By David Himmelstein and Steffie Woolhandler
Room for Debate Blog
New York Times, June 1, 2011
David Himmelstein and Steffie Woolhandler are internists and professors of public health at the City University of New York. They are co-founders of Physicians for a National Health Program.
Eliminating unneeded overhead would save Medicare nearly $100 billion annually. A thicket of insurance and hospital bureaucrats and profiteers distort medical priorities and drain money from care. The most obvious are private insurers who run Medicare Advantage plans that extract overhead, averaging 15 percent, or $1,000 per senior more than overhead in traditional Medicare.
Hospitals also devote a quarter of their revenue to overhead, nearly twice what’s needed. Vast marketing departments and whole buildings that house highly paid financial schemers are the norm in our medical centers. Their goals: attract patients for profitable high tech procedures (whether needed or not); avoid the unprofitably ill (e.g. most psychiatric patients); and jack up billings by exaggerating patients’ illnesses and gaming reimbursement rules.
Rev up your scanner and you’ll find many impressive-sounding (but unimportant) diagnoses that can add thousands to a Medicare bill. Would hospitals do such a thing? Research demonstrates that such overdiagnosis is epidemic. An M.R.I. will find nasty looking knee and spine abnormalities in many Medicare-aged patients who don’t (and won’t) suffer from serious knee or back pain. Most men over 80 have a few abnormal prostate cells that will never make them sick (and won’t be helped by treatment) but can be profitably labeled “cancer.” Such overdiagnosis will bring big bonuses under Medicare’s proposed new payment rules; the risk adjustment formula will reward hospitals that label patients with more diagnoses.
Uprooting the bureaucrats will require taking the profit out of health care and simplifying our payment system. Let’s pay hospitals as we currently pay fire departments: one check each month to cover their entire operating budget, with no profit taken out and hence little reason for financial scheming. Of course, this would require a single payer reform that eliminates the need to keep track of who got each aspirin. That kind of reform has allowed Canada’s Medicare program to simultaneously cover everyone and hold down costs.