Four Medicare Secrets and a $600 Billion Funeral
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?