I’ve read that so-called price fixing of Medicare reimbursements is partly responsible for the rise in prices for medical treatments. I would like more details on the mechanics of this claim.
Thanks in advance.
Doctors have to charge private insurance more because they take a loss on the medicare customers.
Then statists come along and say - look Medicare is cheaper than private insurance or something when it’s just because Medicare price fixes and then doctors have to make it up on the private insurers.
I’ve also heard it said that, because prices are fixed, there’s no motivation to lower costs in order to compete. Would this contradict what you’ve said?
I thought that doctors who accepted Medicare had to charge Medicare prices to non-Medicare customers for the same treatments?
When people spend other peoples money, they don’t spend as much effort searching for the best price than if it is their own money. With less people searching for the best price, firms will experience less competitive pressure and so prices with tend to be higher than if there was more competitive pressure. Therefore, Medicare should cause healthcare prices to rise.
Medicare fixes prices by paying providers based on a MAXIMUM amount per procedure code. (The codes are copyrighted by the AMA which makes matters worse.) Providers who receive Medicare money agree (IE Are forced by the government with criminal charges in addition to losing Medicare patients.) to charge the lowest price to Medicare. So providers have an incentive to charge exactly the maximum per code to Medicare which means they must charge that much to any person receiving the same procedure. I guess if they had a lot of walking business like a family doctor or dentist then they may charge Medicare patients less than the code to keep their other patients so it is not impossible that they would do so but there is a build in incentive to do so.
So the whole question is how do you set the maximum payments per code. That is a political process starting at the highest levels of government, Congress and the President, who all have their favorite interests who want nothing else other than to increase the payments on their respective codes. Congress and President have little, less than zero, incentive to fight with these monied interests so the maximums keep going up. Consequently doctors who raise prices to Medicare pass those prices onto their other customers.
It still sounds to me like there are two contradictory explanations.
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Medicare pays too little, meaning doctors charge others extra to make up for it.
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Medicare pays too much, and doctors have to charge everyone else those same prices.
Dealing with mountainous bureaucracy and tons of regulations imposes additional costs on providers as well. The joys of socialism!
As a physical therapist, I charge all insurances the same and they never pay what I charge entirely. For an hour to an hour and a half visit a normal office visit with electrical stimulation, ultrasound, manual therapy, therapuetic exercise, and nueromuscular reeducation I charge around $500 which is on the cheap side believe it or not.
Private insurances depending on the state it is from and the plan, I’ve seen reimbursements for myself from $150-$300 per session per patient.
When I did take Medicare, they would always reimburse between $80-$100.
Medicare reimburses low on services and over reimburses on goods. I have a very unique example. I recommended a patient to get a walker (a normal walker costs around $100), then she shows up the next week with a motorized scooter. So I asked her how much it was nd she said “I dont know, Medicare paid for it.”, I then asked her if she would be able to tell me how much she paid just out of curiosity. She brought her statement from Medicare and they paid $3500 for the scooter. I called a friend of mine who owns a medical supply shop and asked him how much that particular scooter goes for normally, he said “Oh we sell that kind for $1000”, so I told him about the patients scooter that went for $3500 and he said “Man, that’s normal, I’m not surprised. They will always over reimburse for goods, why do you think Medicare fraud among medical supplies is so rampant? It’s easy and they dont ask questions because they dont need any notes from physicians.”
Since the start of the year, I stopped taking all insurances except car insurances from people who have gotten into car accidents. Currently I charge $55 per visit per person and I havent lost business, it has stayed static and I could credit that to the quality of care and the word of mouth around the community. If anything I have made more because I get to keep the 7% I was giving up to the billing service. I actually got back my taxes yesterday from 2009 and it costs me $170,000 to operate a 1,200 sq. ft. office in a strip mall with an ever increasing rent due to vacancies.
So for procedures, it raises costs by charging too little, and passing on the difference to other patients.
But it doesn’t affect the price of goods for non-Medicare patients, according to your scooter example.
Can we agree conclusively that it does not raise costs by reducing price competition?