Health Care: You didn't pay for it

[RandomGuy]

From the Economists' economy blog.

Long story short: Old timers are a drain on Medicare, who paid into the system at rates far less than what they take out.




I RECENTLY came across a political ad which featured an elderly man telling politicians to stay away from his Medicare. After all, he paid for it, the ad suggested. That struck me as interesting.

Medicare's scope has expanded quite a bit since today's older Americans started paying taxes. Part D, which covers drug benefits, was introduced just six years ago. It is partly funded by premiums paid by current retirees, but mostly through general revenues from the Treasury (from current and future tax-payers). So for much of his working life, the gentleman in the ad paid taxes toward a different, smaller programme.

More generally health care is a peculiar good, and health insurance is an unusual product in that it guarantees a basket of services which is always improving and getting more expensive. In some ways it’s like buying fire insurance on the best house in your town in the 1970s and paying premiums on it for forty years. Were the house to burn down today, would you be entitled to a benefit equal to the value of the old house or the value of the current best house in town? I can’t imagine an insurance company that would offer a contract on the latter. But that is how health insurance works: both the government-provided and private varieties.

Now in a contractual sense retirees that have paid their premiums are obviously entitled to that ever-improving basket of goods. That does not mean that they have really paid for it. According to the Urban Institute an average-earning couple who retired in 2011 would have paid about $116,000 in Medicare taxes over their lifetimes, but can expect lifetime Medicare benefits of $357,000 net of premiums. The later one retires, the more generous Medicare becomes. An average-earning couple who retires in 2030 pays $175,000 in taxes, but gets $527,000 in benefits.

Medicare promises hospital care (known as HI), some outpatient services (part B), and (if you opt in to the drug benefit—part D) prescription drugs. When Medicare was created in the 1960s people did not live as long in retirement as they do now. In 1960 a 65-year-old male was only expected to live 12.9 additional years; in 2010 he could expect 16.5 more years. That's a longer period over which to consume health care (indeed, the consumption of health care is a key contributor to the additional years). And as life-extending technologies improve dying is becoming a more protracted and expensive process.

This partly explains why Medicare spending per beneficiary has increased so much. The figure below shows spending per enrollee since 1970:

http://media.economist.com/sites/default/files/images/2012/10/blogs/free-exchange/medicarespending.jpg

Total spending increased from $2,000 in 1970 to $11,700 in 2010.

A portion of rising health care costs is passed on to retirees. For example they pay premiums on Part B, and the premiums increase with health costs. Part B premiums must finance 25% of cost of the programme, and do pose a large burden on retirees. Right now Medicare premiums and cost-sharing expenses take up about 27% of retirees' Social Security benefit, and by 2030 it will be 36%. But most of the burden will fall on future tax-payers. Right now the programme makes up 3.67% of GDP, but it’s expected to take up 6.7% by 2080.

Medicare is an extremely important programme. Even with it, most retirees die with no assets. That’s largely because sickness in retirement, and dying, is so costly. Medicare ensures that people get some of the care they need in those final days, but that’s an increasingly expensive service to provide. Retiring baby boomers have paid taxes to support Medicare most of their careers, but the idea that they paid for all the benefits to which they feel entitled is a stretch.

[boutons_deux]

I think people would be ready to pay more for Medicare if they felt they weren't getting ripped off by greedy docs, insurance companies, hospitals, donut holes, Medicare Advantage, BigPharma.

People legally paid in, like Gecko, all they were required to pay, just like Gecko, but unlike Gecko, they didn't, couldn't game the system.

It's not the fault of citizens if health costs have exploded into nothing but another way for corps to extract wealth from citizens.

[101A]

My biggest problem with the ACA is that it doesn't get a handle on costs. It only aims at the payment mechanism of healthcare delivery; not the supply/delivery side where costs are incurred. The way our govt. works, they won't deal with it again for a long while - it's fixed, right?

And, B, it's NOT just the "Corps". You seen what doctors are making these days? That is a class that is too protected and coddled; it causes an inflation of their worth in the market.

[boutons_deux]

My biggest problem with the ACA is that it doesn't get a handle on costs. It only aims at the payment mechanism of healthcare delivery; not the supply/delivery side where costs are incurred. The way our govt. works, they won't deal with it again for a long while - it's fixed, right?

And, B, it's NOT just the "Corps". You seen what doctors are making these days? That is a class that is too protected and coddled; it causes an inflation of their worth in the market.

Yes, it does.

ACA cuts $700B+ from payments to the providers, insurers, plus you may have read the govt is stopping the "pay and chase" approach (trust the invoicer, then chase if fraudulent), and racking $100Ms in recovery and penalties for Medicare/Medicaid fraud. I'd really like to see some doctors, etc, in jail.

Ryan's sociopathic plan cuts $700B+ costs by making patients pay more, generally covering less, while while not reducing payments to the providers, insurers.

[FuzzyLumpkins]

My biggest problem with the ACA is that it doesn't get a handle on costs. It only aims at the payment mechanism of healthcare delivery; not the supply/delivery side where costs are incurred. The way our govt. works, they won't deal with it again for a long while - it's fixed, right?

And, B, it's NOT just the "Corps". You seen what doctors are making these days? That is a class that is too protected and coddled; it causes an inflation of their worth in the market.

The biggest problem with the ACA is that it gets young men and women to pay for boomer health care rather than have them pay for their own shit.

Tax rate before boomers entered their majority: 18%
Tax rate since: 13%.

An economist estimated that your average boomer born in 1946 will on average have received $2.2m more in payouts than the amount they paid in.

Next time you see someone bitching about AFDC ask them if they are planning their retirement around have SS and Medicare? they all do.

[boutons_deux]

"The biggest problem with the ACA is that it gets young men and women to pay for boomer health care rather than have them pay for their own shit."

the same problem with ALL insurance. Everybody pays to cover only those people who "win" and make claims on the insurance pool.

What's your solution?

[FuzzyLumpkins]

"The biggest problem with the ACA is that it gets young men and women to pay for boomer health care rather than have them pay for their own shit."

the same problem with ALL insurance. Everybody pays to cover only those people who "win" and make claims on the insurance pool.

What's your solution?

Get private firms out of markets with vertical demand slopes. And get rid of the travesty that ties business payrolls and health care costs together.

[RandomGuy]

Get private firms out of markets with vertical demand slopes. And get rid of the travesty that ties business payrolls and health care costs together.

DING DING DING!!!!

We have a winner.

[boutons_deux]

Get private firms out of markets with vertical demand slopes. And get rid of the travesty that ties business payrolls and health care costs together.

the insurance companies Harry-and-Louise'd Hillary's plan in 1993. Barry ran on a public option, but the the insurance companies extorted, silenced the PO out of the ACA discussion.

A hard-core public insurance option, paid for by UNCAPPED deductions from paychecks, just like Medicare and SS today, is of course pure fantasy. Even an approximation of a PO is fantasy.

Not that it will ever happen, but I'd setup govt owned, operated hospitals and clinics, manned by govt doctors, staff on govt salaries (not fee for service bullshit), no profit anywhere, run as public service utitilies. I'd also finance doctors', nurses' educations in return for 25 years govt employment, cutting banks out of the medical school education financing and removing the gawdawful pressure on indebted doctors to overcharge to payback their med school loans.

[dbestpro]

The solution going forward for healthcare reform starts with true healthcare reform. We need to move towards a pay for performance system. Lab results that are repeated and negative more than once are paid @50%. Positive results are paid at 120% while only allowing for "best practices" procedures.

There is no way that universal health care and litigious medical practice can co-exist. If obamacare is to survive then all issues of litigation need to be removed. The irony is that the lawsuits by themselves do not result in a great deal of cost to healthcare. It is the reaction by the healthcare industry to the threat of a lawsuit that creates an enormous cost in un-necessary procedures and tests by the billions of dollars.

In speaking with some folks at the highest level of health insurance it is believed that we could reduce costs by as much as 40% by supporting these two changes alone.

[ElNono]

The solution going forward for healthcare reform starts with true healthcare reform. We need to move towards a pay for performance system. Lab results that are repeated and negative more than once are paid @50%. Positive results are paid at 120% while only allowing for "best practices" procedures.

That would penalize the Lab, which isn't the one that ordered the test...

[boutons_deux]

"all issues of litigation need to be removed"

When the Repugs were screaming "tort reform" (the real objective was to defund trial/liability lawyers who support Dems, NOT save money. aka, All Politics, All The Time), it was shown that total health care litigation payouts was less the 2% of the national health care bill.

About 90K deaths per year in USA due to AVOIDABLE medical errors. You want NO litigation? then add in 3 or 4 times that in non-death injuries, hospital acquired infection, and look at the current fungus-tainted epidural solutions with 15 death and 100s sickened. BigPharma alone is a huge death and maiming machine. You want NO litigation?

[Wild Cobra]

Maybe if we would stop raising average life expectancy.

When these programs started, the average life expectancy was today. Same with Social Security. We can fix the problem today, but what happens 20 years from now when the average life expectancy may be 100?

[boutons_deux]

Maybe if we would stop raising average life expectancy.

When these programs started, the average life expectancy was today. Same with Social Security. We can fix the problem today, but what happens 20 years from now when the average life expectancy may be 100?

Life expectancy isn't the problem.

Self-inflicted disease from crap food, no exercise, people duped into believing that Ms of shitty pills from BigPharma, and useless tests and procedures, are necessary for a healthy (no medical expenses) quality of life are the problems.

30+ years ago, we didn't have millions of kids and teens at stroke risk, heart disease, pre- or full Type II diabetic. Nor did have Ms of pre-term babies needing ICU at $25K+/day. Another huge doctor ripoff is the huge rise C-sections vs vaginal, with C-sections costing up 10x that of vaginal.

Extended life expectancy isn't the problem. Extended life expectancy while diseased IS a problem.

The national health bill in the 1960s and before was a much lower percentage of a much lower GDP. People were NOT preoccupied with health insurance, health bills, and facing financial disaster if they got sick. The US health system is a huge scam, a ripoff. Other countries do it better and cheaper. "USA NUMBER 1" is fricking myth.

[Wild Cobra]

Life expectancy is one part of a multipart problem. When these programs first started, an average recipient might use these services for five years or so before dying. Now they consume money from these services for an average of about 20 years.

Who on medicare is having C-Sections? Are you confusing that with medicaid?

[boutons_deux]

Life expectancy is one part of a multipart problem. When these programs first started, an average recipient might use these services for five years or so before dying. Now they consume money from these services for an average of about 20 years.

Who on medicare is having C-Sections? Are you confusing that with medicaid?

no c-section on medicare, but plenty on medicaid. Just another the docs and hospitals ripoff medicaid with unnecessary c-sections.

Women aren't living too much longer today than 1965, but men are living a few years longer. My bet is that their diseases and BigPharma consumption dominate the health costs after age 65 more than just living longer.

http://mappinghistory.uoregon.edu/english/US/US39-01.html

[dbestpro]

Removing litigation in healthcare has little to do with the cost of litigation and more with how needless tests are ordered. Estimates are as high as 40% of the procedures and/or tests are not needed. The idea is to reward good medicine more than you would bad medicine. There is not enough money or resources to provide universal medicine and still think that we can support the litigious practice of medicine. These tests are ordered as a result of this culture towards litigation. I have been in healthcare for 34 years and have managed projects in the military, at risk worker programs, university training, Sri Lanka and Mexico, so I do have an idea of what is wrong with the profession.

[TeyshaBlue]

Removing litigation in healthcare has little to do with the cost of litigation and more with how needless tests are ordered. Estimates are as high as 40% of the procedures and/or tests are not needed. The idea is to reward good medicine more than you would bad medicine. There is not enough money or resources to provide universal medicine and still think that we can support the litigious practice of medicine. These tests are ordered as a result of this culture towards litigation. I have been in healthcare for 34 years and have managed projects in the military, at risk worker programs, university training, Sri Lanka and Mexico, so I do have an idea of what is wrong with the profession.
There was a fairly comprehensive study done on Texas. The conclusions pretty much refute your points. I'll try to find it again.

[boutons_deux]

"These tests are ordered as a result of this culture towards litigation."

that's the right-wing spin on excessive testing, docs just gotta protect themselves, EXCEPT there's the moral hazard, of docs ALSO making $Bs from their percentage of the testing, referrals.

There's also the scam I read about recently where docs are claiming $120 for Medicare visit, when in fact the visit was coded at $40.

Medicare ‘Upcoding’ Has Cost Seniors $11 Billion Over the Last Decade (http://thinkprogress.org/health/2012/09/17/859931/upcoding-medicare-11-billion/)


http://thinkprogress.org/health/2012/09/17/859931/upcoding-medicare-11-billion/

[dbestpro]

[COLOR=#000000]"These tests are ordered as a result of this culture towards litigation."

that's the right-wing spin on excessive testing, docs just gotta protect themselves, EXCEPT there's the moral hazard, of docs ALSO making $Bs from their percentage of the testing, referrals.


This is why its a two step process. You pay based off of perfromance so the docs are only paid for practicing good medicine and not for the $Bs that you indicate.

[boutons_deux]

"perfromance"

how does govt define and measure performance?

(ACA penalizes hospitals for readmissions within window, which implies that the hospitals discharge (and bill) too soon)

how does govt define and measure "practicing good medicine"

The docs won't give up their gravy $Bs in easy money for over-testing, over-prescribing.