Medicare Receipts, Medicare Outlays and the Medicare Deficit

Posted by PITHOCRATES - March 5th, 2013

History 101

The Seller is the Medical Provider and the Customer is the Insurer—not the Patient

Health care prices are out of control because there are no market forces in health care.  Buyers and sellers never meet.  As the consumer of health care services doesn’t pay for them.  And the provider of services neither bills nor collects from the recipient of those services.  Instead billings and payments go through a third party.  The insurer.  Or government.

The buyer is the insurer.  Not the patient.  Who is the recipient of what the buyer pays for.  Because the recipient is not paying the recipient does not care about prices.  Or the number of tests and procedures a doctor orders.  Because if you’re not paying what do you care how much anything costs or how many costly tests or procedures you have?  You don’t.

The seller is the medical provider.  The doctor, hospital, laboratory, nursing home, etc.  Their customer is the insurer.  Who pays their bills.  Not the recipient of their services.  The patient.  Because the patient is not paying medical providers can charge high prices without hurting their patient.  And they can order excessive tests and procedures without hurting their patient.  Financially, at least.  Which they often do because medical providers don’t get paid for all the services they provide.  Some people without insurance can’t pay their bills.  And insurers often refuse to pay or discount some of the bills they receive.  Also, the government is always reducing Medicare reimbursements.  Forcing medical providers to be more creative in getting paid for services rendered.

As Medicare Outlays and Receipts grew Further Apart the Medicare Deficit Soared

Medicare began in 1965.  Medical care for people 65 and older.  And like the private health care market there are no market forces in Medicare.  Worse, government bureaucrats run it.  Which throws open the doors to waste and inefficiencies.  And cost overruns.  Because private insurers have bottom lines to meet.  Government bureaucrats don’t.  All they have to do when they do a poor job managing something is to raise taxes.  Which they had to as Medicare ran a deficit in all but one year of its existence (see Table 2.4—COMPOSITION OF SOCIAL INSURANCE AND RETIREMENT RECEIPTS AND OF EXCISE TAXES: 1940–2017 and Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017 at FISCAL YEAR 2013 HISTORICAL TABLES BUDGET OF THE U.S. GOVERNMENT).

Medicare Receipts Outlays Deficit 1970-2011

Medicare ran a $912 million surplus in 1974.  We made it zero to keep the Y-axis positive.  The difference in graphs is negligible and unnoticeable at the scale shown.  The right axis shows the Medicare payroll tax rate.  Medicare outlays and receipts are pulled from the above referenced source.  The Medicare deficit is calculated by subtracting Medicare Receipts from Medicare Outlays.  However, for simplicity we show that negative number as a positive value on the graph (the graph shows the magnitude only of the deficit).  The graphs are pretty flat during the Seventies so we drop them off in the following chart.

Medicare Receipts Outlays Deficit 1980-2011

The Medicare tax rate has been holding steady at 2.8% since 1986.  This tax rate has provided a growing rate of Medicare receipts.  But Medicare outlays have grown at a greater rate.  Outlays remained flat for a few years in the Nineties thanks to the Medicare Sustainable Growth Rate (SGR) included in the Balanced Budget Act of 1997.  Which basically discounted doctors’ Medicare billings.  Doctors provide the same services.  Only the government paid them less.  After some fierce opposition this provision (the doc fix) went away.  For it was either that or doctors would leave the Medicare program en masse instead of operating at a loss.  Leaving the government with a lot of seniors without any doctors.  So Medicare outlays resumed their upward growth.  With receipts growing at a lesser rate.  As outlays and receipts grew further apart the Medicare deficit soared.

Obamacare Spending will be out of Control because Medicare Spending is out of Control

The Medicare tax is a flat tax.  Which means the more you earn the more you pay.  Unlike Social Security that has a maximum taxable earnings amount.  The Social Security tax rate is 12.4% of the first $113,700 you earn.  Bringing the FICA tax (Social Security and Medicare) total to 15.3%.  When they passed the Social Security into law they promised that the Social Security tax would never exceed 3% of the first $3,000 you earn.  Just to give you an idea of how horrible the government’s projections were.  They have raised taxes far beyond what they promised and it still isn’t enough.  Medicare is running greater and greater deficits.  So Medicare is in trouble.  And with Obamacare pulling some $700 billion from Medicare things aren’t going to get any better any time soon.

Medicare is national health care.  And the government is running it very poorly.  The Medicare outlays in 2011 were $485.6 billion (or about 13.5% of all 2011 federal outlays).  And that was generated from treating only 12.8% of the population.  How bad will these numbers be if Obamacare evolves into a full-fledged national health care service?  If you divide the 2011 Medicare outlays by 12.8% you get $3.79 trillion.  This amount would be for 100% of the population receiving medical care as if they are 65 or older.  Currently those 65 and older consume about 35% of all health care spending.  So if we multiply $3.79 trillion by 65% (1-35%) we get $2.47 trillion (or about 68.4% of all 2011 federal outlays).  Which adjusts this amount as if everyone receiving health care is under 65.  As the amount of those 65 and over receiving health care will fall under Obamacare thanks to those unofficial death panels.  And they’re going to need those death panels.  Because with the government running Obamacare it will be an abject failure.

A crude guesstimate.  But it’s probably not that far off.  For national health care is very, very expensive.  And as we’ve learned from Medicare, it’s also very, very inefficient.  Because there are no market forces in health care.  Which is why Medicare spending is out of control.  And why Obamacare spending will be out of control.  Requiring massive new taxation.  Rationing.  And cost cutting.  As in death panels.  For letting people die instead of treating them will be the only way to bring down costs.  Unless they force health care providers to work without pay.  Another way to cut costs.  Compel health care providers to work against their will.  For why should anyone profit off the suffering of others?  Which may be the next dictate handed down in Obamacare.

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Woman waits over 12 Months for Colonoscopy in Australia

Posted by PITHOCRATES - September 2nd, 2012

Week in Review

Health care in Australia is a hybrid of public and private service providers.  It is mostly a public universal health care system with a private system layered on top for those who wish to pay for it.  The federal government subsidizes private insurance to encourage some to use it and leave the federal system.  For Australia, like most developed nations, has an aging population.  Thus a growing rate of people leaving the workforce and becoming high consumers of health care services while there are fewer people entering the workforce to pay for this large rise in health care consumption results in a doctor and nurse shortage.  Which leads to, of course, longer waiting times (see Still on hospital waiting list by Richard Bruinsma posted 9/3/2012 on the Sunshine Coast Daily).

A MAROOCHYDORE woman who requires a simple exploratory colonoscopy every five years has “celebrated” 12 months on the Nambour General Hospital waiting list.

The woman, who did not want to be named, has a family history of bowel cancer and requires the regular check-ups as a precaution…

“Five years ago, I got in within three months, so I couldn’t believe a whole year has passed since I’ve been referred by my doctor…”

“If I’m waiting for 12 months for a simple colonoscopy, then what’s the rest of the health system like?”

A Nambour hospital spokesman was restricted from speaking specifically about the woman’s case but said the opening of new procedural suites at the hospital in April meant patient through-put had increased…

“All referrals to the service are reviewed and categorised according to clinical urgency and need by a medical officer. Those deemed more urgent are given priority.

“The Sunshine Coast Hospital and Health Service is working hard to assess and treat all patients on the waiting list.”

Most Australians are satisfied with their health care.  It’s one of the better universal health care systems.  Thanks to the hybrid structure of it.  And a relatively small population.  Though as baby boomers are retiring and leaving the workforce it is making an impact on their health care services.  As time goes on the Australians may love their health care system.  But they may complain about it more.  Such as in the UK.  And Canada.  Even in the United States.  Which before Obamacare they didn’t complain about the same kind of things.  The rationing of services.  And longer waiting times.  But that will come.  Because it’s happened in the UK, Canada and Australia.  And they’ve been practicing universal care for a long time.

Australia’s population is less than 10% of the United States’ population.  And it’s about a third of the UK’s.  So they don’t need a very large health care system by comparison.  But as Obamacare takes off the bureaucracy running it will be enormous.  As will the costs.  The bill itself had over 2,000 pages of new rules, regulations, fees and fines.  A lot of which were fill-in-the-blanks.  Things left noted ‘as to be determined’ by some government bureaucrat.  Meaning they will be making a lot of it up as they go.

So while the UK, Canada and Australia have universal systems with some problems with rationing and waiting times the Americans will see under Obamacare an explosion in rationing and waiting times simply because they will have so many more patients in their system than the British, the Canadians or the Australians.  Resulting in their own doctor and nurse shortage.  And if they are having problems after doing universal health care for such a long time you know some newcomer to the game will have even more problems.  Especially considering the US will have about five times the number of patients the British have.  And about thirteen and a half times the number of patients the Australians have.

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Canada’s National Health Care forces some Windsor Moms to have their Babies 2 Hours away in London

Posted by PITHOCRATES - July 21st, 2012

Week in Review

One of the most traveled VIA Rail corridors is between Windsor, Ontario, and Quebec City, Quebec.  There’s a lot of population density along that corridor.  Some of Canada’s biggest cities, too.  Including Toronto and Montreal.  But at the western terminus is the city of Windsor.  Across the river from Detroit, Michigan.  One of the most congested US-Canada border crossing.  A city all Canadians can get to by train.  But apparently health care dollars have trouble reaching (see Change to hospital could force babies, moms to London posted 7/20/2012 on CBC News).

The CEO of Windsor Regional Hospital fears a potential downsizing of its neonatal intensive care unit could mean a loss of doctors and force women to give birth in London.

The province is in the process of reviewing Ontario’s 14 NICUs. Windsor’s NICU is currently classified as a modified Level 3 care centre but wants to become a full Level 3 unit. However, according to CEO David Musyj, the province is looking to increase the number of Level 2 centres and that could mean a demotion for his hospital.

“It will negatively impact 50-60 babies in a year and some 300 moms,” Musyj claims.

Windsor currently has the ability to care for pregnant women and newborns who are a minimum of 26 weeks. A change would mean those women and babies would have to head to London for care.

Why are they doing this?  Why else?  Budget cuts.  Common in a national health care system.  Something we can look forward to under Obamacare.  Once they start cutting costs to make Obamacare more efficient.  Making us travel 2 hours for health care services we once received from our local hospital.

All Canadians pay taxes.  And they will get the health care services those taxes pay for.  It just may take a 2 hour drive to get to your hospital.  Of course the good people of Windsor may be able to shorten that drive time by crossing the most congested US-Canada border crossing.  And paying for their health care in the United States.  Of course with Obamacare that may not be an option for long.

Sad, this free national health care.  It can make getting medical treatment so very hard.  Which is something we have to look forward to under Obamacare.

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A Glimpse of Obamacare through the Death of a Child in the NHS

Posted by PITHOCRATES - April 8th, 2012

Week in Review

The problem with health care everywhere is twofold.  Our aging populations.  And our longer life spans that allow people to have more illnesses.  So improvements in medicine are compounding the problem.  By allowing people to live longer so they can consume more medical services.  And unlike manufacturing we can’t use new technology to increase efficiencies.  At least not yet.  So the only way to control costs is to spend less.  Treating only those who are sick.  And sending those who are not quickly on their way.  A health care triage system.  Where they quickly weed out the non-sick to make room for the sick.  To make sure they don’t waste their limited funds and services on those who don’t need it. 

It works well on paper.  But it has one serious drawback in practice.  The ‘assembly line’ triage can only catch the glaringly obvious.  Like a missing leg.  Or blood squirting out of a cut artery.  But if everything looks okay on the outside and the standard tests come back negative, doctors can discharge a patient.  Missing something a little more rare and unusual.  Like dehydration and kidney failure in an otherwise healthy child (see Doctors failed to spot toddler’s fatal illness on THREE occasions before he died by Jill Reilly posted 4/6/2012 on the Daily Mail).

A devastated mother is demanding to find out why her young son died after medics sent him home three times in less than two weeks. 

Harry Connolly died of dehydration and acute kidney failure after medics repeatedly failed to diagnose his illness…

Mrs Connolly said: ‘The fact remains that Harry died as a result of dehydration and acute renal failure despite being admitted to hospital twice and attended by an out-of-hours doctor in the space of just five days.

‘He would have survived if he’d remained in hospital from 26 April and fully rehydrated, he would have survived had he been readmitted on 28 April, and would have survived had the out-of-hours doctor referred him to be readmitted on 29 April.

Suppose the doctors admitted a similar child who proved not to be sick.  Taking a bed in pediatrics.  Taking a doctor away from other patients.  Taking nurses away from those more ill.  Taking up time on diagnostic equipment that they could have used on others actually ill.  Perhaps pushing back someone else in line.  Who may die because of the delay.  Then the doctor responsible for admitting a healthy child has to stand before an administrator.  To explain the waste of resources.  The death of a patient they couldn’t save thanks to the waste of said resources.  And the unnecessary expense of all those tests on a healthy child.  Exceeding the department’s budget.

Sadly, these are real concerns for those in the health care industry today.  Especially in national health care systems.  Like Britain’s National Health Service (NHS).  That are bursting at the seams because of the explosion in costs because of that aging population.  And their longer lives.  Taxing available resources so much that doctors have to carefully ration health care services.  To make sure that they are available for the patients who need them most.

This is the world of national health care.  Where you try to take care of everyone.  With resources that can’t save everyone.  Where the rationing of services leaves some to die.  And causes others to die that they could have saved had they only spent a few more moments on their diagnosis.  So if you want a glimpse into the world of Obamacare, here it is.  It will be like the NHS.  Only bigger.  And because it’s bigger it won’t be as good as the NHS.  Which is the problem with health care for everyone.  We don’t have resources to cover everyone in a national system.  Because the bureaucracy to run it will consume so much of the budget.  Requiring some sort of triage system.  Or death panels.  To ration those limited services.  To choose who to save.  And who to send home.  To let nature take its course.

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The Only Way to cut Health Care Costs while Expanding Coverage is to Ration Services with Death Panels

Posted by PITHOCRATES - November 6th, 2011

Week in Review

Vermont has solved their health care problem.  To reduce costs they’re going to cover more people.  And in some other world of mathematics, this may actually make sense (see Report: Vt. public health care cost could top $9B by DAVE GRAM posted 11/1/2011 on the Associated Press).

New projections by the state of Vermont say a public, universal health care system would cost between $8.2 billion and $9.5 billion a year – roughly $13,000 to $14,000 per resident – by 2020, but that sticking with the current system based on private insurers would cost even more.

Without a health care overhaul approved by lawmakers this year, including a new law that could move Vermont closer than any other state to a Canadian-style single-payer system, costs would surpass $10 billion by 2020, the report said.

$14,000 per resident is a lot of money.  Which is why a lot of young, healthy people choose not to have health insurance.  Because they don’t consume anywhere near $14,000 per year.  Well, the young and healthy will be paying now.  Because that’s the only to pay for people who consume health care services.  By making the people who don’t consume them pay for those services.

“In a way we’ve been a victim of our own success,” said health care consultant Steve Kappel, who helped write the report. “As people get covered, spending will go up.”

Imagine that.  Cover more people.  And spending will go up.

The goal of this year’s legislation actually runs counter to that – a key target of lawmakers was to reduce cost growth while extending coverage to the roughly 10 percent of Vermonters still without it.

So, you want to reduce costs.  While at the same time you want to expand coverage.  Only one way to do that.  You have to give each person less.  Way less.

The largest category of projected savings would come from “changes in the care process,” the report said. The focus here would be on redoubling efforts to make sure necessary care is delivered and unnecessary care is sharply limited. Among the strategies: better management of chronic diseases like diabetes and getting patients to have regular checkups so they don’t end up in emergency rooms.

I won’t use the expression ‘death panels’ but what you have here is a bureaucratic panel approving treatment.  And denying treatment.  Not a doctor.  So a doctor may say that a certain treatment is necessary to save a patient’s live.  And these bureaucrats may deny that treatment.

If it looks like a duck, walks like a duck and quacks like a duck, it’s a death panel.  Because if you don’t pass muster with the bureaucrats you may be denied life-saving treatment.  Which is the only way to cut costs.  While expanding coverage.  You give each person less.  Way less.  That is, you ration services.  And if someone dies as a result the system will realize real savings.

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Why does Obama move toward National Health Care when Europe moves away from It?

Posted by PITHOCRATES - March 27th, 2011

Rationing is the Hallmark of National Health Care

Supporters of Obamacare say everyone will get quality health care services.  Opponents say it will result in lower quality and rationing.  The UK has national health care.  The National Health Service (NHS).  So how are things in the NHS?  Are they overflowing with quality health care services?  Or are they rationing.  Well, let’s take a look at one example in the vast NHS system (see Dementia checks at 75 urged by Alzheimer’s Society by Adam Brimelow, Health Correspondent, BBC News).

The NHS should offer checks for dementia when people reach 75, a leading health charity says…

Dr Laurence Buckman, from the British Medical Association, says there is value in the idea of screening for dementia, and that many GPs would be happy to carry it out. But he says many would struggle to find the time.

“It takes an hour to do an assessment, during which time five other patients could have been seen. In the current economic climate, when the NHS is being asked to make huge efficiency savings and there are many equally valid competing demands, patients and the public need to have a debate over which services should be prioritised.”

The NHS should check for dementia.  But doesn’t.  They could.  But they would have to make cuts elsewhere.  Because they have limited resources.  And more people that that they can handle on their current budget.  So they don’t check for dementia.  To save money for other patients.  That sounds like rationing.  And it is no doubt the future of Obamacare.

Europeans have Learned that Less Government is Best in their Health Care

The NHS is a behemoth.  With lots of bureaucrats and bureaucracy between doctors and patients.  And one thing about bureaucracies is that they don’t change much.  If at all.  They’re like a big ship with a tiny rudder.  Change is slow.  And hard.  It pushes bureaucrats out of their comfort zones.  So they resist change.  So while technology marches on in the private sector, the old way of doing things remain in these bloated bureaucracies. 

In the public sector bureaucracy there is a saying.  If it’s broke, don’t fix it.  Because fixing it may involve change.  And they don’t like change.  This is why people tend to get exasperated dealing with government bureaucracies.  At any level.  Standing in line to renew your driver’s license can be insufferable.  You’ll see state workers standing around doing nothing.  While you stand in line.  Why?  Because they can.  Where else are you going to go?  And so it is in the NHS.  You’ll have to deal with rationing.  Long wait times.  Impersonal bureaucrats.  Why?  You have no choice.  Where else are you going to go? 

Yes, there are problems in the NHS.  But they are not unique.  All of Europe’s health care systems are having problems (see Europe’s Failing Health by Javier Espinoza posted 3/28/2011 on The Wall Street Journal).

Reformers want to reduce the state’s role in health-care delivery and introduce a competitive element…many feel that without innovation, crumbling state-backed systems will collapse as they struggle to cope with aging populations, soaring overheads and, more recently, mounting budget deficits.

The statistics paint a bleak picture. According to the Organization for Economic Cooperation and Development, the European Union will see an increase in health expenditure of 350% by 2050, whereas at the same time the economy is only set to expand by 180%.

Some work has already been done to estimate the real impact on future expenditures. Friedrich Breyer, a professor of economics at the University of Konstanz in Germany, calculates that in Germany alone between 2020 and 2030 there will be a huge spike in the number of elderly people alongside an enormous drop in young and working-age people. “This will mean a dramatic increase in individuals’ payroll tax contribution rates to health care to 20.7% in 2030 and over 23% in 2040,” he says. This compares to just 11.4% in 1980.

Like that old saying says, competition makes everything better.  Without it there’s no incentive to improve.  Or a reason to worry about costs.  You just go to the government for more money.  Unfortunately, doing that for all these years just made these costs grow out of control.  And an aging population just compounds that problem.  You can thank birth control and abortion for that.  The baby boom was the population growth rate’s last hurrah.  And now we’re stuck with declining birth rate.  Fewer young who pay taxes.  And more old who consume benefits.  In an archaic system.  That’s cost inefficient.  In other words, health care systems around the world are broken.  And someone needs to fix them.

Unlike the U.K. health-care system, where the state manages and delivers the services, systems in the rest of Europe, particularly Switzerland, the Netherlands and to some extent Germany, rely more on a system of private insurance. Switzerland has been hailed as the least over-protective system. In that country health insurers are the ones who determine their fees and the services they provide—as long as they adhere to the basic services agreed in the country’s Health Insurance Law…

As a result of less government control, the Swiss health-care system has been able to reduce waiting time for treatment and pioneers new technology and pharmaceuticals, according to the Institute for the Study of Civil Society, a London think tank known as Civitas.

While President Obama is moving the U.S. towards a more centralized, state-controlled behemoth, Europe is moving the other way.  It looks like the social democracies of Europe have learned that less government is best in health care.  Privatization lowers cost through competition.  And it’s reduced waiting times and increased quality.  And yet Obama wants to take the U.S. in the other way.  The wrong way.  Why?

…it is in the U.K. that arguably the biggest changes need to be made. The government of Prime Minister David Cameron is determined to reform the 63-year-old National Health System. It is undergoing a massive overhaul in an effort to save £1.7 billion ($2.7 billion) a year. Under the proposed plans, general practitioners are set to take control of commissioning services for patients. The government is proposing to scrap strategic health authorities and primary care trusts, which currently commission services. The government argues it does not have a choice. The country’s budget deficit is soaring and the NHS is one of the biggest drains on its resources…

Not everyone, however, is an advocate of health-care reform. In the U.K., trade unions have been vociferous in their discontent over the proposed overhaul of the NHS…

The big fear is that these reforms promote a system where you can top up. And this diminishes the quality of health and creates a two-tier system.”

The U.K. already has a two-tier system.  The rank and file British goes to the NHS.  The affluent travel to where they can buy the best health care that money can buy.

Once upon the time unions wanted to control their health care plans.  And they offered some nice plans.  Because that’s why people joined unions.  For the benefits.  Union benefits were always better than non-union benefits.  But unions everywhere want to shed their health care costs.  Because they’re just too damn expensive.  And they can’t pass these costs onto their employers anymore.  Trade union members in the U.S. have long been contributing to their health care costs.  And the size of that contribution just seems to keep on growing.  The unions want out.  They want national health care.  But not the people who currently have private health insurance.  Because they know things will get worse.  There’ll be longer waits.  And lower quality.  How do they know that?  By simply looking at what’s going on in Europe.

Obamacare:  Transferring Money from the Private to the Public Sector

There is empirical evidence everywhere that shows Obamacare is wrong.  The U.K.  Europe.  Canada.  Cuba.  It tries to replicate here what’s already been proven wrong.  Everywhere people have tried it.  So why the persistence here in the USA to nationalize our health care?

Well, first of all, you have to look at who supports national health care.  They’re all Big Government people.  Unions.  Liberals.  Government statists.  And how do these people get power?  By pandering.  And you need money to pander.  Taxes were always a good for that until they became so high people resisted further increases.  Unions were also a good source of money (union dues supported liberal/statist candidates) but market pressures squeezed their pay (and, subsequently, what they could pay in dues).  Public sector unions were their best vehicle to transfer money from the private sector to their pockets.  Because there are no market forces involved.  Salary and wage packages are set by unions and government.  The taxpayers, who pay for these packages, have no say.  But their greed has bankrupted states and cities and angry taxpayers have voted statists out of office.  And that leaves nationalized health care as their last best hope.

You see, it’s not about providing quality health care to all Americans.  It’s about transferring money from the private sector to the public sector.  That’s why they ignore the empirical evidence.  Because they don’t care.  They just want to control that money.  And at about 17% of GDP, that’s a lot of money to pass through their greedy little fingers.  So while Europe tries to improve their health care systems, Obama, Pelosi, Reid, et al, are trying to enrich their political class at the expense of our health care system.  Further impoverishing working Americans.  And giving them a poorer health care system in the process.

Boy.  With friends like this in government, I guess we don’t need any enemies.

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