A Detailed View of Medicare's Destruction of US Medical Care

Yesterday's Wall Street Journal included an eye-opening editorial by Richard Hannon, a Blue Cross Blue Shield (of Arizona) SVP, concerning how Medicare contributed to the destruction of US medical care.

Hannon's father-in-law was a doctor. The type of doctor whom Hannon describes as 'a Marcus Welby, M.D.' type who made house calls and treated the poor sick either for free, or for payment in kind. He writes,

"I remember my father-in-law, a real-life Dr. Welby, telling me the exciting news that the federal government was going to start paying him to see seniors- patients who before he had seen for the proverbial chicken (or nothing at all). That fabulous deal was Medicare."

Right at this point, I thought about prior posts I've written on this or my other blog concerning how Medicare was a rather stupidly-designed knock-off, for medicine, of the 1930s Social Security program. They both share direct federal government intrusion into otherwise-private behaviors, and a 'common pot' approach to social services provision. That is, social security has a single general fund out of which payments are made, without any limits on individual payments or an ability to assign individual ownership of assets.

In the case of Medicare, just from Hannon's example, it's easy to see how wrong things went from the very start. Rather than have government, as a third party, pay the doctor, why didn't Washington's political hacks simply means-test Americans for vouchers to be used either to buy health insurance or to fund a health savings account, out of which to pay for medical care?

Hannon continues by describing how Medicare's costs ballooned so exorbitantly that, in 1966, Congress estimated the program's 1990 cost would be $12B, which was laughably under the actual 1990 cost of $107B!

Then came cost controls. But Hannon provides details that simply defy reason and logic,

"To fix the cost problem, Medicare in 1992 began using the "resource based relative value system" (RBRVS), a way of evaluating doctors based on factors such as education, effort and specialized training. But the system didn't consider factors such as outcomes, quality of service, severity or demand.

Today most insurance companies use the Medicare RBRVS because it is perceived as objective. As a result of RBRVS, specialists- especially those who perform a lot of procedures- do extremely well. Primary-care doctors do not."

It makes you want to cry, doesn't it? Most sensible people wouldn't design such a stupid system. And they'd certainly include outcomes and relative demand or incidence of condition and disease when creating algorithms to price medical care.

Hannon goes on to trace the decline of the GP, or, as they are now called, primary-care doctor, under this pricing system. And to lay the demise of good, preventative primary care at the feet of Medicare's centrally planned system, replete with formulas, data, and abstracted views of medicine.

His editorial is engaging for its combination of a personal anecdote which captures so well the innocent hopes even doctors initially held for the centrally-operated federal government medical juggernaut which would ultimately warp, then destroy the simpler, less-expensive world of medical care that I knew in my youth.