whatever problems exist in the current system, they can always be made a lot worse and this bill would do it.