Almost all discussions about Medicare reform ignore one key factor: Medicare utilization is roughly 50% higher than private health-insurance utilization, even after adjusting for age and medical conditions. In other words, given two patients with similar health-care needs--one a Medicare beneficiary over age 65, the other an individual under 65 who has private health insurance--the senior will use nearly 50% more care.Agreed.
Several factors help cause this substantial disparity. First and foremost is the lack of effective cost sharing. When people are insulated from the cost of a desirable product or service, they use more. Thus people who have comprehensive health coverage tend to use more care, and more expensive care--with no noticeable improvement in health outcomes--than those who have basic coverage or high deductibles.
In addition, Medicare's convoluted benefit structure encourages the purchase--either individually or through an employer--of various forms of supplemental insurance. Medicare covers roughly three-fourths of total costs, but about 85% of the Medicare population has expanded coverage with small to limited cost sharing. This additional cost insulation pushes seniors' out-of-pocket costs toward zero, thereby increasing overall utilization.
Friday, July 22, 2011
Merrill Matthews and Mark Litow in the July 11th Wall Street Journal: