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Monday, July 25, 2005

Kudos to The Washington Post for Superb Medicare Series

There is likely no other federal program that more vividly illustrates the fatal flaws of government regulation than Medicare. If you doubt that statement, take a look at the front page of The Washington Post yesterday, today and tomorrow and read the "Chronic Condition" series by reporter Gilbert Gaul.

Today's installment in the series focuses on how Medicare spends more than half a billion dollars annually on audits, inspections and reviews to insure compliance by Medicare providers with quality standards. Despite this tremendous outlay of tax dollars, stories abound of hospitals and other health care facilities failing to maintain even minimally acceptable standards for things like cleaning and maintaining equipment used to keep people alive.

The reason? Medicare is a regulatory system shot through with conflicts of interests. The non-profit Joint Commission on Accreditation of Healthcare Organizations, for example, is dominated by officials from the American Hospital Association and the American Medical Association, according to the Post report, which notes that:

"Today, the nonprofit is one of the nation's most influential health groups, evaluating thousands of medical facilities annually. It collects $113 million in annual revenue, mainly from the fees it charges hospitals.
"Yet at the same time, the joint commission's practices raise questions about potential conflicts of interest and the rigor of its hospital surveys. It operates a thriving subsidiary that charges hospitals thousands of dollars for coaching on how to pass its reviews. About 99 percent of the hospitals reviewed by the joint commission win accreditation, and in recent years it has missed glaring examples of poor care in which patients have been injured or killed."


The Post doesn't say this, but let it be noted here that the conflicts of interest detailed by the newspaper illustrate the fundamental flaw of any government regulatory scheme - sooner or later, the regulators and the regulated get together to insure mutual survival. It's inevitable for two reasons:

First, who knows better how an industry functions than people in the industry? That means the regulators must to some degree depend upon industry representatives for expertise and experience essential to rational regulatory actions. Impartial expertise is thus essentially a myth perpetuated mainly by Public Administration professors and government bureaucrats.

Second, political expediency encourages accommodations to insure predictable, smooth functioning of the industry so that regulators don't have to worry about being surprised by technological or competitive upheavals and the regulated don't have to worry about a sudden spike in compliance costs.

Yesterday's opening installment in the Post series focused on how Medicare's payment system actually encourages waste, inefficiency and even bad medicine:

"In Medicare's upside-down reimbursement system, hospitals and doctors who order unnecessary tests, provide poor care or even injure patients often receive higher payments than those who provide efficient, high-quality medicine.
"'It's the exact opposite of what you would expect,' said Mary Brainerd, chief executive officer of HealthPartners, a nonprofit health plan based in Bloomington, Minn. Her Medicare HMO ranked among the top 10 in the nation last year for quality but was paid thousands of dollars less per patient by Medicare than lower-performing plans.
"'The way Medicare is set up,' Brainerd said, 'it actually punishes you for being good.'"


Again, the Post doesn't desdribe it in these terms but its reporting shows how Medicare is intended to insure quality healthcare for those it covers, yet it encourages exactly the opposite. In other words, Medicare demonstrates the Law of Unintended Consequences that characterizes virtually all government programs.

And then we wonder why Medicare costs are spiralling? As the Post observes:

"As Medicare approaches its 40th anniversary on Saturday, much of the debate about the nation's largest health insurance program revolves around whether it will remain solvent for aging baby boomers. Yet another critical question is often overlooked: whether taxpayers and patients get their money's worth from the $300 billion Medicare spends each year -- now about 15 percent of federal spending and projected to grow to nearly a quarter of the budget in a decade."

The Post deserves accoladates for this series, which is among the best I've seen anywhere on the crisis that is Medicare.

UPDATE:

The concluding piece in the three-part series is a thorough expose of Medicare's Quality Improvement Organizations, the $1.15 billion contract between the government and 53 private groups to insure Medicare recipients receive quality care. Instead, the QIOs are essentially industry dominated panels that provide shields against outside examination of the actions of Medicare providers.