No one really knows how much the new health care measure will cost but one clue is to look at the past.
Both political parties agree that Medicare is a model of success for millons of senior citizens, all of whom have no choice in health care. Our Federal Government allows no private alternative to this socialized form of health care. But how much does it actually cost each subscriber? We went to the Kaiser Institute to extrapolate and compile the numbers from several statistical abstacts from the government itself. The findings are stunning...
Medicare spending equals $450 Billion Dollars per year. This represents about one third of all Federal Government spending. There are 45 million Medicare clients. This means the Federal Government spends $10,000.00 per year on each individual client and $20,000.00 per year on each retired couple over age 65.
However, per HCFA [Health Care Funding Administration] reports reprinted by the Kaiser Family Foundation [Kaiser Foundation] a private charitable trust dedicated to affordable health care. Ninety percent [90%] of all beneficiaries received only $2,934.00 in health care benefits in 2005.
So the government spent $10,000.00 to deliver under $3,000.00 in benefits. This makes the administrative cost of the program 70% of total spending. What is incredible is that HCFA and other federal sources claim that the administrative cost is only 3%. How can they make this claim? They do this by redefining the definition of administrative costs.
Whatever the definition though, the average recipient receives only 29 cents per dollar spent on Medicare benefits.
The cost to the average recipient is equally shocking. In 2005 all Medicare recipients contributed $1,350.00 in premiums. The average recipient also contributed $4,000.00 in the present value of their yearly lifetime of contributions to the system.
So the average [90% according to HCFA] Medicare beneficiary paid $5,350.00 in past and current contributions to receive less than $3,000.00 in health care. But the real cost is even more than that. Each recipient owes a 20% co-pay to the health care provider after Medicare pays its discounted payment to the provider.
The results are that senior citizens on limited incomes have to pay an additional $590.00 to the providers; making the total cost of Medicare coverage to the average recipient just under $6,000.00 per year. For a retired couple that totals $12,000.00 per year.
Keep in mind that providers give senior citizens medical care at 60% less than the normal amounts charged to regular patients. So when seniors receive $3,000.00 in care non seniors are charged about $12,000.00 for the same care. This means that the system is subsidizing the average medical bill for the Medicare system at $9,000.00 per patient.
It is interesting to note that a competitive health care insurance plan for a typical couple aged 62 that provides for no co pay and allows the patient complete choice in provider selection [i.e. not a PPO or HMO] costs $12,000.00 per year in premiums.
Which insurance coverage would you want? Would you select the government option that gives you 60% less in coverage and could cost you much more than average if you have a catastrophic illness? Or would you select the private insurance option that costs the same out of pocket but covers you completely at the same cost?
In my last post I noted that Family Practice Physicians real incomes have gone down since 1968. The above numbers suggest that the real culprit in the explosion in health care costs is administrative costs and mismanagement by HCFA and other government health care agencies.
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8 comments:
A high dollar amount in Medi Care is FRAUD
HCFA claims that there is $50 Billion dollars worth of fraud each year.
But it is outrageous that the agency in charge of catching fraud spends $350 billion to certify and process $150 billion in medical claims and tells us that almost 1/3 of their payouts are for fraudulent claims?
I spoke to one provider who told me HCFA lists an address change as a fraudulent event. That is, if a claim was placed for a senior who moved and the provider had the updated address but the HCFA system still showed the old one, then that would be red flagged as a fraudulent claim during an audit. That means that even though HCFA would still make the payment to the provider, if the provider were audited HCFA would list the wrong address as a fraudulent act by the provider, slap them on the wrist, and tell them to make sure HCFA had the corrected address before making a claim for service.
60 Minutes notwithstanding the real fraud is being perpetrated on the American people by our government.
Bill
It is appalling. I did not realize the numbers were so high. But if you think about the layers upon layers of beaurocrats that exist in the system, it seems correct. No one seems to be pushing this story at all.
Pat,
The problem is that the numbers are supplied exclusively by the medicare system and HCFA. I put my numbers together from stats HCFA published trying to prove different points.
So you get them by joining one set of numbers with a second set. Each statistical abstract was created to prove the HCFA is fighting the good fight for us.
But I am using them in a way the agency never intended.
Bill Carroll
"Ninety percent [90%] of all beneficiaries received only $2,934.00 in health care benefits in 2005"
What are the other 10% receiving? Could it be that 10% of the recipients actaully need more than 10,000, thus blowing up the average? This seems possible considering many people need hundereds of thousands due to major health problems componded by extremely high costs. It appears that your 10,000 of spending for 3,000 of coverage is a bit misstated, and 70% of administrative costs is probably incorrect.
Yes there is fraud, and yes there are beurocratic loopholes that funnel money to the politicians and high powered executives.
The end result is that costs need to be reduced by actaully reducing waste (bloated administrative costs as you have stated, medical mistakes and malpractice, redundant employees and processes). There is no excuse for Obama, congress AND insurance companies who seep to have swept this detail under the rug, and everybody else seems to have forgotten. I'd like to hear more about that.
Your analysis is actually pretty good and it was the one made by HCFA. That is 10% of the people soaked up the lions share of the costs.
But if you look at my previous post you can see that real incomes for Family Physicians is down since 1968. It is impossible to analyze specialists over that time because specialty practice has drastically changed since then.
The real decline though over that time is real wealth. Our country has more millionaires than ever but the value of their holdings is less than those with estates worth $50,000.00 years ago.
So it was easier for a family to afford a $7.00 doctors visit in 1968 than the actual cost of a visit today. There are no more semi skilled manufacturing jobs for a middle class income. people either work at Wal Mart or they work in financial services. To exaggerate a point.
Bill: I just took this off of Google where there are more studies . Oscar
http://ohmygov.com/blogs/general_news/archive/2008/10/16/for-the-record-just-what-is-the-average-cost-of-health-care-insurance.aspx
Oscar,
That is a well reasoned site and the author makes a good point about cost estimates being manipulated by politicians on both sides of the argument.
My Medicare costs [$10,000.00 per person on Medicare] come from HCFA itself. My Private industry costs come from a Blue Cross quote for a 62 year old married couple.
So while there is no denying that the Government option costs 2x the private one, you can tell by the post just before yours by Anthony that the interpretation of the meaning of the stats is where the debate lies.
Bill Carroll
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