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> Multiple the medicare spending for the amount of population it serves and rejoice in a 40% GDP spending on healthcare. Don't forget to account for the fact

> Multiple the medicare spending for the amount of population it serves and rejoice in a 40% GDP spending on healthcare. Don't forget to account for the fact that Medicare's reimbursement rates are not self-sufficient - they're implicitly subsidized by private insurers. So it's actually much higher than that.

conanbatt 8y ago
That effect goes both ways: medicare gets patients that are old and have more expensive and chronic diseases, thus their spending per service might be very efficient. Which leans on which is hard to know without some rigorous analysis.
- chimeracoder 8y ago
  > That effect goes both ways: medicare gets patients that are old and have more expensive and chronic diseases, thus their spending per service might be very efficient. It doesn't really matter, if they're reimbursing below COGS (which they are). If the expected value of a set of numbers is negative, you can't make it positive by adding a bunch of other numbers which are also negative (even if they might be closer to zero, which in this case they oftentimes are not).
  - conanbatt 8y ago
    I don't follow your reasoning. Private insurance pays physicians more than medicare, producing the implied subsidy you mention (as they pay less). But once patients get onto medicare, they dont go to private insurance anymore so there is no subsidy: almost all the money is spent by the state at that stage. This has the incentive that private markets have incentives to do disease treatment and prevention before the patient goes to medicare, potentially offloading care onto the later stages. I would surely like some formal study and analysis on this, i feel this is very theoretical.
    - chimeracoder 8y ago
      > I don't follow your reasoning. Private insurance pays physicians more than medicare, producing the implied subsidy you mention (as they pay less). But once patients get onto medicare, they dont go to private insurance anymore so there is no subsidy: almost all the money is spent by the state at that stage. As a provider, let's say 40% of your patients are on Medicare, and 60% are on private insurance. On average, you're losing money on a per-patient basis for 40% of your patient base, since Medicare's reimbursement rates are below COGS. You stay in the black by charging the remaining 60% enough to make up the difference. Without the privately-insured patient base to subsidize the Medicare patients, the provider would go out of business immediately, because they wouldn't even have enough revenue to cover the direct, marginal costs of supplies for each treatment, let alone anything to pay for staff wages, office space, overhead, etc. > I would surely like some formal study and analysis on this, i feel this is very theoretical. This isn't theoretical at all. It's no secret that Medicare's reimbursement rates are below sustainable levels. Medicare itself admits as much. For providers that see a high enough percentage of Medicare patients that they can't effectively distribute the costs among their privately-insured patients (because there aren't enough of them), Medicare actually runs special stipend programs, where they provide you with extra money to stay afloat (separately from the regular reimbursements).
      - conanbatt 8y ago
        I dont agree with this analysis, but Im more than willing to read up on it. > Medicare does not reimburse below sustainable levels > On average, you're losing money on a per-patient basis for 40% of your patient basis.. I disagree with this conception of sustainable: at any point if you have two suppliers with price differenciation yes, one of them 'subsidizes' the other, but that doesnt make it so the latter doesnt bring revenue. If by law airlines could not sell coach anymore, they would all drastically go out of business, even though they dont make money on coach. Medicare does lower reimbursement but it only matters in so far they take the spot of a private insurer. Furthermore, sustainable implies that there would be no providers at medicares rates but that is not true: there would be less because they pay less, but you would still have providers. Second, accepting medicare is a hassle for providers but I assure you they dont do it out of charity. They give you infinite demand which means you can fill your non-private insurers slots with medicare and provide lots of revenue.
jadedhacker 8y ago
I don't believe this is accurate. The causality runs the other way. Medicare takes the oldest sickest patients away from private enterprise. Private insurance gets to cherry pick healthy people and aggressively denies coverage whenever it can.
- chimeracoder 8y ago
  > I don't believe this is accurate. The causality runs the other way. Medicare takes the oldest sickest patients away from private enterprise. Private insurance gets to cherry pick healthy people and aggressively denies coverage whenever it can. As I explain below, Medicare reimburses providers rates that are below COGS. That's not a secret, and Medicare itself admits as much. It's not hard to see that, if Medicare reimburses rates that are below COGS, the only way providers can stay in business is by making up those losses with non-Medicare patients. The patient pool of Medicare is actually not relevant to this entire conversation, because we're talking about what Medicare themselves reimburse for individual services, so we're already comparing like quantities. But if you really want to explore that line of reasoning, note that privately-managed Medicare plans (who have the same general patient population as Original Medicare) systematically outperform Medicare on the three top metrics: medical outcomes, cost, and patient satisfaction.

conanbatt 8y ago

That effect goes both ways: medicare gets patients that are old and have more expensive and chronic diseases, thus their spending per service might be very efficient. Which leans on which is hard to know without some rigorous analysis.

chimeracoder 8y ago
> That effect goes both ways: medicare gets patients that are old and have more expensive and chronic diseases, thus their spending per service might be very efficient. It doesn't really matter, if they're reimbursing below COGS (which they are). If the expected value of a set of numbers is negative, you can't make it positive by adding a bunch of other numbers which are also negative (even if they might be closer to zero, which in this case they oftentimes are not).
- conanbatt 8y ago
  I don't follow your reasoning. Private insurance pays physicians more than medicare, producing the implied subsidy you mention (as they pay less). But once patients get onto medicare, they dont go to private insurance anymore so there is no subsidy: almost all the money is spent by the state at that stage. This has the incentive that private markets have incentives to do disease treatment and prevention before the patient goes to medicare, potentially offloading care onto the later stages. I would surely like some formal study and analysis on this, i feel this is very theoretical.
  - chimeracoder 8y ago
    > I don't follow your reasoning. Private insurance pays physicians more than medicare, producing the implied subsidy you mention (as they pay less). But once patients get onto medicare, they dont go to private insurance anymore so there is no subsidy: almost all the money is spent by the state at that stage. As a provider, let's say 40% of your patients are on Medicare, and 60% are on private insurance. On average, you're losing money on a per-patient basis for 40% of your patient base, since Medicare's reimbursement rates are below COGS. You stay in the black by charging the remaining 60% enough to make up the difference. Without the privately-insured patient base to subsidize the Medicare patients, the provider would go out of business immediately, because they wouldn't even have enough revenue to cover the direct, marginal costs of supplies for each treatment, let alone anything to pay for staff wages, office space, overhead, etc. > I would surely like some formal study and analysis on this, i feel this is very theoretical. This isn't theoretical at all. It's no secret that Medicare's reimbursement rates are below sustainable levels. Medicare itself admits as much. For providers that see a high enough percentage of Medicare patients that they can't effectively distribute the costs among their privately-insured patients (because there aren't enough of them), Medicare actually runs special stipend programs, where they provide you with extra money to stay afloat (separately from the regular reimbursements).
    - conanbatt 8y ago
      I dont agree with this analysis, but Im more than willing to read up on it. > Medicare does not reimburse below sustainable levels > On average, you're losing money on a per-patient basis for 40% of your patient basis.. I disagree with this conception of sustainable: at any point if you have two suppliers with price differenciation yes, one of them 'subsidizes' the other, but that doesnt make it so the latter doesnt bring revenue. If by law airlines could not sell coach anymore, they would all drastically go out of business, even though they dont make money on coach. Medicare does lower reimbursement but it only matters in so far they take the spot of a private insurer. Furthermore, sustainable implies that there would be no providers at medicares rates but that is not true: there would be less because they pay less, but you would still have providers. Second, accepting medicare is a hassle for providers but I assure you they dont do it out of charity. They give you infinite demand which means you can fill your non-private insurers slots with medicare and provide lots of revenue.

jadedhacker 8y ago

I don't believe this is accurate. The causality runs the other way. Medicare takes the oldest sickest patients away from private enterprise. Private insurance gets to cherry pick healthy people and aggressively denies coverage whenever it can.

chimeracoder 8y ago
> I don't believe this is accurate. The causality runs the other way. Medicare takes the oldest sickest patients away from private enterprise. Private insurance gets to cherry pick healthy people and aggressively denies coverage whenever it can. As I explain below, Medicare reimburses providers rates that are below COGS. That's not a secret, and Medicare itself admits as much. It's not hard to see that, if Medicare reimburses rates that are below COGS, the only way providers can stay in business is by making up those losses with non-Medicare patients. The patient pool of Medicare is actually not relevant to this entire conversation, because we're talking about what Medicare themselves reimburse for individual services, so we're already comparing like quantities. But if you really want to explore that line of reasoning, note that privately-managed Medicare plans (who have the same general patient population as Original Medicare) systematically outperform Medicare on the three top metrics: medical outcomes, cost, and patient satisfaction.