Medicare pricing drives high health-care costs
For virtually every procedure and service — from routine colonoscopies to brain surgery and hospice care — Medicare comes up with a dollar figure that the government considers a fair price. But economists are finding that, largely because of the program’s vast scale, Medicare prices substantially shape what all Americans pay for health care.
“It’s a very big problem — Medicare pays too much for a lot of stuff it buys,” said Bruce Vladeck, who headed Medicare under President Bill Clinton. “If you had better pricing policy, a whole lot of hysteria about long-term insolvency of Medicare would go away.”
“Medicare is a wonderful program, but behaviorally, because of the price-fixing, it’s a mess,” said Tom Scully, who was Medicare chief during the George W. Bush administration and is now a partner in a private-equity firm that invests in health care.
Economists believe that the Medicare prices are even more important than that massive scale suggests, because in the absence of a traditional market for medical services, the Medicare prices form the foundation for private insurers, as well.
That is partly because Medicare is such a huge player in the market, accounting for more than a fifth of the money spent on personal health care. But there is a second, possibly more important impetus: Because of the complexity of modern medicine, setting prices is an arduous, time-consuming task. Insurers save money by letting Medicare do the work.
Read more about this in the Washington Post at http://www.washingtonpost.com/business/economy/medicare-pricing-drives-high-health-care-costs/2013/12/31/24befa46-7248-11e3-8b3f-b1666705ca3b_story.html
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