Tuesday, July 28, 2009

Can nationalized health care reduce cost? What does our experience right here in the USA say? 

Instead of going through the current debate about health care reform imagining the good and bad possible results of nationalized health care, let's consider our actual experience of it right here in the USA.

We have more than most people think. For more than 40 years we've had two single-payer government-run health care plans right here. One is Medicare, which everyone talks about, the other is Medicaid -- the government-run health program for low income individuals and families. The cost of Medicaid is now over $330 billion [.pdf] annually, rivaling that of Medicare, though it receives much less attention.

The Obama administration claims a critical reason to move to nationalized health care is to reduce rising health care costs that otherwise project to grow so great as to threaten the very solvency of the US government as soon as 20-odd years from now (which is true enough!)

It claims that its health care program can cut the projected level of health spending over the next 20 years by as much as 30 percent [.pdf] -- through application of careful scientific analysis to direct medical expenditures towards the most effective procedures, and so forth.

But what does experience say?

Well, by far the most wasteful cost to cut, and the simplest, the "lowest-hanging fruit" of all costs to cut, is fraud. No scientific analysis is needed for that at all!

How good is the government's record of cutting fraud from the health care it pays for?

"Of $34 billion annually spent by the Medi-Cal program for health care for some 7 million poor Californians, state officials estimate that as much as 40 percent or nearly $14 billion is stolen in fraud..." [LA Daily News]

New York Medicaid fraud may reach into billions ... "It's like a honey pot," said John M. Meekins, a former senior Medicaid fraud prosecutor in Albany who said he grew increasingly disillusioned before he retired in 2003. "It truly is. That is what they use it for"...

James Mehmet, who retired in 2001 as chief state investigator of Medicaid fraud and abuse in New York City, said he and his colleagues believed that at least 10 percent of state Medicaid dollars were spent on fraudulent claims, while 20 or 30 percent more were siphoned off by what they termed abuse, meaning unnecessary spending that might not be criminal. "So we're talking about 40 percent of all claims ..." [NY Times]

These are reports of 40% fraud in Medicaid -- not "inefficient medical procedures", but f-r-a-u-d and abuse -- from coast-to-coast, or at least on both coasts, 3,000 miles apart. (Remarkable consistency!) Total Medicaid fraud is estimated to be in the deca-billions, nobody really knows the exact number obviously.

How can this be?
Over half of states now spend less than one-tenth of 1 percent of their Medicaid budgets to fight fraud ... New York cut the number of health-department staffers combating Medicaid scams from 200 to 50 [as] expenditures have grown by $30 billion ...

Federal supervision of these fraud-fighting efforts is almost nonexistent. The GAO reports that the federal agency responsible for overseeing Medicaid employs just eight people, wielding a minuscule budget of $26,000 annually ... [City Journal]
Well, how can this be?

The answer is simplicity itself. Government-run health care is run by politicians, and politicians get votes by providing medical benefits to people -- not by taking benefits away from people, especially from the poor (Medicaid) and the old (Medicare).

Now, combine that with the fact that politicians get contributions, votes, and labor support from a huge range of groups who want more payments for medical services to flow easily, without check, from the government. Doctors, hospital CEOs, unions of health care workers, medical supply businesses -- they all lobby for more, easier funding of medical care.

Where is the interest group that is advocating reducing health expenditures, even if only to reduce fraud, to balance these political drivers? There isn't one. It's as simple as that.

Politicians do what gets them elected. They get elected by handing out more, and get un-elected by handing out less. "Efficiency" doesn't enter the equation at all.

Now the "trillion dollar question" (literally) for health care is, what is there in the Obama/Democratic proposal to remedy this problem of the behavior of politicians -- and the political incentives that drive their behavior? Do Obama and the Democrats even mention this issue?

At any point in the debate have you heard Obama, or anyone on the left, anyone at all, even mention the deca-billion fraud losses in Medicaid? Even thought they ought to be the easiest cost savings at all -- and in fact are large enough to pay for a significant portion of Obama's entire health care proposal by themselves!

If nationalized, politician-run health care can't even cut fraud like this, what cost can it cut?