David R. Henderson  

Medicare Kills a Program

May Day, Bourgeois Virtues, an... A Natalist Provision...

What do you do when you find a program that actually works, that is, saves the government money and improves health outcomes? If you're the people who run Medicare, the socialized health insurance program for the elderly, you kill it. Or, at least, that's what the Medicare bureaucracy is about to do with one such program. In one of his best posts ever, Ezra Klein lays out the details.

Two things caught my attention. Actually, the first one, on incentives, is what caught my student's attention.

First, the incentives:

If you go into the hospital for heart surgery and you end up getting a central-line infection, you'd hope that the hospital would be penalized for it. The opposite, in fact, is true. According to a new study in the Journal of the American Medical Association, surgical complications increase the margin the hospital makes on the patient by 330 percent for the privately insured and 190 percent for Medicare patients.

Second, the public choice:
To Health Quality Partners and its defenders, Medicare's decision is ludicrous. "We're spending tens of billions of dollars now on Medicare innovation where Medicare already discovered something amazing and now they're forgetting what they discovered?" Brenner says. "It's an amazing government moment."

It's not that amazing.

HT to John C. Goodman

Comments and Sharing

COMMENTS (3 to date)
fused writes:

It was a test program. Now that we know it works, it's no longer a test program. Congress (read, Republicans) won't allocate the funds to continue it as an actual program.

R Richard Schweitzer writes:

β€œTo the political class, whatever the rhetoric, government programs aren't tools for improving the country. They're tools for acquiring the main goal of the political class: more power . . .”

Glen Harlan Reynolds (Instapundit) in USA Today – April 29, 2013

MingoV writes:

Hospitals are cheating. Iatrogenic complications such as central line infections should not result in greater payments. The same is true for inadequate care that results in readmission less than a week after discharge. However, it is easy to "cook the codes" and get the money. Cheaters are unlikely to be caught. If some cheating is detected, the penalties are too small to deter cheating (similar to those $5 "misuse of resources" tickets given to speeders in Montana).

Why aren't cheaters caught? The government could quadruple its care-related audits and save far more money than the costs of expanding the audit unit. One answer is that strict audits would cut Medicare revenues to hospitals, and some of them would stop accepting Medicare patients or go out of business. Both outcomes result in fewer available hospitals for Medicare patients. Another answer is that the bureaucrats don't care because "it's other peoples' money."

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