top of page

This Wall Street Journal article (Insurers Pocketed $50 Billion From Medicare for Diseases No Doctor Treated) is exceptionally well done and more importantly, it accurately diagnoses what is wrong with the US health system:


When Congress conceived of the Medicare Advantage program decades ago, the hope

was that insurers would make Medicare more efficient. In traditional Medicare, doctors

and hospitals get paid for each service they provide, an incentive to offer more. The idea

behind Medicare Advantage was to pay private insurers a lump sum to cover all services,

giving them an incentive to keep patients healthier.


To protect insurers from the risk of winding up with sicker-than-average patients, the

government allowed bigger payments for certain serious health conditions.


Partly because of that, Medicare Advantage has cost the government an extra $591billion over the past 18 years, compared with what Medicare would have cost without the help of the private plans, according to a March report by the Medicare Payment Advisory Commission, or MedPAC, a nonpartisan agency that advises Congress. Adjusted for inflation, that amounts to $4,300 per U.S. tax filer.


The most critical problem in healthcare today is the corruption of the payment system,

which is complex coding. It has destroyed primary care and hospice and invited massive

fraud into health care. The article does a great job making the point that coding invites fraud:


John Gorman, a former Medicare official and founder of two companies that review

records and conduct home visits on behalf of Medicare insurers, says “Any time you base a system like this on diagnosis codes, there’s going to be rampant abuse of the system. [Insurers] will find something else to make up the revenue.”


The article artfully illustrates how private insurers use coding to increase their payments -

and defend it as appropriate. Medicare has known this abuse has been going on for years.

But they are unable to prove the abuse. Why? Because coding complexity is full of gray

space. The abusers live pretty well in that gray space.


The only problem with the article is that it offers no meaningful solutions. More fraud

oversight by Medicare will fail because of the inevitable gray space in coding. There are meaningful solutions to the problem - beginning with eliminating coding from the payment formulas. My website offers more details on eliminating this fraud and improving healthcare.




0 views0 comments

The Wall Street Journal article on 6/23/24 titled When Hospital Prices Go Up, Local Economies Take a Hit illustrates a fundamental misunderstanding of how healthcare operates economically. 


The article suggests that health system mergers cause rising hospital prices. This analysis confuses correlation with cause and effect. The fundamental question of the article is why hospital prices are rising. The answer is the growing problem of cross-subsidization in healthcare. 


Hospitals receive 70-80% of their payments from Medicare and Medicaid. These government payments are not based on hospital prices but based on regulation. These regulatory payments have been declining over the past two decades. Recent studies document that today, Medicare only pays for 82% of hospital costs. Medicaid is even worse, paying only 50-70% of hospital costs depending on the state. So hospitals must recover 20-25% of their costs from private insurance carriers to break even. 


As these government payments decline, hospitals are forced to raise prices; otherwise, they will go bankrupt. This pattern of cross-subsidization, not health system mergers, is the cause of higher hospital prices. 


In addition, cross-subsidization has been a driving force that encourages hospital mergers as an opportunity for health systems to lower costs and raise prices. This analysis's proof is demonstrated in declining hospital margins despite higher prices.


We need fundamental reform of the healthcare payment model. Potential solutions exist. Visit https://www.thejourneys-end.org/ to learn more.



0 views0 comments
bottom of page