Saturday, January 2, 2010
The Socialized Medicine Scheme: Medicare is a popular government-run program?
An argument put forth by proponents of Socialized Medicine is that Medicare is a popular government run medical program. (1) That the Medicare program is popular among participants.
Is Medicare popular or is it popular as no alternative medical plan is available to participants? Is Medicare popular with suppliers of medical services? Is Medicare popular with participants as the price paid by participants (tax levied) is too low in regards to benefits derived? What part does Medicare's monopolistic price controls forced upon suppliers of medical services and the consequential subsidization of price through private insurance have to do with popularity or satisfaction of Medicare?
Medicare is a popular government-run medical program?
The argument supporting the popularity of Medicare among participants and hence a popular government run health-care program points to a 2007 CAHPS survey (2). In the survey 51% were satisfied or very satisfied when asked how they rated their health plan (Medicare).
The survey question that yielded the above results is as follows: "Using 0 to 10, where 0 is the worst possible and 10 is the best possible, how would you rate your health plan?" A glaring problem exists in regards to the survey question mentioned above: how can a survey respondent rationally judge satisfaction regarding Medicare when the survey respondent has no other alternative regarding their health-care? How can any survey respondent, in any survey, regarding any product or service, rationally rate satisfaction when no other choice(s) are presented to the survey respondent?
The survey question was posed to another group that in fact have alternate choices and can rationally judge satisfaction. Reviewing the results of the above mentioned survey regarding private insurance yields a result of 40% satisfied or very satisfied. However, in this case the survey respondent has many alternative private health plans available to base their response upon. Health plans in the private sector cover the entire spectrum from basic scheduled medical indemnity plans, to traditional major medical plans, to health savings accounts, to plans with expansive coverage with low out of pocket costs. Hence if the survey respondent has a health plan but perceives an alternate health plan as more desirable, would the survey respondent score his/her current plan with less satisfaction merely because they desire another alternative plan?
Therefore, since Medicare represents a monopoly on health-care for survey respondents, would the existence of alternate plans for the survey respondent to choose from have caused the survey results to vary? If the survey respondent was not faced with a monopolistic provider (Medicare), would alternatives, if available to the survey respondent, seem more or less satisfactory to the survey respondent than the zero choice alternative provided by the monopoly known as Medicare?
What about Medicare's popularity among suppliers of health-care?
The survey question and survey results mentioned above are purely a demand side examination. That is, the survey is only examining those that receive health-care or in other words, the demanders of health-care supply.
What about the popularity of Medicare on the supply side of the equation. How satisfied are suppliers of health-care regarding the health insurance plan known as Medicare?
Suppliers are completely dissatisfied by Medicare. More and more doctors are no longer accepting Medicare recipients. (3) Medicare services providers as well as medical care device makers are forced into accepting an artificial below market price from Medicare. This artificial price is being rejected by some while other consequences of the artificial below market price are doctors not investing in the latest technology as well as medical device supplier not investing as quickly in advancements in devices.(4)
Hence in this particular demand and supply segment of health-care you have the demanders 51% satisfied and the suppliers so dissatisfied they are more and more opting out of providing health-care through the Medicare mechanism of monopolistic price controls.
A scenario of satisfied demand and completely dissatisfied suppliers can not last long as the suppliers will find a better use for their resources. In other words, resources will be employed in a more productive manner, likely in other indusrties with no price controls, by those making up the current health-care supply.
Medicare's artificial price affects satisfaction for both Demand and Supply
Medicare is going bankrupt. Imminent bankruptcy is around the corner. On the demand side of the equation Medicare recipients are being charged an artificially low premium. The artificially low premium (tax levied) for Medicare is unsustainable as medical-care expenditures are greater than receipts. When expenditures are greater than receipts over an extended period of time, such as the Medicare case, then insolvency is the eventual result.
Receipts or premiums in this case is the tax revenue for Medicare. The imminent bankruptcy of Medicare is in large part due to underfunding (tax receipts). Had current Medicare recipients been charged a higher tax rate and/or been taxed on larger amounts of income, would the Medicare survey mentioned above yielded a different satisfaction percentage? Did an artificially low tax rate during the working years of current Medicare recipients affect the satisfaction level of the survey mentioned above?
On the Supply side of the equation, artificially low payment rates forced upon Medicare suppliers creates dissatisfaction. Any supplier forced to take a payment below market rates will always be dissatisfied. Price controls always create supplier dissatisfaction.
Artificial Medicare prices and the Private Insurance Subsidy
Given the Medicare program is facing bankruptcy, and with Medicare artificial pricing affecting satisfaction in regards to Demand and Supply, what is holding the plan together on a current basis? Medicare is on life support through subsidies from private insurance.
One way to get around Medicare price controls forced upon suppliers is for suppliers to make up the below market payments by over charging another group. Medical-care suppliers have raised prices they charge for goods and services to Private Insurers hence subsidizing Medicare. (5) (6)
The current Socialized Medicine proponents want to eliminate or strongly reduce private health care. If you eliminate private health insurance where will suppliers of medical-care find the revenue lost from over charging the segment known as private health care?
Proponents of Socialized Medicine, pointing to Medicare as a popular Government run plan, are using a highly flawed argument.How can any survey respondent, in any survey, regarding any product or service, rationally rate satisfaction when no other choice(s) are presented to the survey respondent?
Basing an argument on the the demand side of health-care without regard to the dissatisfaction of the supply side is an incomplete argument. That price controls by the monopoly known as Medicare is creating artificial satisfaction on the demand side of health-care and price controls are directly creating dissatisfaction on the supply side of health-care.
That the looming bankruptcy of Medicare due to underfunding is a direct result of insufficient tax revenue. With Medicare recipients paying an insufficient tax for benefits provided, would a sufficient tax in the past (higher tax and/or higher tax applied to more income) have impacted the current Medicare recipients satisfaction regarding the survey result?
Finally, the survey results are an attempt to argue for Socialized Medicine and the abatement of private health-care. The argument does not account for Medicare's monopolistic price controls causing suppliers to make up the deficient price mandated by Medicare through higher prices charged to private health-care. The elimination of private health-care would then cause suppliers to seek alternative uses for their resources as the price controls of the monopolistic provider Medicare could no longer be subsidized by private health-care.