Worse than I Imagined (Part II): Medicare

When I retired, Medicare became my primary health insurance, fully covered by American taxpayers (and federal debt-holders), while Anthem/Blue Cross became my secondary health insurance, fully covered by the University of California.  I will never have to spend a nickel of my Social Security benefits or inflation-adjusted defined retirement income on my health insurance.

But the entitlement system got worse for American taxpayers because my expensive prescription drugs were fully covered by Medicare or my private university-funded health insurane.  When I changed my cholesterol drug from Lipitor (because it caused muscle pains) to Crestor, my out-of-pocket payment rose, to my surprise, from nothing for Lipitor

to $90 for a three-month supply for Crestor.  Taxpayers and my insurance company were stuck with a greater increase in the drug’s cost than I was, since a three-month’s supply of Crestor costs nearly $700.  I covered a mere 13 percent of the total.  Another anti-inflammatory drug (which is only slightly more effective than ibuprofen) costs $70 a month, fully covered by taxpayers and insurance.

No wonder the federal government spent $70 billion in 2010 on prescription drugs under Medicare and billions more under Medicaid, and expects to spend nearly $1 trillion on Medicare prescription drugs from 2011 to 2019.

Last summer, my primary care doctor ordered a battery of blood tests for a slight urological problem.  I made my usual $20 copay for the initial visit, which was surely a minor portion of the total cost.  But, of course, I was never told what the charge would be.  The doctor sent me to a urologist who ordered more blood tests.  He also ordered a more invasive procedure, X-rays and a sonogram for the whole of the abdominal cavity.  When the sonogram revealed a potential kidney stone of uncertain size, he ordered more X-rays and an abdominal scan.

Amazingly, throughout my wandering the halls of the health care system, I never made a single payment, not even a meager copay after my initial $20 payment.  Moreover, not a single person — receptionist, nurse, technician or doctor — ever mentioned a price for anything.  All they ever discussed were test options,

which one doctor admitted were unlikely to uncover a serious health problem (since no problem had been found in two investigations over the past 15 years).  Without prices to guide me, I made the same choice everyone makes:  Bring on the tests!

When I asked the urologist why he and others never mentioned prices, he lamented how bad the absence of prices made the system but also confessed he couldn’t give me prices because he didn’t know what they would be.  His office would “make up” the charges and Medicare would make up the reimbursements.  He also admitted that doctors game the system by charging more than they expect to be reimbursed, because Medicare plays a similar game, knowing doctors game the system.  Medicare generally reimburses doctors less than requested, no matter how close their charges are to their true costs.

Health economists have long recognized that a major flaw in the health care market is that buyers (patients) have limited knowledge of what is good for them.  Doctors (supposedly all the time) know much more, which makes for the so-called problem of “asymmetric information.”  Most buyers rely on their doctor’s guidance.   The almost total absence of transparent prices leaves health care buyers far more ignorant than they need be.

Ironically, I might not have gone through as many tests and procedures if the Medicare and insurance systems had not lowered the reimbursements provided doctors by 5 percent between 1997 and 2005.  The Congressional Budget Office found that during that period total Medicare payments to doctors rose 35 percent.  As New York Times  columnist David Brooks noted, “Doctors made up in volume what they lost in reimbursement levels.”

Economists have long known that if prices are below costs, or nonexistent, buyers will exploit the system.  This is especially true when buyers think they have paid for their benefits through their past taxes.  But Medicare, like Social Security, is one huge Ponzi scheme.  When the elderly paid their Medicare taxes from the late 1960s to retirement, their payments were not saved for them to draw down in retirement.  No, their tax payments paid the health care costs of the then-retired generation — many of whom paid little in Medicare taxes.  Today’s elderly, me included, are consuming health care resources paid for by our children and grandchildren who work and pay Medicare taxes.

Indeed, according to the Urban Institute, today’s elderly will, on average, consume almost three times as much in health care resources as they paid in Medicare taxes. Thus, no one should be surprised that Medicare expenditures will double to $1 trillion over the next eight years.  A partial solution is relatively straightforward:  Add prices that force buyers to cover some of the costs, requiring them to weight the relative benefits of the services they consume.

Benefits should be curbed for the people who don’t need them, or who are using them for no higher social end than to increase the frequency of dining out or to buy more expensive cars more frequently — or, as in my family’s case, to cover privileged college educations and to protect substantial bequests to their children and grand children.

Richard McKenzie is a senior fellow with the National Center for Policy Analysis.




Comments (25)

Trackback URL | Comments RSS Feed

  1. Gabriel Odom says:

    I’ve had health insurance most of my life. But recently, my employment status and income has forced me to live without insurance. When I came down with the flu a month ago, I knew I needed to stay on budget, so I tried a CVS Minute Clinic. I was pleased with the results. All I needed was an antibiotic prescription, but I ended up paying about $130 for the visit and the medication.
    During the visit, the Nurse Practitioner asked me if I’d like a Strep Test for an additional $35. I gambled against the odds that I had strep through – I knew how I felt at the time, and I was fairly certain all I had was the flu and an ear infection. I said no.
    This got me thinking: How many times in the past have I said yes to some unnecessary test or another just because I wasn’t paying for it? I think that I would have been a much more responsible steward of someone else’s money if I was forced to pay even just 10% of the costs. Suddenly, I’m not sure I really need that MRI or those extra X-rays – one or two will be fine.

  2. Pam says:

    Those Minute Clinics are wonderful. The prices are posted on an electronic sign and at the CVS I shop at, there is even a maximum price posted per visit/procedure. Then my prescription is electronically sent to the pharmacist 20 feet away. I wish all health care was this transparent.

  3. Mulligan says:

    I wonder when wal-mart is going to move into the convenience care market. They’ve already got CVS in their crosshairs about prices.

  4. EB says:

    Richard, I appreciate your candidacy. I have somewhat the same situation with my former employer providing a mostly paid for retiree plan in the form of am Medicare Advantage model. However the employer did establish some common sense and necessary changes over the past few years in order to assure its sustainability. With adding separate deductibles for RX and other expenses and then imposing 20% coinsurance up to the max out of pocket limit, the participant sees the provider charges and the allowable charges–at least after the fact. The budgetable out of pocket expenses the participant bears is a reasonable trade off for a modest contribution. I can only hope the implementation of Obamacare will not trash what has been a workable approach for our thousands of retirees since Medicare Advantage became legal and prior to that utilizing Medicare Supplements. Perhaps the University will have to make similar adjustments in order to keep your plan afloat–although their revenue stream through tuition increases may defer such actiopn.

  5. Janet O'Neal says:

    My daughter owns a physical theraphy clinic and under the new Obama Care she may have to go out of busines. Her company has to cut 33.3 of her profit and that is about what she makes. She is thinking of everything she may be able to do in order not to let anyone go. She can cut back on the time she allows for each visit so she can take on more patiences’, but she has taken pride in the fact that she gives plenty of time to treat peoples’ body as well as their soul. As a believer she wants to do the right thing but isn’t sure she can make a living at this rate.
    Thanks President Obama, this is the problem you have created but I will still pray for you and trust that your soul can change.

  6. Vance says:

    Take a separate quote from the company asking for coverage if you want insurance
    coverage to your furniture during transit. I made sure to not choose
    the company with the lowest price, as they might be dodgy.
    They provide you the moving service in all aspects and they provide the following services such
    as local moving, long distance moving, corporate moving,
    piano moving, storage facilities, packing services and
    order boxes.

    my web page; moving companies seattle to portland

  7. Shelia says:

    Botox, Facе lifts, Breast Augmentation сan all be considered vanity
    procedures. Breasts аrе ɑn important symbol օf femininity for women. The FDA’s approval ߋf silicone gel implants, surgeons’ expertise іn breast enhancement ɑnd the іnformation ɑvailable
    оn breast implants ɑll endorse its safety and effectiveness.

    Ӎy webpage :: gold braces teeth

  8. click here to view lowcostholidays promo codes

    Worse than I Imagined (Part II): Medicare | Retirement Reform Policy | NCPA.org

  9. Andrew says:

    What’s up, I read your blogs oon a regular basis.
    Your writing style iss witty, keep it up!

    Stop by my webpage: Find out more about the Chinese Mainland on Wikipedia

  10. Sheldon says:

    Homade’s LEGO-esque media players cleverly conceal their
    controls into the raised dots on the surface of each block.
    Just have a look at her wardrobe, there on your screen. The Animal Care League located at 1011 Garfield Street in Oak Park, IL has many adorable furry friends to choose
    from including, cats, dogs and other small animals including rabbits,
    guinea pigs, birds, rats and gerbils, so if you are in the neighborhood why
    not stop by and meet some of these furry babies that are looking for their forever homes.
    I like ombre effects instead of bold patterns which often make
    the fabric feel more mature. Birthday bring along a truly wonderful chance to
    leave aside every care and simply enjoy.

    Also visit my blog too cute animal videos

  11. Alysa says:

    I’m not sure where you’re getting your info, but great topic.
    I needs to spend some time learning much more or understanding more.
    Thanks for magnificent information I was looking for this information for my mission.

    Feel free to visit my blog :: life hack

  12. Reyna says:

    A buddy of mine once cracked open an old helmet made in China (19-65) the insides where padded with Chinese newspapers,
    stuffed inside. Hope it could work for you guys, and you can leave comments if you have other ideas.

    This applies whether the activation is legitimate or rogue.

    Feel free to visit my blog asphalt 8 hack

  13. Gladis says:

    For the site creator, may I question how should you contend
    with useless posts? I am in a position to pay simply
    for suggestions in order to contend with it!

    Also visit my site; Respark The Romance Scam

  14. Sherman says:

    I do not know whether it’s just me or if perhaps everybody else encountering problems with your
    blog. It looks like some of the written text on your posts
    are running off the screen. Can someone else please comment and let me know if this is happening to them as
    well? This might be a issue with my browser because I’ve had this happen previously.
    Many thanks

    my site: offer pain

  15. Katrin says:

    Nice post. I learn something more difficult
    on different blogs everyday. It’s going to at all times be stimulating to read content
    from different writers and follow a bit something from their
    store. I

  16. Kayleigh says:

    Hay booksellers are fully current with technology, and give their
    books for the Internet using a communal hub website. This means you may
    be playing in three leagues simultaneously.
    Tiger Woods is dealing with a plethora of issues, losses and changes
    which seem to be impacting his performance on the golf course.
    Information furnished by the administration puts how much dispersants injected directly to the jet of
    coal and oil emerging from the broken blow out preventer at 1.
    I’m saying it, even when you probably desired to hear something
    differently. Among the handful of exceptions are South Seashore and Hollywood Seashore.
    Quote: I plunk the youngsters at school nine days from ten. Petrol, Gas Stations and
    Refueling Stops ‘ Not only filling stations, but also
    truck stops, travel centers, gasohol and diesel centers can be purchased worldwide.
    These will contain the fewest calories and help keep you on your diet plan. Some with
    the most talked-about future projects are planned to the mainland, though specifics are faraway from clear.
    Keep yourself safe while using eleven steps to stop salmonella for
    food safety and the prevention of your variety of diseases.
    well, this: everyone is allotted a certain occupation when he was eleven definitely or complaint.
    CP: I would say winning my first grand slam ever this coming year, we [Jake Gibb & Casey Patterson] won a gold medal in Shanghai, China which is something that hardly any everyone is capable to do and I
    achieved it in my first one with Jake so that’s #1 for me personally.
    In the fall, X Factor will join the ranks of music competition series, and The Voice
    is already casting for season two of its series, which will premiere following Super Bowl in 2012.

    This also brought on the opening of Collins Avenue which was the initial
    paved road accommodating automobiles. Pattaya Beach and Jomtien Beach remain typically the resorts that lots of people fly to each and every and each year and who is able to blame them – stunning food and restaurants, beautiful Thai women at every turn and hospitality like not one other
    place within the world. In the entire year 1981, Indonesia acquired two
    Cakra Class submarines that have been produced in Germany.
    The growing quantity of specialized imitation sites calls to mind many questions, but perhaps the biggest
    coming from all: what would be the top eleven best potential
    names for Groupon rip-off sites. So whichever GPS manufacturer unit you could possibly
    own and use, you’re sure to become capable of improve its
    features. t realize until the very end is the
    fact that whichever relative receives the “winning” lot (in cases like this, Tess Hutchinson) will be stoned to death through the other townspeople.
    Steph may not be around that, but after all, she gets sick and tired with
    peanut butter and olive sandwiches once in a very while.
    Baby carriages became a middle-class obtain only within the 1950s.
    real estate property marketplace is in turmoil and purchasing property this is
    sketchy at best, there can be a solid investment option that may provide over monetary
    rewards. However, this excludes all kinds of sexual coercion, exploitation and abuse at
    any some time to situations in life. Margaret “Meg” Murry will be the protagonist who is continually in trouble
    at school.

    Stop by my web blog; top eleven hack download

  17. Lacy says:

    With technology taking leaps and bounds on a daily basis you would have to live under
    a rock not to see how far we have come and not to be
    amazed. And I’m not meaning the android games that will undoubted be downloaded to
    the console by players, but will the Ouya versions of said games be able to be played with and against their android counterparts.
    The unity community was eagerly waiting for
    the release of windows 8 for access to windows phones.

    my web-site shadowgun deadzone hack gold

  18. Josefina says:

    Good write-up. I certainly appreciate this site.
    Keep writing!

    My web page :: Where to Buy IC-5

  19. Carroll says:

    Soldiers of Anarchy Demo Sudden Strike 3: Arms for Victory.
    Warhammer 40,000: Fire Warrior Worms: Armageddon Demo.
    One could be the people get little say by which channels or show are broadcast.

    They also give you a seal as well as a document of authenticity
    not to mention a rating. “No man cannot become rich
    without enriching others,” revealed Carnegie. Make a short introduction and let everyone find out more
    regarding the program as well as purpose. Those wanting a much more action-oriented experience
    can quickly build an army to devastate their enemy directly, while those
    who take pleasure in the strategy and tactical aspects from the genre may also be capable of finding
    these elements inside the game. Money likes to flow it loves people who manage it competently.
    This past weekend was one of the most transformational of playing and it is BECAUSE of Reconnective Healing.
    You is now able to ask its members to create their ideas for team names.
    5 per cent annually [in 19th-century Europe], plus it was below
    the speed of return to wealth, which averaged from four to five %,
    leading to huge inequality of wealth. To take advantage of the game to its fullest you may need to possess your entire computer
    components upgraded to the latest versions. All you’ll need to know are several minimal details about the person that will assist to find
    them. Just a good example of Relic fixing the few things that was wrong using the original game.
    The Mego Corporation was founded inside early 1950s by David Abrams along a reputation before the 70s of producing cheap, dollar store type toys.
    The indictment also named Mego’s General Counsel and Vice-President, in addition to a number
    of other former Mego executives. They say the products for your most
    work within the way they say they’ll knowning that in addition they
    taste good. Notice how this really is completely different from saying, “Hey babe. In addition, it ought to even be noted that a few are “wild
    harvested” meaning actually picked, because the name suggests, from your wild and thus are incredibly organic and without any pesticides. After the widely used Cher and Happy Days figures, Mego struggled to find the newest hit. You need the dev console in order to be capable of input cheat commands. In the early 1970s Rolling Stone changed printers and went along to a tabloid format enhancing the sizes with the covers from 8. They’re a deliciously fresh addition for the usually formulaic landscape of RTS gameplay that contributes beautifully for the already solid options of Company of Heroes. If you would like to experience Reconnective Healing personally I do facilitate distance or perhaps in person sessions in Oneonta, NY. You are capable to access Netflix in Gibraltar, along with another American content which is restricted to people living inside the United States.

    Also visit my webpage :: hay day hack

  20. Robt says:

    I have read so many articles or reviews about the
    blogger lovers but this article is truly a nice paragraph,
    keep it up.

    Here is my webpage: test

  21. Wyatt says:

    Oh my goodness! Incredible article dude! Thank you, However I am encountering
    troubles with your RSS. I don’t know the reason why I am unaable
    to join it. Is there anybody having similar RSS problems?
    Anyone that knows the solution will you kindly respond?

    my page :: beest automatic coffee machine for office; http://infocomtechnologies.com,

  22. Dacia says:

    Everything is very open with a precise description of the challenges.
    It was truly informative. Your site is very helpful.
    Many thanks for sharing!

    Have a look at my web blog; remove malware – http://patch.com -

  23. Dorcas says:

    Heya i’m for the primary time here. I came across this board and I to
    find It truly helpful & it helped me out a lot. I hope to offer
    something back and help others like you aided me.

    Here is my blog :: خرید شارژ همراه اول (Dorcas)

  24. Reyes says:

    I saw firsthand who was making money and who wasn’t, what worked and what didn’t,
    what people wanted that wasn’t available and what was to easy to find but wasn’t wanted.
    You may want to include a vegetable garden in your landscaping
    plan. Any business you want to start needs to begin with a business plan.

    Feel free to surf to my blog post … simple landscaping ideas; http://toboganium.com/,

  25. Paulina says:

    But still, I actually hollowed out a portion of the women arrested for prostitution, but in Eagle Rock home.
    The business itself does not need the permit any longer.
    Michael Nogueria/Eagle Rock Businessowner: Well, my friends boom beach hack and I don’t, the faster things go, your first named horse.
    With coordinates in hand, I just didn’t have to replant. Astronauts, especially those who have gone nowhere.
    My focus at the speed of light.

    Feel free to surf to my blog – boom beach hacks

Leave a Reply

If you want a picture to show with your comment, go get a Gravatar.