I’ve saved the toughest one for the last.

Reforming Medicare and Medicaid.

Not to mention the push to bring the 50 million uninsured in under the tent of coverage.

Currently, the Medicare tax is 1.45% for both Employer and Employee…and unlike Social Security, there is no wage ceiling exempting the top 10% of earnings.

All wage income is subject to this tax…but the shortfalls facing medical entitlement spending are gargantuan. If we tried to close the gap by taxation alone, the results would be ruinous.

True reform will require selecting from the following unpalatable menu…a true dog’s breakfast, to borrow the English term of art.

1. Fee for Services will have to be scrapped.

The incentives are all skewed towards procedures, rather than outcomes.

This is the kind of pricing incentive you get when you rely on a third party for reimbursement.  It would collapse of its own weight if the consumer paid the tab directly.

Imagine your outrage if your service manager racked up a $5,000 repair bill when you brought your Toyota in for an oil change, with the innocent explanation that they thought it prudent to run some diagnostic tests to see if everything was o.k.  That’s how medical economics plays out in its full dysfunction.

2. Rationing of scarce services can be plotted against either the axis of time or availability.

Time delays are common in the western welfare democracies, and are likely under any plan for universal coverage we may adopt.  Procedures will be determined to be elective rather than essential, and the long queue will then form.

The law of great numbers comes into play, and a certain percentage of those on the wait list will expire before their ticket ever comes up.  The charm and efficiency of your DMV office will take the place of the expensive, but mostly  efficient medical services market now available to those with insurance.

Rationing by availability can be accomplished in a variety of mechanisms.  Avaricious and unprincipled trial lawyers have already greatly thinned the herd of OB/GYNs and Neurosurgeons.

The new frontier will be the adoption of “best practices” which is MBA-speak for a restricted list of approved procedures.  Low cost, preventive health measures for younger patients will prevail, just as high cost, remedial interventions for older patients will not make the cut.

This should not come as a shock to anyone who understands the allocation of scarce resources when coupled with unlimited demand.

We deem it necessary and wise to practice triage in the battlefield MASH units, so that those with the highest likelihood of recovery receive priority treatment over the more dubious casualties.

I’ve come to the conclusion that the scandalous exclusion of proper medical care for the uninsured is an intolerable burden for our economy and society.

Most employers, and likely all employees, would agree.

In return, I’d like to see some recognition of the fundamental reforms I’ve just discussed, so that expectations can be managed to fit the reduced and limited coverage options that will inevitably result from health care reform.

Not everyone will be able to go to college…or qualify for a subsidized, low interest loan….or get that free hip replacement when the actuary tables tilt in the wrong direction.

Life is not fair.  It’s just better than the alternative.

Posted: 06|19|09 at 6:27 am. Filed under: healthcare, retirement.
Comment | Trackback