Obamacare is the law of the land


Anyone who is paying for commercial insurance is subsidizing Medicare and also Medicaid as well as the uninsured. Medicare does have the power to set prices since there are a number of commercial payors that will set their contract at x% above Medicare… aka, they’re using Medicare as a base. Beyond just straight up prices, if Medicare decides something isn’t covered, or changes the way they will pay something, ,a lot of payors will follow suit, just a matter of time.

There are and have been several health systems / hospitals, that went bankrupt and closed. It’s not ultra rare. It does happen.


I wasn’t talking only about prescription drug rates. If Medicare weren’t prohibited by law from negotiating drug prices, then the Medicare discount rates for drugs would as good as they are for all other Medicare reimbursement rates.


Yes, and they have no other imaginable reason or motivation for saying this.


You make some interesting points Sharpe, and I’ve been looking up articles for a good half hour and reading about this. One thing I would say is that, despite being in a market system, it appears that hospitals do lose money on Medicare and choose to continue to offer Medicare.

So theory aside, this does seem to be a fact that is happening in the world.
I think the most plausible explanation of the phenomena was from this link:

E.g. that there are so many fixed costs for a hospital, that they choose to cover some patients at money-losing prices rather than just have the capacity be unused, in which case they would lose even more money.

Another potential explanation is here:

E.g. all the pricing numbers are completely made up gibberish, which is why conventional economic theory isn’t working as expected.

Anyway! Some food for thought.


Maybe if they didn’t pay the CEO $15 million, and maybe if they didn’t pay the other executives similar-but-lesser-millions, and maybe if the average doctor across all US hospitals didn’t make $225k, twice what they’re paid in e.g. the UK, then maybe hospitals wouldn’t have to worry so much about losing money by treating Medicare patients. Just sayin’.


Aaah, the old Ben and Jerry’s argument. Do you remember how that worked out for them? I’m not a CEO, and I think the multiplier between what the top execs make and what the other employees make has gotten out of control, in a lot of industries actually not just this one, but… others have tried and failed with this approach before.

The general practitioners and the family med /pcp group makes a lot less than that, especially starting out. It’s part of the problem…


There’s certainly truth in this, but it’s not the whole story. You’ve also got hidden information (patients have no idea what stuff costs), inelastic demand (you can’t just choose not to get health care when you need it), lack of competition (your insurance basically dictates which providers you can see), etc, etc. Pricing is a problem, but it’s far from the only one, and I’d argue not even close to the worst.


Yes. The CEO and admin salaries seem to be part of America’s healthcare problems. I think the actual Dr’s are their own separate situation, since they have massive educational costs to recoup. Without high 6 figure salaries they will never pay off their student loans in a single lifetime. US Healthcare is a giant rat’s nest, and fixing the economics of training Dr’s is its own sub-nest.


Yes. :D I wrote an eerily similar rant before deleting it for space.


I don’t agree that Hospitals lose money on Medicare in the big picture including revenue flow and use of latent capacity, but let’s set that aside.

If Medicare is so bad, what would be better? If you can’t answer that, that should give you pause.


Better for… whom? Medicare is not better for subscribers than a lot of commercial insurances if we’re talking about what is covered and what is not. Medicare is an end-of-life insurance. It makes very little sense to try and slap that on 20 year olds who want to have kids and still run marathons.


Yes, but if they can train doctors in Europe, and then those doctors can live well on annual income which is half of that in the US, then that can work here, too. There’s nothing exceptional about the US except, perhaps, greed.


Oh, of course. When Obama cites them as examples I suppose they’re wonderful, but when they say something you don’t want to hear, they’re liars?


It may surprise you to learn that I don’t think Obama is infallible, but it shouldn’t. That aside, I was C-suite executive for 16 years. Lots of them are greedy and overpaid, trust me.


I agree with you that our health care system needs massive changes and that we should copy systems that are working elsewhere. All I was saying is that in our current system, high doctor salaries are not just because doctors are being greedy. Under our system they put off their income for a long time and assume massive debts in order to become doctors. Which is why they then need large salaries in order to pay off those debts. They are both being screwed and agents of screwing in our current system.


Medicare "dictates’ because a general hospital system can’t exist and refuse Medicare patients. So it’s a take-it-or-leave-it proposition. As Nesrie correctly states, all the negotiated rates with commercial payers are a multiple of Medicare rates. That’s the subsidy.


I understand that in theory. In practice, I’ve never met a poor American doctor. It may be that their debt load is grinding them down, but they sure seem to be living well despite that, and those pictures from the 6 weeks they spent in Tuscany last year sure like nice on their walls.


So Johns Hopkins, Mayo and Cleveland aren’t the best our healthcare system has to offer? OK, I’m being snarky. The executives may be greedy and overpaid, but their salaries are a small fraction of the costs we’re discussing here. The fact remains that, at current rates, the public payers, Medicare and Medicaid would not pay enough to equal the costs incurred by a healthcare system. Or put another way, shifting the entire population to Medicare would mean a significant loss for those systems, unless Medicare rates are boosted substantially.


Yet it would be enough to pay those costs anywhere in Europe, which means we should understand that we’re doing it wrong, not that we should defend the way we’re doing it.


I’m pointing out what is, not defending it. And I am saying that the Bernie Sanders argument that all we have to do is apply Medicare to the entire population and it will work just like it does for the current Medicare population is naive. It will work more or less like the Canadian or European single-payer systems and bring with it the good – and bad – that comes with those systems. We certainly can decide as a society that such a system is better than what we have, but we need to understand all the ramifications of it. There’s no free lunch here.