Last Friday, I did a breakfast interview with Dave Borgert. Dave is the director of Government Relations at CentraCare Health System here in St. Cloud. For over 90 minutes, Dave fielded my questions and King’s questions. The wealth of information I gained from this interview left me overwhelmed. Processing that much information is difficult enough. (Storing that much information takes it to an entirely different level.)
Several things must be shared with you so you can better understand the health care debate.
1. When Medicare decides how much they’re paying for a procedure, it doesn’t have anything to do with whether that payment covers the cost of that procedure. The principle of supply and demand doesn’t play a significant role in determining payments. Medicare totals up how many angioplasties were done, how many MRIs were done, etc. Then they look at how much money Congress appropriated for Medicare. Once the Medicare budget is set, then a cost per procedure is established.
2. The ‘Medicare is more efficient than private insurance’ meme is a myth. Dave said that the way that Medicare can say that only 2% of the Medicare budget is spent on administrative costs is because billing is the only thing that’s counted as an administrative costs. Things like processing referrals, doublechecking what was done, whether it’s dispensing medication or IVs or whatever, are counted as patient care.
While it’s true that dispensing medication or IVs genuinely is patient care, having an administrator verify what supplies were used shouldn’t be counted as patient care. The best way to describe the administrative cost comparisons is that it’s an apples to green beans comparison. They’re that dissimilar.
3. The way that CanadaCare works is that each province is given a “global budget.” Their global budget doesn’t all go to patient care and administration. Part of their budget goes to nursing and medical schools. Another part goes to research grants. There are other things that must be paid for from this global budget, too. After these things have been paid for, what’s left is what’s actually spent on patients.
When the MRI budget reaches zero, the rest of the people needing MRIs are put on a waiting list until the next budget is appropriated.
QUESTION: How many people think that waiting 2-3 months to start chemotherapy is the type of system we should aspire to?
4. CanadaCare doesn’t include a perscription drug benefit. Let’s repeat that; CanadaCare doesn’t include a perscription drug benefit. While it’s true that perscription drugs are cheaper in Canada, it’s equally true that they’re paid for by the patient or by their supplemental insurance policy.
That’s something that you won’t hear President Obama or Ted Kennedy or other single-payer advocates talk about. You won’t hear them say that CanadaCare doesn’t pay for perscriptions. I don’t think Ted Kennedy or Max Baucus would write legislation that didn’t include perscriptions. It’s just that that’s another thing that will run up the cost of ObamaCare.
5. Medicare doesn’t negotiate prices. It sets prices. Here’s the definition of negotiate:
to arrange for or bring about by discussion and settlement of terms
Medicare tells pharmaceutical companies what they’ll pay for prescriptions. The pharmaceuticals accept this because they know that they can charge a much higher price to people with private insurances. That’s where cost-shifting starts. (The VA hospitals essentially operates the same way.)
If you want the perfect real-life illustration of what happens when a ‘public option’ or single-payer plan is implemented, just read Ed’s post about the baby that was born 14 weeks premature:
A critically-ill premature-born baby from Hamilton is all alone in a Buffalo, N.Y., hospital after she was turned away for treatment at local facility and transferred across the border without her parents, who don’t have passports.
Ava Stinson was born Thursday at St. Joseph’s Hospital, 14 weeks premature. A provincewide search for an open neonatal intensive care unit bed came up empty, leaving no choice but to send the two pound, four ounce baby to Buffalo.
Her parents Natalie Paquette and Richard Stinson couldn’t follow their child because as of June 1, a passport is required to cross the border into the United States. They’re having to approve medical procedures over the phone and are terrified something will happen to their baby before they get there.
Ed’s commentary is spot on:
But why wasn’t there a NICU bed for the child in the entire nation of Canada? The government of Canada won’t pay for more. They don’t exist to expand supply to meet demand; their single-payer system exists to ration care as a cost-saving mechanism. In a free-market system, supply expands to meet demand, which is why Canada could subcontract out to a US hospital for capacity. Michael writes that paragraph as if it was mere luck that an NICU bed happened to be open in the US, but that’s a function of the system, and not luck. These parents are separated from their child at the moment through the fault of Canada’s government and not the US.
As I mentioned earlier, Medicare’s payment system doesn’t care about supply and demand. They’re just interested in keeping costs down by utilizing a low-profile const control system. Medicare can’t afford to start paying according to the principles of supply and demand; their cost controls won’t allow them to consider supply and demand principles.
Our health care system can’t function in a price control world because there wouldn’t be an incentive for pharmaceutical companies to invest in R & D. The minute that that incentive disappears, then the race to the bottom is just an eventuality.
That’s a race that’s best not run.