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October 29, 2007

Your World in Charts: "It's The System, Stupid" Edition

By now, you folks well know my obsession with pointing out that Medicare's costs will blow up not because of demographics, but because of the same cost growth afflicting the private sector Here, however, is a nice, colorful chart making the point:

Demographics Vs Spending In Medicare

As you can see, demographics make a rather small portion of the whole. If you want to save the budget, you have to get the system's spending under control. There's no other way.

October 29, 2007 in Charts | Permalink


So--how about we test all the great cost-control mechanisms that government-paid-healthcare will make available on the existing Medicare program?

Posted by: SamChevre | Oct 29, 2007 1:59:42 PM

you folks well know my obsession with pointing out that Medicare's costs will blow up not because of demographics, but because of the same cost growth afflicting the private sector

Its my obsession too, for different reasons. Single-payer advocates focus on the adminstrative cost savings and lack of profit "waste." As demonstrated above, that's not really helping the problem. We need a system for constraining cost growth that isn't achievable in any health care system today.

Posted by: wisewon | Oct 29, 2007 2:03:20 PM

What this chart shows is that the idea that single-payer health care ("Medicare for all!") would control the growth in health care costs is an absurd fantasy. That growth is driven by the relentless demand for new and better drugs, tests, surgeries, etc.

Posted by: JasonR | Oct 29, 2007 2:12:15 PM

My families business administered Medicare Supplement policies for 10+ years. That is one of the main reason's I'm scared to death of any universal healthcare/single payor system. If not addressed soon and drastically Medicare and SS will bankrupt us. When we first started processing claims in the early 90s for each retiree you would see 2-3 claims per month, when we stopped a little over a year ago it was running like 7-8 claims per month. To many seniors treat healthcare as a social exercise, the weekly trip to the doctor is a reason to get out of the house. Healthcare is consumed with no regard for cost. It was an entitlement in every since of the word that you dare not question. They would get their annual rate increase, based upon experience, and howl like crazy about how we expected them to afford it, never once do they consider changing their habits. A Dr. could tell them he needs to see them in his office every other week to check their blood pressure and tempature and like clockwork they are there. The analysis scholars do and the plans of policy "experts" just don't take into account how totally F'd the system really is. Until you really sit and go through years worth of actual claims to see how things really work on a day to day basis you can't even begin to propose solutions that would stand a chance of working. There is nothing rational or logical about the current system, most of those messes are legislated on the system and thus the last place we should go for salvation is the legislature.

Posted by: Nate O | Oct 29, 2007 2:22:49 PM

One word:

Posted by: Dingo | Oct 29, 2007 2:23:24 PM

I have to give a quick example of how government run Healthcare works. 2-3 years ago physician reimbursement was being considered, they where going to slightly increase it. Overall the flow of data and bills is quick, Drs bill Medicare electronically who in turn electronically sent us their information for us to pay the balance. All told 2-3 weeks a claim was processed front to back Dr paid in full. So congress in all their brillance decides to retroactivly increase physician reimbursements. I forget the exact number but 2-3 months of Medicare claims had to all be reprocessed. Your talking 10s of millions of claims had to be redone and additional payment sent. THey only increased it a couple percent so you where talking pennies that had to be paid. We litterly spent a couple dollars to send providers a couple extra cents. That is what you get with government ran healthcare and that is why it eventually fails every time.

Posted by: Nate O | Oct 29, 2007 2:31:16 PM

To many seniors treat healthcare as a social exercise, the weekly trip to the doctor is a reason to get out of the house.

I know there's nothing quite so enticing as month-old magazines to a senior, but come on now.

Posted by: mightygodking | Oct 29, 2007 2:48:17 PM

. and getting Medicare spending under control means one thing: denial of care.

Remember that collectivist boys and girls - when it happens (deservedly) to you.

Posted by: Stuart Browning | Oct 29, 2007 3:01:55 PM

Let me play Devil's Advocate -- why are skyrocketing health care costs such a bad thing? Perhaps the increasing costs are just a function of more things that we can spend on, especially in our old age (new drugs, joint replacements, etc.). Who knows what cool (yet expensive) things we will be able to purchase in the future to better our bodies and extend our lives?

There are many "manageable" diseases today that were truly debilitating one or two generations ago. Hence, prior generations didn't spend money to manage them b/c there was nothing to spend the money on in the first place! This trend should continue into the future, and I think it's probably a good thing.

Posted by: George | Oct 29, 2007 3:18:51 PM

Oh Stuart, that is just so cute.

Posted by: Sangfroid826 | Oct 29, 2007 3:19:36 PM

Mightygodking are year old magazines in their house more appealing? After talking to thousands of retirees personally I can only pass on my opinion of their situation but it is based on rather large exposure to individuals using Medicare, much larger I am sure then any study you will read. As the owner of the company it was frustrating how many would call just to talk to our CSRs, on our 800 line of course. Granted we got great gifts at christmas, some delivered personally, but I can assure you many of today's seniors are lonely and bored and Healthcare is a break from that. The breakdown of the family has had an effect, they lack the family contact seniors use to get.

Posted by: Nate O | Oct 29, 2007 3:19:54 PM


I'm not sure why you're playing Devil's Advocate, because your argument is perfectly valid.

It seems highly likely that over the next few decades medical science and technology will continue to advance. Even if these advances do not significantly extend the average lifespan, they may do much to slow or alleviate the long-term decline in health and well-being that typically precedes death among the elderly. People will probably be willing to spend huge amounts of money for additional years of vigor and good health.

Posted by: JasonR | Oct 29, 2007 3:27:31 PM

I can't wait to see the first politician who is going to ban people over 75 from the ICU. That's going to be right up there with kicking puppies and telling children there is no Santa Claus, but its easy to see that's where a huge portion of the waste is. Eliminate the 100,000 dollar ICU stays for the demented nursing home patient that happen day after day in every city, that contribute nothing to the end result and you will get your cost savings. It is politically radioactive so it will never get done though.

Posted by: Dingo | Oct 29, 2007 3:42:38 PM

Spending cannot grow at that rate indefinately, so it will not. One way or another the medical spending growth rate will slow. Could be by technology or some other way.

Posted by: Floccina | Oct 29, 2007 5:15:15 PM

Since Government in the USA already spends more per capita on medical care than France does and France covers everyone I think that we should demand that our corrupt politicians cover everyone without increasing spending.

Posted by: Floccina | Oct 29, 2007 5:28:32 PM

Dingo typifies the total B-S that comes down around this subject.

If I went into Seattle right now I might find about 50 ICU units in use. Almost none of these would have "demented nursing home patients" in them. If you apply even a sliver of logic you can see that there aren't very many ICUs and most of the people in them had an accident, a medical emergency, or some major surgery.

The fact that a situation is ruinous financially to the individual does not mean it is ruinous to the system.

Will we need more money in the future for healthcare? Well, what if we did- we could save about $400 billion this year by cutting the war budget back to some reasonable figure. We could save $50 billion by legalizing marijuana.

The continued insistence by the rightwing that we're not as capable as the Germans or French sure gets old. We may be English speakers, but it's a handicap we can overcome- if we try.

Posted by: serial catowner | Oct 29, 2007 6:30:36 PM

All of the experimental cancer and other rare disease treatments that are available in the US and no where else run tens of thousands a month. A successful course of treatment might extend the patients life 1-2 months. It isn't even a question of curing the illness or restoring quality of life, billions are spent for a few more weeks of life no matter how poor the quality of life for that period is. None of these treatments are paid for in England, France or Canada. They flatly deny them as not cost effective. You can't compare the gross expenditures of our system to any other and not adjust for those situtions. This is just one of 100s of major differences that makes a percise comparison inaccurate.

Posted by: Nate O | Oct 29, 2007 7:10:47 PM

That is what you get with government ran healthcare and that is why it eventually fails every time.

Hello again, Nate. I can see that since our last conversation the time you've spent improving your a)grammar, b)comprehension of logic, c)understanding of the niceties of documentation, and d)grasp of the subtle difference between statistical analysis and anecdote, has been disastrously ineffective. In reference to the above I shout down from my ivory tower "What about France?! Their 'government ran[sic]' healthcare system is fine."

Conveniently for your position, however, you earnestly conclude that they can't really be compared. Why on earth not? We compare Boeing to Airbus all the time. Who's running red ink? What do current sales trends for each bode for the future, etc. This despite the fact that Boeing pays for health insurance for its (US) employees and Airbus doesn't. If this "incomparablity" of Boeing to Airbus were crucial to minimizing an inconvenient truth that renders my position weaker in an argument I was having with you, wouldn't you call bullshit too? Wouldn't you wish for a carefully reasoned, verifiable justification beyond just some hand waving about "100's of major differences"? There are "hundreds of major differences" between a Corvette and a Porsche, yet Motor Trend manages to deal with it...

All of the experimental cancer and other rare disease treatments that are available in the US and no where else run tens of thousands a month.

And here, your ignorance is near comical. "Experimental treatments" are, by definition, experimental, and not covered by insurance. The treatment is paid for by the firm that is developing the drug or equipment in question or by an NIH grant(I know...more government meddling!)or some such, not by the patient or their insurance company.

"They flatly deny them as not cost effective."

...and just what, my dear boy, do think thousands upon thousands of claims adjusters do for a living over here in the good ol' US of A?

You are polluting the discussion over here: please go away. I don't think i can take any more of your "Healthcare is in crisis because of the breakdown of the extended nuclear family and the concomitant hordes of slightly addled elderly!" arguments. It's like a Benny Hill sketch! Next it'll be "Prayer in school will make people healthier!"

Posted by: DMonteith | Oct 30, 2007 1:39:46 AM

...Boeing pays for health insurance for its (US) employees and Airbus doesn't...

Urm, what I meant was: I assume that Airbus does pay for its US employees' healthcare too, but I assume (and this being the point) that there are far fewer of them than Boeing's US workforce...

Posted by: DMonteith | Oct 30, 2007 1:46:15 AM

Lacking context, that graph looks really ridiculous. Basically, it says that health costs rise at zero percent of GDP until 2015, at which point they start rapidly rising and dominating the effect from demographics. Another point of confusion: the green are represents the change in health costs resulting from changes in demographics, correct? How can that be positive for the next 40 years? I get that the baby boomers are getting older, but at some point in the next 40 years, they're going to start dying, at which point demographics should shift so as to decrease health care costs.

I may be jumping into the middle of a discussion here--not a regular reader--but I'm fairly confused as to how this admittedly colorful graph supports any argument whatsover.

Posted by: Ben | Oct 30, 2007 9:09:20 AM

No, the graph is right in line with what we've seen in war spending and the "war on drugs" spending- the results flatline, but the costs climb like a 747 looking for altitude.

How can this be? It's the miracle of compound interest- when everybody who is politically connected takes 5% of the hog, that 5% gets larger as the hog gets larger. And none of the "decision makers" involved can face the consequences of turning back.

In the case of healthcare, hospitals overbuild, doctors overprescribe, health insurance companies look for a larger gross every year, as do drug companies- and there you have your built-in increases while the population served flatlines.

Posted by: serial catowner | Oct 30, 2007 11:39:18 AM

You are telling me there are no demented nursing home patients in any ICU in Seattle? Completely naive and laughable. I spend a few days a every week in the ICU and the vast majority are demented nursing home patients. Before you open your mouth about a subject you should know something about it.

Posted by: Dingo | Oct 30, 2007 6:59:37 PM

An ICU can run up a bill like few other departments in a hospital. 100,000 grand is par for the course. Look at how much we spend on care in the last 6 months of life and you will change your tune.

Posted by: Dingo | Oct 30, 2007 7:02:12 PM

DMonteith, before I jump all over you for not having any clue what your talkign about I'll give you a chance to do some homework, come back and say your sorry, then have a discussion based on facts. Medicare covers most experimental teatments now. You should see the bills they can rack up for back surgery or some new cancer treatments. I actually look at the Medicare EOBs saying they pay them, where do you get your info?

Posted by: Nate O | Oct 31, 2007 12:30:26 AM

What is this, governments cancer site discussing coverage of clinical trials?


A clinical trial is a research study conducted with people (see Question 1).
Clinical trials are conducted with patients to find out whether promising treatments are safe and more effective than those already available (see Question 2).
Any cancer care normally covered by Medicare is also covered when it is part of a clinical trial (see Question 6).

Services or items usually associated with the experimental treatment, such as costs to administer investigational drugs

Could you be any more wrong? Could it be any more clearly proiven your wrong? Now do you man up, admit you where wrong and say your sorry or just stop posting for a few days?

Posted by: Nate O | Oct 31, 2007 12:52:09 AM

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