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The Medicare Cost-Control Efficiency Paradox

Essay on the Eight-Hundred Pound Gorilla in the Medical Treatment Room

By Dr. David E. Marcinko MBA


According to economist Austin Frakt PhD, and others, there is a school of thought that says Congress is incapable of controlling costs in the Medicare and Medicaid System [CMS].

And, then there is the reality known by all practicing medical professionals regardless of specialty orientation or degree designation. That is to say, CMS really can control healthcare costs and with great ferocity and efficiency, and to non-public sectors as well …. PARADOXICAL?

On Getting What You Wish For

Blogger Ezra Klein opines that one of the dirty little secrets of the health-care system is that Medicare has done a much better job controlling costs than private health insurers.


A Forehead-Palm Moment

Of course, we doctors know that the real problem is that Medicare seemingly [think Seinfeld’s character George Costanza] controls costs all too well; but not really. It is just that CMS pays doctors too little and thus it appears costs are controlled. What really is happening is that physician fees are being reduced carte’ blanche.

Nevertheless, and regardless of semantics, CMS will never control costs much more efficiently than private insurance companies or doctors will simply abandon Medicare for related payment models like direct reimbursement or concierge medicine. This is happening right now. Physicians, osteopaths and podiatrists etc, are opting out of Medicare in increasingly large numbers. In a world where there’s only Medicare and Medicare to control costs, doctors can either take the pay cut or stop seeing patients, and stop being doctors. “Taking what they are given – because they’re working for a livin.”

So sorry that this seems like a forehead-palm moment for Ezra, but not for healthcare practitioners or the ME-P!

Too Much Demand Elsewhere

And, as we see from other countries, many young bright folks want to be doctors, even if being a doctor doesn’t make one particularly wealthy [high demand and high eventual supply produces lower provider costs in the long term?]. Think medical tourism.

Not so much the case anymore in this country [lower demand and lower eventual supply produces higher reimbursement costs to the doctor survivors in the very long term?].

Our Domestic World

But, we are not elsewhere. In fact, in our present domestic healthcare ecosystem, when Medicare decides to control costs, many doctors can simply stop accepting Medicare patients, and the politicians will lose their jobs. One political party then declares that Medicare is rationing and will hurt senior citizens. The other party capitulates and pays MDs more [SGR]. Then, the federal budget looks bad as it does now. The circle is complete when one party asserts that Medicare actually can’t contain costs but the private insurance companies will.  It all fails, in an unending circular Boolean-like loop of illogic.

Listen Up!

So, listen up AARP, politicians, CMS and seniors as I admonish you to be careful what you wish for [medical cost controls]. It might just come true. As Ezra rightly says; rinse, repeat – rinse, repeat – ad nausea. You simply can’t have it both ways.  You either choose to spend less and offend certain cohorts, or spend more and offend different factions.  Either way, you’re going to piss someone off. A good healthcare reimbursement system would try to make that decision rationally [a-politically]. But, at least it would make an economics driven decision; wouldn’t it?


Is CMS really the eight hundred pound cost-controlled gorilla in the increasingly large Medicare treatment room? Why or why not? Now, relative to the ACA of 2010, please read: The Case for Public Plan Choice in National Health Reform [Key to Cost Control and Quality Coverage], by Jacob S. Hacker, PhD. Link: Jacob Hacker Public Plan Choice


And so, your thoughts and comments on this ME-P are appreciated. Do we have a Medicare cost control efficiency paradox? Or, are the economists just reveling in the publication banal? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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8 Responses

  1. Senior Home Health Visits

    Dr. Marcinko – Medicare recipients could see a new out-of-pocket charge for home health visits if Congress follows through on a recommendation just issued by its own advisory panel; the Medicare Payment Advisory Commission [MedPAC].




  2. Dam it Jim – I’m a Doctor – Not an Accountant

    Bain & Company spoke with over 300 U.S. physicians to assess their perspectives on managing costs, drug and device usage, and standardized care protocols.


    Cost-controlling physicians, anyone?

    Ann Miller RN MHA


  3. Obama Outlines Options on Medicare

    Acknowledging that federal lawmakers are “running out of time” on the debt-ceiling negotiations, President Barack Obama is still pushing for a big deal and mentioned a few healthcare entitlement reforms under consideration in a deficit-reduction package.

    Obama emphasized that leaders should make sure that current Medicare beneficiaries “as much as possible are not affected,” but that it’s important to consider changes in later years to ensure the program’s sustainability.

    “What we’re not willing to do is restructure the program in the ways coming out of the House where we voucherize the program,” Obama said, adding that modest modifications could yield trillions in savings while still maintaining the program’s integrity.

    Source: Jessica Zigmond, Modern Healthcare [7/15/11]


  4. How Debt Deal Could Squeeze Medicare Pay Even More

    The last-minute agreement that lawmakers and the White House reached to avoid a default on the nation’s debt also considerably raises the stakes for physicians pushing for congressional action on Medicare payment before the end of the year.

    The debt measure President Obama signed into law on Aug. 2 does not address the sustainable growth rate formula that is set to slash doctor pay by 29.5% on Jan. 1, 2012. On top of that, doctors treating Medicare patients could see another cut — projected at $10 billion to $15 billion annually — if a special congressional committee fails to agree on a long-term deficit reduction plan that can pass Congress and be signed into law during this session.

    Source: Charles Fiegl, Amednews [8/8/11]


  5. Be sure to sign-up for Medicare on time

    Not withstanding the above, all folks should be sure to sign-up for Medicare on time!

    You can first sign up for Medicare beginning three months before the month you turn 65. This initial enrollment period lasts through the three months following the month you turn age 65. If you don’t sign up during the seven-month window around your 65th birthday, your monthly premiums will increase by 10% for each 12-month period you were eligible for, but did not enroll in, Medicare Part B.

    If you are covered by a group health plan based on your or your spouse’s current employment after age 65, you need to sign up within eight months of leaving the job or health plan to avoid the penalty.

    For people who retire before age 65, you need a plan to maintain health coverage until you become eligible for Medicare, such as through COBRA continuation coverage or a spouse’s health plan.



  6. From Jon Tilburt and Christine Cassel in JAMA:

    Rationing means explicit or implicit withholding and allocation of beneficial resources from some patients for the sake of others. In the United States, health care rationing occurs routinely (and justifiably) in situations of absolute resource scarcity such as organ transplantation, distribution of blood products, or mass casualty events. In these circumstances, prespecified principles guide the timing of how the resource is delivered to maximize benefit. In other circumstances, health care is rationed de facto (and arguably less justifiably) by financing schemes, even when the resource in question exists in adequate supply. In the current US system, health care is rationed by ability to pay: underinsured and uninsured patients do not receive the care they need more frequently than those who are well insured.[…]


    But parsimonious medicine is not rationing; it means delivering appropriate health care that fits the needs and circumstances of patients and that actively avoids wasteful care—care that does not benefit patients. […]

    Parsimonious care is not “rationing,” because it does not withhold something effective to provide it to others; on the contrary, it restrains the use of unnecessary and potentially harmful services.

    Dr. David Edward Marcinko MBA


  7. Sequester’s Medicare Cuts Would Start with Services Provided in April

    If sequestration kicks in Friday as planned, the 2% payment reduction to Medicare providers and insurers will be for services provided on or after April 1, an HHS spokesman confirmed Wednesday. When asked if HHS has already alerted providers and insurers about the date of the payment cuts, the spokesman replied in an e-mail, “If sequestration occurs, official notifications will be made.”

    The lack of any notice from HHS left provider groups to wonder when their members will see those reductions. An official for the American Health Care Association—which represents skilled-nursing facilities and assisted-living providers—said there has been confusion among the organization’s staff and lawyers about when those cuts would take place, while the American Hospital Association, Federation of American Hospitals and National Association of Public Hospitals and Health Systems all anticipated the cuts would begin in April.

    Source: Rich Daly and Jessica Zigmond, Modern Healthcare [2/27/13]


  8. Fee-for-service model continues reign

    The commercially insured market continues to be dominated by the fee-for-service payment model, data from the Catalyst for Payment Reform report reveals.


    Dr. David Edward Marcinko MBA


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