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Richard (RJ) Eskow
Published: Monday 10 December 2012
There are only two paths to $600 billion in savings; one’s macabre and morbid, and is offered here only to make as a Swiftian “modest proposal,” and the other would take a chunk out of corporate profits.

Four Medicare Secrets and a $600 Billion Funeral

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The Republicans are demanding $600 billion in Medicare cuts over the next 10 years. Their only concrete proposal is to deny Medicare coverage to Americans during what is now their first two years of eligibility at ages 65 and 66. But their official offer isn’t even that specific. It just throws out that figure: $600 billion. But you can’t get there from here.

At least you can’t do it their way—not without causing enormous hardship and not without costing the public twice as much from other sources as would be saved in government spending.

In fact, there are only two paths to $600 billion in savings. One’s macabre and morbid, and is offered here only to make as a Swiftian “modest proposal.” The other would take a chunk out of corporate profits.

Which path do you think the GOP would prefer?

This entire Medicare debate’s being held under false pretenses. Here are four multibillion-dollar Medicare secrets they don’t want you to know—along with that funereal “modest proposal:”

1. Runaway corporate profits are squeezing medicare.

Republican Sen. Bob Corker echoed the party line today when he said that cutting “entitlements” was needed in order to “save the nation.” But benefit cuts aren’t where the money is: profits are.  We did some rough calculations to show you just how much profit’s involved:

Roughly $200 billion in Medicare spending will go to drug company profits in the next 10 years. (We got that figure by averaging the profit margins for large pharmaceutical corporations by projected Medicare drug expenditures.) And yet the Republicans have blocked legislation that would allow the government to use its purchasing power to negotiate for a better deal. So the drug companies can charge us whatever they want—and we pay it.

Medicare has reportedly underpaid for hospital services at times. But for-profit hospitals have an average profit margin of 5.5 percent. What they’re not receiving from Medicare is ‘cost-shifting’ to private health insurance. We pay for that, too –  in insurance premiums and tax concessions for employer-sponsored coverage.  With, Medicare hospital expenditures likely to approach $2.5 trillion in the next 10 years, that’s costing society a fortune.

And that doesn’t include high margins in the non-profit hospital field, where CEOs frequently earn more than a million dollars as a reward for maximizing revenue. Nor does these figures include the profits received by a whole range of other for-profit health providers ranging from diagnostic centers to ambulatory surgery clinics.

2. We receive far too much unnecessary care, and are often fraudulently billed for the care that is given.

Then there’s what may be the most expensive effect that greed has on Medicare: overtreatment. A series of exposés (some of which we discussed in “Sick Money,” a review of Bain Capital’s health investments) have revealed gross patterns of fraudulent Medicare overcharging.

Even worse tis the overtreatment that’s done to boost profits. Unnecessary procedures are difficult and uncomfortable at best, and at worst they can lead to pain, disability, even death. This overtreatment’s been documented in both academic studies (John Wennberg’s Dartmouth Atlas is a great resource) and some excellent journalism.

And it’s getting worse. Now hospitals are buying physician practices and exerting financial pressure on doctors to perform more surgeries. But the truth is that doctors have always been under financial pressure to overtreat. They graduate from medical school with tons of debt and must then maintain a profitable practice, including everything from equipment to office staff.

And yet Republicans have beaten back attempts to control this overtreatment with their “death panel” hoax. That  myth is only slightly less believable than “black helicopters.” There are death panels – but they’re manned by insurance executives, not bureaucrats.  Republicans have fought Medicare by telling us that doctors shouldn’t be “employees” of the government. Now they’re employed by MBAs who want a fat bonus.

Does overtreatment research interfere with our right to choose our own care?  I want to make an informed choice—and I don’t want anybody cutting me open if it isn’t absolutely necessary.

3. Seniors are already being hit hard by medical costs.

People who aren’t covered by Medicare and don’t know much about it often assume it covers all, or most, medical expenses. But the average person on Medicare pays roughly $4,600 per year in out-of-pocket medical costs, and that figure can be much higher for those who are severely or chronically ill or who have suffered a serious injury.

Boehner’s figure of $600 billion over 10 years is a reduction of approximately 7.8 percent from current projections. But Medicare enrollment will increase from 49 million people to 85 million over the same period. Assuming that these Republican cuts are made permanent, that means that Medicare’s per-person budget will have been cut by more than 15 percent by the year 2022.

4. Chronic conditions and end of life illnesses are extraordinarily expensive.

They’re not proposing to do anything about Medicare’s biggest cost problem: the care that’s provided to the severely ill, especially in the final year of life. As the Dartmouth Atlas reports, “Patients with chronic illness in their last two years of life account for about 32 percent of total Medicare spending.” That comes to nearly $2.5 trillion over the next 10 years, based on current projects. And yet the GOP is proposing to slash, not increase, funding for research that might help us provide end-of-life care more effectively and humanely.

The elderly are particularly prone to other costly chronic conditions like cancer and diabetes, which can be treated much more effectively – and much less expensively—if they are caught early. Instead, their plan to deny Medicare for 65 and 66 year olds will lead to less early diagnosis and intervention, making us sicker and driving up Medicare’s costs.

It’s Your Funeral

That leads us to our “modest proposal.” Any way you look at it, we’re going to be seeing an increase in the number of funerals if Medicare benefits are cut. Research has shown that the survival for seniors in this country increased by 13 percent when Medicare was introduced in the 1960s.  

It’s reasonable to assume that those survival rates will begin to fall again—and death rates will rise—if we impose mindless benefit cuts, instead of taking an intelligent cost management approach that focuses on expense drivers such as overtreatment, overbilling, and excessive profiteering.

The Republicans want drastic cost reductions without disturbing corporate profits. Using their logic, they shouldn’t take away our first two years of Medicare coverage. They should take away the last two years.  That would cut Medicare expenditures by more than a third.

And what do they care about one more funeral here or there – as long as it’s not theirs?



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ABOUT Richard (RJ) Eskow

Richard (RJ) Eskow is a well-known blogger and writer, a former Wall Street executive, an experienced consultant, and a former musician. He has experience in health insurance and economics, occupational health, benefits, risk management, finance, and information technology.

survival for seniors in this

survival for seniors in this country increased by 13 percent when Medicare was introduced in the 1960s. ,,,,And the average age of death has gone down in the last couple of years.

You know those

You know those Hoverround/Scooter Store commercials that advertise "no cost to you"? The companies charge Medicare four times the actual cost of the item. That's where the waste and fraud are in Medicare. Eliminate that, and Medicare could even be expanded. Better yet - single-payer for all!

My wife and I turned 65 last

My wife and I turned 65 last year. We both still work and contribute to Medicare through payroll tax and $2400 a year in part B premiums. With annual doctor visits and the use of generic drugs we cost Medicare less than $500 last year. Is congress sure that raising the age won't just eliminate the profitable portion of recipients? I think that it's all more political ploy than practicality.

Ah, the Republican Health

Ah, the Republican Health Care Plan;
Don't get sick.
But if you do,
then die quick.

We the people should me a law

We the people should me a law that that gives us the last vote on anything our elected agreed on, I would like to see that all congressional benefits, and all who get a benefits from our tax contributions have been eliminated? except for the salaries for all who get paid by our tax contributions?. those who paid into the system are getting NOTHING yet criminals, welfare, the elected, those who under 62 years, those who not contributed to our nation, who have not live here long enough at least 30 years, are getting all ree help while those who keep on contributing, lost jobs lost home R getting sht?not even that?...

On a recent episode of the

On a recent episode of the Rachel Maddow Show, Ezra Klein did a great, 2-minute economic analysis of why the increased age requirement of 67 on Medicare would actally cost significantly more than the proposed vague savings. check it out: http://www.msnbc.msn.com/id/26315908/#50125323

Let's hope someone sends a copy to the Tea Party and the GOP.

Did anyone NOT know that

Did anyone NOT know that wiping out basic poverty relief (welfare) was simply a first step toward ending Social Security/Medicare? We've devoted years of effort to going backwards, and we have been doing an amazing job of reconstructing a primitive, brutal society.

Mr. Eskow's heart is in the

Mr. Eskow's heart is in the right place, but he has missed the Elephant in the room: Congress has borrowed over 2.5 trillion dollars from the Social Security trust fund and Congress has no plan in place to pay it back when it will be needed to pay benefits. Meanwhile the Bush tax cuts have cost about the same amount. As recently as 2008, the trust fund was spinning off over 200 billion dollars per year in surplus, as the baby boomers reached their peak earning years in preparation for their retirement. - What the Republicans want to do is to cut benefits, but continue to collect FICA taxes at the levels that were in effect before the President's temporary payroll tax cut - so that the trust fund will continue to run a surplus which can be "borrowed'' and spent on other things. -

Thanks again to Clinton.

Thanks again to Clinton. There used to be a firewall between SS and the Congresses dirty hands.

I recall hearing in the 1990s

I recall hearing in the 1990s about Republicans insisting that there would be no risk in allowing them to "borrow" money from Social Security, "for more immediate needs." A lot of people agreed, while most said "NO!" We did point out, for example, that our own government has a very, very poor record of keeping promises. Of course, we could always demand that pre-Reagan tax rates be restored on corporations/the rich, at least until this bill is fully repaid. We could end corporate tax cuts, even though they always insist that the tax cuts are necessary for job creation: 30+ yrs of massive annual corp. tax cuts has actually left us with far fewer jobs, at worsening wages.

Let's change the "modest

Let's change the "modest proposal" just a bit more. Let's make Medicare available for the first 65 or 66 years of life, then cut it off. I'll bet the savings will be much greater and the end result will be fewer funerals (longer life expectancy) at least after a few years. Then we can decide if the savings can add another year or two of coverage for "seniors". If we can get some of the reforms outlined in the first four sections, we might even be able to cover everyone for life.

Misery is money! Like Jesus

Misery is money! Like Jesus used to say:"Lestus thou haveth health insuranceth, No miracles for you! Next!"

Yes! Yes! I can see it

Yes! Yes! I can see it now......

blind beggar, (Bob Hoskins); "Jesus! Jesus! Is it truly you. I am told you have the power to restore sight to the blind. Jesus, please. I could really use a miracle like that right now.

Jesus, (Mel Gibson); "Of course old man. I have that power. Who is thouest carrier?"

Beggar; "Carrier, Jesus? What do you mean by that?"

Jesus; "Your insurance company. Who is your insurer?"

Beggar; "But I have none. I am poor an thus without a, uh....carrier."

Jesus; "Can you put it on a card? Master card? Visa?"

Seriously. I have a modest proposal too. Single payer. We the people can construct any kind of society we want. I for one think we would be far better off without a parasitic industry that is calculated to profit from the natural process of life generally and the physical breakdown of age. I am inclined to think I am not the only one who finds the whole idea morally repugnant. What we now have, and will remain little modified by Obamacare, is not so much healthcare model as it is a health-insurance-company care model. Allowing this system to continue is no more than the raw capitulation of our legislators to their owners in the insurance industry. Cowards all.

I am far from ready to throw in the towel on single payer. State by state if need be.

Let's unmask the GOP for what

Let's unmask the GOP for what it is: representing the 1% at the expense of 99%. Most of the problems of our society are resulting from inadequate government, wrong type of government (military taking the lion share of the money maintaining a corporate empire to secure raw materials/markets), destroying the environment, creating wars all over the world, lying to and cheating the public (WMD and subsequent squandering of money and lives) who pays them. Let's make the next four years GOP's funeral....

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