![Federal agents storm a Los Angeles hospital engaged in a scheme to defraud Medicare. Such fraud is rampant, raising the question of whether "Medicare for All" is a good idea. [Credit: LA Times]](https://i0.wp.com/www.dougsbriefcase.com/blog/wp-content/uploads/2014/01/Credit-LA-Times.jpg)
Federal agents storm a Los Angeles hospital engaged in a scheme to defraud Medicare. Such fraud is rampant, raising the question of whether “Medicare for All” is a good idea. [Credit: LA Times]
Setting up shop at a faux medical facility that he dubbed the ”Assessment Center,” Mitts hired what he called “stringers” to pay homeless people small sums of money to go to one of three medical facilities that were in on the scam – City of Angels, LA Metropolitan and Tustin Hospital and Medical Center – where they were admitted whether or not they actually required care. The hospitals billed Medicare or Medicaid for the inpatient stays and made kickback payments to Mitts.
What makes Mitts and his accomplices unusual is that, unlike so many people who perpetrate fraud against government-run health programs, they were caught. Police observed that a large number of patients discharged from those hospitals were being dumped on Skid Row, some still wearing medical gowns. When questioned, the discharged patients told police that they’d been paid to go to the hospital, leading to Mitts’ undoing.
A cautionary tale for those who think that Obamacare should evolve into “Medicare for All,” a single-payer system that is the talisman for the American Left.
In 2012, state, local and federal governments spent a total of $1.23 trillion on health care, which translates to nearly $3.4 billion per day. No institution can possibly keep track of all that money, much less ensure that it is appropriately spent.
Which creates a world of opportunities for people like Mitts. Judge George H. King sentenced Mitts to 18 months in prison and ordered him to make $9.8 million in restitution payments. Mitts’ ill-gotten gains represent less than 5 minutes of government health spending, a pittance that would never have been noticed had his homeless partners been less forthcoming with the authorities.
Other fraudsters are more circumspect and successful. Relatively simple schemes produce easy money with little chance of being caught. The money flows so fast and in such volume as to escape detection.
Still, there are those who are convinced in their bones that government can allocate medical goods and services more fairly and efficiently than can markets. Vermont Governor Peter Shumlin is one. Taking advantage of an Obamacare provision that allows states to implement a single-payer system beginning in 2017, Shumlin has laid the groundwork for a government-run system in his state to be known as Green Mountain Care (GMC).
GMC’s coverage is quite generous relative to that offered through Obamacare. It would pay, on average, 87 percent of medical costs, compared with the 70 percent that an Obamacare silver plan covers. Lavish benefits, of course, come at a cost. The Green Mountain Care Board estimates that it will need to raise $1.61 billion to pay for the plan in 2017, comparable to the total amount that the state collects in taxes from all sources today. Doubling people’s taxes would not be terribly popular even in a state with reliably leftist sensibilities, so the Governor has yet to specify precisely how he’ll finance his project.
A study by health consultancy Avalere concluded that $1.61 billion will not be enough in any event. They put GMC’s first-year cost somewhere between $1.9 and $2.2 billion (p. 2).
In producing the estimates, the Avalere study challenged the most durable superstition among single-payer advocates: that putting all of health care financing in the hands of the government will save enormous amounts of overhead costs. Eliminating private insurers, the argument goes, means eliminating the portion of premiums that goes to profit – profit being understood, not as a motivation to efficiency, but as a sort of obscenity. A single payer system also is thought to cut the administrative costs of doctors and hospitals, since they won’t have to deal with the paperwork demanded by competing insurers, only that required by the tender touch of government.
The Avalere study questions both assumptions. It first undercuts the notion that GMC would reduce administrative costs from 12 percent to 7 percent (p.3). The actual current average administrative cost incurred by commercial insurers in Vermont is 6.7 percent, according to Avalere, less than that projected for GMC (p. 16). It also notes that Vermonters receive roughly 1/3 of their inpatient care and more than 1/5 of their outpatient care in other states (p. 19, Table 6). Vermont will incur the costs of negotiating rates with out-of-state providers or simply paying them what they demand (pp. 19–20), since providers in those states won’t be affected by Vermont’s price controls.
About those price controls: GMC proposes to pay in-state medical providers a lot less than they receive now from private plans. One of the dirty little secrets of government programs like Medicare and Medicaid is that they pay providers poorly, relying on private insurers (and, more accurately, those who pay premiums for private insurance) to make up the difference.
Avalere found that private insurers in Vermont currently pay hospitals 55 percent more than Medicare and nearly 90 percent more than Medicaid for inpatient services (p. 10, Table 3). Hospitals need these higher payments from private insurers to make up for their Medicare and Medicaid shortfalls. Under the Governor’s plan, GMC would pay hospitals only 5 percent more than Medicare. Since Medicare already pays hospitals less than it costs to provide inpatient care, paring commercial rates to just above the Medicare level would cause some Vermont hospitals to “suffer gravely” (p. 5), according to Avalere. Doctors, too, could see a “dramatic drop” (p. 3) in reimbursement under GMC, which “could create a significant disincentive for [them] to work in Vermont” (p. 5).
As for non-physicians who work in Vermont, GMC presumes that 84 percent of them will lose their employer-sponsor coverage (p. 4). Governor Shumlin avoids the President’s mendacity that you can keep your coverage if you like it. The success of GMC depends on people losing their employer-sponsored coverage, forcing them into the state-run system. Its authors say that GMC will cost more if employers don’t drop coverage (p. 8).
Avalere isn’t sure how employers might react to Vermont’s single payer program. On the one hand, employers are “hopeful that GMC might unburden them of the ever-rising expense of providing health care coverage to their workers” (p. 21); on the other, the Governor has not said “whether employers will be expected to help with the funding of GMC through an employment-based tax” (p. 21). Business owners, being engaged in commerce, are not easily beguiled. They understand that the Governor must find his $1.6 (or $1.9 or $2.2) billion somewhere and that they are very likely marks.
The picture is clearer for insurers. State officials confirmed to Avalere that “insurers would not be needed” under GMC, though the government “intend[s] to explore alternative roles” for them (p. 21). So they have that going for them.
Doctors and hospitals probably won’t see much relief from administrative costs, according to Avalere (p. 21), but they will see lower reimbursement for the care they provide, making it “challenging for Vermont to retain a highly qualified and talented health care workforce and to attract new highly qualified health care professionals” (p. 21).
All of which will adversely affect consumers, who “may experience longer wait times to receive health care services” and who could see their “access to care constrained further if the supply of health care practitioners is diminished as a result of reduced payment” (p. 22). At an 87 percent actuarial value, though, they should pay less for services than under Obamacare, once they make it to the front of the line. Even those savings could prove illusory, however, if they are “affected by additional taxes” required to finance GMC (p. 22).
Obamacare continues to hobble along, but seems more likely than not to survive its continued stumbles. If it does, Vermont may offer a vision of the future it will bring. Though it may seem a dreary one, take heart. By 2017, Estill Mitts will be out of prison and perhaps looking for a new scam to run. Vermont beckons.