Wednesday, July 22, 2009

A good question re Medicare

UPDATE: I got a cost concentration fact wrong below.

(1)In overall health system:
*1 in 100 people in US consume a bit more than 1 in 5 dollars. 50 in 100 in the US who use the smallest amount of care, use only 3%

(2)In the Medicare program:
*1 in 10 Medicare beneficiaries consume a bit more than 6 in 10 Medicare dollars.

If you go to there are numerous slides, etc. demonstrating these relationships in horrible detail.

*One thing to note, these are annual figures. If you are in the low spending group one year, you don't know you will always be there...this is why you need insurance (uncertainty).
*you can go through your entire life as a low user, but you will almost certainly be a high user just before you die. Because Medicare covers people 65+, they pay for lots of this care.

A reader asks a good question.

Hi Don,
> I have a question. If approximatly 90% of health care cost for
> individuals are for the last year of a persons life, most of our current
> cost are through medicare and mediciad. If the government can't control
> cost within that part,, 90% of cost, how can the government make it less
> expensive for the rest of us? Maybe I'm missing something. It just
> simply scares me what is happening in Washington.
Hey. Your question is a good one.

It is 25% of all Medicare spending in a given year comes in the last year of someone's life. Not 90%....unless you are asking a different question. But, 25% of total Medicare budget spent in last year of someone's life is still lots. A couple of things about this fact (25% of Medicare spending in last year of someone's life).

*you don't know when it (last year of life) starts until you it makes it hard to figure out when to start 'saving' money. Not trying to be funny, but the medical system is set up to do everything, and I think Americans value this try everything approach.
*Medicare covers folks 65 yrs + (and permanently disabled and end stage renal disease) so it is responsible for covering the most expensive folks. The most important descriptor of Medicare is not that it is a gov't insurer, it is that it covers folks in their older years when they are more likely to get sick. There is no private insurance company in their right mind that would take over the entire Medicare program....because the sickest folks require tons of money.
*Even within Medicare, there are huge differences in spending with a very few consumming a very lot. 1 in 100 Medicare beneficiaries consumes about 1 in 5 Medicare dollars. Whoever is responsible for covering them is going to have massive costs....again, no private insurance company would ever cover these folks. I understand Medicare to essentially be a fulfillment of 'honor thy father and mother'....but I think we should do it more sensibly.
*The biggest problem with Medicare in my opinion regarding costs is that it has very stringent payment rate setting (meaning how much doc paid for a visit, or how much paid to a hospital for a cataract surgery, etc.) but does virtually nothing to determine what is actually done in terms of care. That is left totally up to the doctor and the patient. Docs and hospitals can't negotiate with Medicare for payment rates, Medicare sets them....but Medicare does almost no policing about what docs and patients decide to do.
*Most policy attempts to address what is noted just above has focused on cutting payment rates (like all the bills now have Medicare payment cuts) but there has never been an attempt to begin to judge whether some care is legit or not. This is because (1) the docs will go bananas, and (2) patients will get upset about cutting off services (rationing). We have to start setting some standards (my opinion) and identifying care that is either of no value, or that is of very diminishing value.
*Congress has no hope of doing this, to big, too political....only chance is something like a base closing commission of experts that adopts a series of recommendations related to quality improvements and cost effectiveness research...then Congress has to vote it up or down (like base closing).

So, biggest problem for Medicare from a cost standpoint is that it is responsible for covering every person who is age 65+, and pays for the care just before most deaths in this nation, and most people are very ill just before they die (about 30% suffer sudden death; rest are typically ill for some period of time).

Upon re-reading question, I think you were saying 90% of lifetime costs for a given indivdiual is spent in their last year of life...I am not sure it is that concentrated, but it is very concentrated. The answers above really hold either way, Medicare pays for the sickest folks, and it happens to be a gov't insurer. No private insurer would cover all Medicare beneficiaries....the Medicare Advantage plans are well known for enrolling the healthiest Medicare beneficiaries.


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