Thursday, March 27, 2008

Imagine A World Without Medicare

Imagine if Medicare were to become insolvent. What would happen?

Would the sky fall?

Would people stop needing or receiving healthcare?

I don’t think so.

The implications of this are interesting to ponder.

I suspect the majority of us would be fine. Healthcare would be delivered, but the world of healthcare as we know it would rapidly change. Congress would likely attempt to take the path of least resistance to maintain solvency by raising taxes, imposing a healthcare mandate, or delaying the Medicare eligibility age.

But what if all hell broke loose and no Medicare were available. What would our healthcare world look like?

First and foremost, existing entities dependent on Medicare payments would scurry to assure their viability and potential for profitability any way possible. For most, rationing of healthcare benefits would rapidly accelerate. High risk individuals would be denied insurance coverage or face exorbitant premiums. Competition for low-risk patients would accelerate between insurers. The weak insurers would die out or be consolidated and the strong would likely survive. Hospitals would shift billing from their largest insurer to the patients themselves. Patients would have an eye-opening experience when the reality of their price markup reveals the perversity of health care prices. Grass-root advocacy groups would call for immediate change to include price transparency. Hospitals would be forced to compete for high-cost services. Simultaneously, hospitals would recognize the need to greatly restrict new debt obligations (like construction costs) to conserve resources to cover bad debt. The unchecked hospital construction boom would quickly cease. Unnecessary administrative and support personnel would be weaned. Hospitals would put pressure on suppliers to reduce costs: pharmaceutical companies and medical device companies would be forced to cut costs, lest their customers go bankrupt, too. Pharmaceutical companies, eager to cut costs, might remove the excess cost-ballast of direct-to-consumer advertising. CEO’s salaries and severance packages would come into line with reality. No one would be spared cost-cutting measures.

Regrettably, many patients with existing illnesses would likely be forced into bankruptcy as hospitals would increasingly employ legions of collection agents to extract payments from their patients' assets. Some would turn to Medicaid or another government safety net system. These stories would likely make heart-wrenching press stories and more pressure would be placed on the healthcare system to reduce costs or develop cost-effective options for the disenfranchised. Suddenly, patients will ask, “Could this happen to me?”

Doctors would immediately opt out of accepting any Medicare reimbursement due to the unreliability of payment. At least the threat of reimbursement cuts would cease. Especially since the ultimate reimbursement cut had just occurred. Patients would have to negotiate with doctors to provide care. Each test ordered on behalf of their care would be closely scrutinized for necessity. Costs would have to be transparent. Patients would become frugal lest they squander their life savings. Insurers would adapt to providing patients with insurance options to cover their costs. Employers would have the options of purchasing insurance for their employees at varying levels of coverage as a “perk,” provided the costs were not excessive. Since healthcare would no longer an entitlement, people would have to prioritize their savings to adjust for the inevitable need for late life care. Health savings accounts, or their equivalent, would flourish.

Admittedly, there are those less fortunate who cannot afford to contribute meaningfully to their healthcare costs, or there will always be individuals whom have been afflicted with a malady that has left them unable to contribute. For those, a bare-bones government-sponsored health plan would have to be available. To do otherwise would be inhumane. But healthcare, like hotels and restaurants, will gradually be tailored to meet the needs of patients. Those wanting 5-star Hilton-like accommodations and can afford them, will pay for them. Those that can only afford a Motel-6 accommodation will pay less. Nothing will be free any longer. Come to an Emergency Room? Expect a bill. Can’t pay? Apply for government assistance or a low-cost insurance or payment plan. That’s the way it’ll have to be.

Additional pressure would also be applied to limit unnecessary and costly testing in a non-Medicare era. Pressure to establish meaningful nation-wide tort-reform will simultaneously take place. Since medical errors in any healthcare system are inevitable, peer-directed health courts or a no-fault payment policy would have to be implemented. Perhaps then, and only then, patients with legitimate complaints will be heard and compensated, while exorbitant and costly legal posturing and judgments with grossly overpaid expert witnesses and the like, will end.

Without Medicare, for the first time healthcare policy would become a priority, not an afterthought.

Imagine. Real change.

And most for the better.



#1 Dinosaur said...

Great post! All I would ask is that you change the word "reimbursement" to "payment" each time it occurs. Strenthens your entire argument.

Anonymous said...

With Medicare projected deficits well into the double figure trillions (no, not a misprint), your well reasoned essay is a blueprint, not a speculation.

DDx:dx said...

"there will always be individuals whom have been afflicted with a malady that has left them unable to contribute. For those, a bare-bones government-sponsored health plan would have to be available"

Ain't that the rub now? You know how many folks I see in the ER on disability for a bad back or Adult ADD? That's SSI, I know.
...Medicare SHOULD die. Making universal a failed system is right up there with 1960's soviet economic policy. But the real question should be, what would you( or me) like a health care system to look like? What is the vision?

The real impact of Medicare failure will be the ripple economic effect, much greater than the sub prime housing slowdown. The "health effects" disease rampant, dead bodies in the streets, is Hollywood. When Hospitals cut back jobs(often the major employer in small towns)and the mill closed 5 years ago, it could look like the 1930's...

Anonymous said...

My co-worker's father was a physician in Michigan. He was telling me that until Medicare came along his father never made much money, but that they always had food and services because people would barter with them for medical treatment.

Amelia Ames said...

Scary, but probably necessary. It scares me to think of the transition, but once you get there, it would be reasonable and right.

Anonymous said...

Medicare,medicade, and self pay make up what % of hospital admisssion? My guess is 65%. Out of those only less than 5% could afford any health care is my guess. It seems like alot of layoffs and decreases in salaries would happen. A lot of life styles would change. 5 cars 2 homes living big on tax payers money.

Anonymous said...

Would it be right? Most of us are getting older. As we get older we get sicker. Virtually no insurance would want to have retirees including catastrofic care insurance. This isn't likely to change.

In terms of saving enough for healthcare costs later in life: I am fairly comfortable financially with income and savings that put me in top 10% of Americans; yet I'd be hard-pressed to cover costs of hundreds of thousands. I suspect for most people it'd be next-to-impossible to save hundreds of thousands for healthcare late in life + the amount of money needed to live on in retirement. Catastrofic care insurance would be really difficult to get too once you are old.

In terms of unnecessary tests. Yes, the third payer is one reason, but it isn't the only one. Public ignorance about tests benefits and risks combined with constant promotion of testing in the media is another. You may say that once people start questioning tests that'll change. It may have lessen the demands for tests from public; but if a doctor wants to order the test e.g. for defensive reasons (or monetary - most of lung CT advertising comes from doctors) a lot of patients would find it hard to refuse. From (totally unscientific) personal experience: when I just came to the US I had no insurance and had to pay cash. Later I had a large deductible. Yet while I suspected that not every test a doctor wants to order may be necessary, I was really reluctant to question the doctor. After all "what if" test is really needed, "what if" doctor would label me "non-compliant" what if doctor would be offended that I don't trust his or her judgement. I suspect for many asking "is this test really necessary" is difficult.

In terms of testing - rich will still have unnecessary tests not because they really want to but because they believe every test is potentially life-saving. Poor people will have no tests at all. Because let's face it, even for recommended tests the NNS is often high. Saying "if you have this test, it has 1/1000 chance saving your life after 10 years of testing; but in the same 10 years your probability of having at least 1 false positive (more money; anxiety; risk of more invasive tests) is 50%; you also have a higher chance of being diagnosed with the desease (overdiagnosis)" wouldn't sound very convincing to someone paying out of pocket. Provided of course that this information is available; but with more people questioning tests more people would investigate all tests. This isn't necessarily a bad thing, of course, although some may disagree.

The easiest and far less drastic way to make public more aware of costs is to go from HMO-like copayments with no deductibles to PPO-like 20 or 30% co-insurance with deductible. Not necessarily such a high deductible as in HSA plan (arguably - many will disagree), but just a regular PPO type deductible. Many companies are already doing it. Mine replaced most HMOs 5 years ago with two PPO options (higher premiums - smaller deductible; lower premiums - larger deductible) and one HSA/high deductible plan. I suspect lots of companies will follow suit soon.

As to medicare, I think that it should be limited to those below certain income level. A multi-millionaire doesn't need medicare; but most middle class and even upper middle class retirees need something.

Unknown said...

Wes -
Brilliant analysis.
I'm with you - stop rearranging the deck chairs on the Titanic. Necessity is the mother of invention. Let Medicare cuts happen and just force the issue.
Of course, the politicians will come through at the eleventh hour and put off Medicare cuts until after the elections.
After that, watch out.

Anonymous said...

Dr. Wes,

Great piece about why the Medicare cuts should go through. However, you also suggested a government-sponsored health insurance program for the destitute. If government is allowed to re-enter the market, then won't they simply encumber everyone all over again with pointless regulations, excessive costs, etc.? Why not just bring back the classic teaching hospital, with free/inexpensive care done by students/interns? This would be a lot simpler and just as effective as any government solution (keep in mind that the vast majority of government workers at ALL levels are unemployable outside govt.)

The Happy Hospitalist said...

when the spigots of cash dry up, the real market forces would come out and play.

And a mean lean survival machine would prevail.

Not the bloated pig called American Healthcare.

Great entry

yanub said...

Oh, what a great idea. Sure, some tens of thousands of people with serious health care problems will be left without treatment for their chronic conditions, and will fall into abject poverty and even worse health and perhaps die. But all that really matters is the better tomorrow, since none of that applies to right-thinking people who had the good sense to be born to prosperous parents and who made sure to save up their lemonade stand money ever since kindergarten. Yeah, great plan you have there.

DrWes said...

Our current "solution" is so much better? 40 years of fiscally-irresponsible "entitlement" programs have exacted a remarkable toll on our economy and threatens more than just healthcare. If the government just prints money to "solve" this crisis, the housing crash of today will look like chump change. No one wants to see patients suffer - certainly those who need chronic ongoing complicated care. But until we accept that continued feeding from the government trough has a downside, then things like access and ever-inflating costs will continue. How many people will die from that?