Government and Medical Costs, Continued

I’ve spent some more time going through Steven Brill’s magnum opus on medical prices, and am even more amazed at (a) the quality of the reporting (b) his weird refusal to draw the obvious conclusion...Brill highlights the extent to which Medicare is able to get better deals than private insurers, who in turn get much better deals than individuals. Somewhat puzzlingly, he says almost nothing about Medicaid, which does even better at bargaining because of its greater ability to say no. The best available research says that Medicaid — if provided directly — is way cheaper than private insurance:



So the obvious answer is to expand public insurance, and give Medicare more bargaining power.

But somehow Brill veers off at the last minute. He gets all politically realistic about the prospect of expanding Medicare; I’m all for realism, but shouldn’t the overwhelming message of his piece be that what passes for realism in American medicine is disastrous? And he argues that

trying to cut the deficit by simply lowering the fees Medicare and Medicaid pay to hospitals will not work. It will only cause the hospitals to shift the costs to non-Medicare patients in order to maintain profits — which they will be able to do because of their increasing leverage in their markets over insurers.

This is, from everything I’ve read, a highly dubious proposition — and everything Brill has said up to this point reinforces that position. After all, the argument that hospitals will raise fees if they make less on Medicare patients only works if hospitals are currently charging less than the traffic will bear — and Brill has just spent 20,000 words telling us that they squeeze every dime they can out of patients.

Anyway, read his reporting, but turn to health-care economists for the analytical implications.

http://krugman.blogs.nytimes.com/2013/03/03/government-and-medical-costs-continued