Our Next President?

[dcarrigg]

Re: Our Next President?

Then the way forward is to include the capability towards patient travel; towards a much more competitive location on the planet.

Hear, hear! I was talking in an earlier thread about the US potentially becoming a net exporter of students by 2030. And this will be a big part of that.

One weird thing that's popping up lately is universities largely running their own health insurance and delivery racket, and not even just ones with med schools. They'll set up a treatment clinic and pharmacy and then push to sell or auto-enroll students in their fee and insurance schemes. They require students to have coverage. The insurance itself can easily run over $5k per year.

So let's get concrete. Stanford's up to $5,208. Relatively cheap, by US insurance standards, but students are also a younger, healthier population generally. Thing is, on top of that, there's a health fee of $217 per quarter, so about $6k per year we're up to now. But that's not all. Need to be admitted to Stanford Hospital during that time? $500 co-pay. Then there's a deductible. Want to use the medical center you pay $217 per quarter fees to access and $5,208 per year to insure against? You pay between $25 and $35 co-pays each time depending on what you go for. Go to any other hospital or doctor (say you went home for the summer), and you owe 30% of the bill in co-insurance for certain covered procedures, for many others (including all mental health, etc), you owe 100% and insurance will not cover it.

Big take-away: It's probably easy to drop $40,000 in health costs alone on the cost of a 4-year education there, even if one is not very sick. That's significant, even if tuition is running a bit over $200,000 for 4 years. It's a 20% adder during a time when many are not earning income. But, let's say you get a side-job. CA minimum is up to $11/hr now. Say you worked about ~20 hours at a part-time job for that $11: that would only buy you only the health fees, and wouldn't even touch tuition or living expenses. Now, mommy and daddy might still claim you as a tax dependent and keep you on their family plans during this time, thanks to the delayed adulthood provisions from Obamacare. But doing so can have other negative student aid consequences when it comes time to fill out the FAFSA. And it might cost mommy or daddy more. Not to mention all the kids who don't have parents willing or able to do it.

You can see how foreign schools look better and better to middle class Americans and American schools look worse and worse to foreign students when you look at it this way. Top schools like Stanford will probably always have some pull for princesses and emirs around the world. But the layer just under them, and everything below, maybe not. But can you imagine, say, paying £7,500 or so per year just in student health insurance and fees? Oxford's whole tuition is what? £9,200? You'll pay that just for standard health coverage at comparable US schools. And it's growing compounded at 7% or so per year, doubling every 10, eating up a bigger and bigger share of the pie. While we spin our wheels about free markets and competition, it will just get worse and worse.

Lots of America's competitive edge rests solely on past reputation at this point. We're coasting on it. And if we don't get our act together, as more people wake up and realize the halcyon days are over and prices are really high here and quality not so great, trouble can brew up easily. The brain drain thing's a real threat. Combine anti-immigrant sentiment with outrageous university costs and health costs, and any animosity with huge countries like India or China, and you've got a recipe for net out-flow of students.

So think about that:

1. The US experienced a 6.6% drop in international student enrollment this year, on top of a 3.3% drop last year.
2. US students fleeing the US to study are up 2.3% this year, and have been growing steadily. Anecdotally, I think they're some of the sharpest middle class public school kids.
3. Health costs slowed between 2013 and 2014, but are now back up to between 5%-7% increases per year and growing since 2015.
4. Despite this, US life expectancy has dropped for consecutive years on end.
5. And health costs are still the number one source of bankruptcy in the US.

So here's what we have:

1. Fewer smart kids coming in.
2. More smart kids going out.
3. Unaffordable care prices, growing exponentially.
4. Falling life expectancy despite it.
5. Hospitals that have become a game of financial Russian roulette.

Time is not on our side on this one. I really don't think Americans can handle another decade of price doubling coupled with the rest of these trends. If there's not major change before 2030, we're gonna be in a very bad spot.

More than that, I don't think most people realize how close we are to the knife's edge on this one. The mandate exemption law not only takes the penalty for being uninsured away, but it also makes offering defined contribution (rather than real benefit) plans more attractive. It's especially attractive to small businesses. Where you may have gotten health insurance before, now you get the equivalent of a $300 per month coupon to go buy it on the exchange. And that $300 will not go up to keep up with health price inflation. With no tax penalty on the other side, we're in a rough spot. And states get strapped when recessions hit, and roll back medicaid coverage. It happened last time, but medicaid was much smaller then, before obamacare.

I think hardly anyone has priced in the possibility of a sudden, massive shift of about 10-50 million Americans from insured to uninsured in the wake of a recession, and the effects that will have rippling through all sorts of consumer spending and consumer debt. But I also think events have conspired to make such a thing much more probable, and increasingly likely with time.

[DSpencer]

Re: Our Next President?

Does the electric company sell a single product? Or does it appear that way thanks to regulation? I mean, if you stop and think about it off the top of your head, they're selling poles, wires, distribution lines, transmission lines, pole space for telecom use, repair services, ballasts, street lighting, transformers, ground trenches, load balancing and monitoring services, interconnection services, transfer stations and substations, power transition services, tree clearing services, preventative maintenance services, billing passthrough services for third party power providers, demand-side management programs, etc etc etc.

The regulators say, "Wrap all that stuff up into a standard kWh charge." But if they didn't, I'd bet you anything there'd be 5,000 charges for all these little things meted out. Because they could. And since they own the only grid connected to your house, they could charge you whatever. Thus is the nature of natural monopoly.

I think it's a stretch to say that hospital billing would be as simple as electric utility billing if only it were regulated. But we don't have to think about it in hypothetical terms anyway. If all it takes to simplify the system is for the government regulators to step in and put their foot down, then why is it still so complicated?

The Federal government already has the power to control this. The majority of patients in hospitals are covered by Medicare or Medicaid. If they say "CMS now pays a flat hourly rate for hospital care" then it's done. The hospitals will either bill by the hour or not get paid by CMS and lose ~60% of their patients. The hospitals don't get to decide how this works. CMS decides what is covered, how much it pays, what codes and forms must be used, what quality standards must be met, etc.

If Medicare did a good job, I don't think we'd be having this discussion. We'd already have some kind of single payer or medicare for all or public option. It would have been a tale of two payers where Medicare was obviously better and everyone except for insurance company employees would be begging for its expansion.

[LazyBoy]

Re: Our Next President?

So what are the "good" countries to study in now? (And what language should I make sure my daughter studies?) Germany?


Actually, my boss (a German transplant) was just on a rant about (stem) PhD programs in the U.S. vs Europe. He thinks the U.S. programs are too directed. (Basically, that the U.S. prof typically finds your research topic for you.) He has organizations in both regions and hires PhDs.

[dcarrigg]

Re: Our Next President?

I think it's a stretch to say that hospital billing would be as simple as electric utility billing if only it were regulated. But we don't have to think about it in hypothetical terms anyway. If all it takes to simplify the system is for the government regulators to step in and put their foot down, then why is it still so complicated?

The Federal government already has the power to control this. The majority of patients in hospitals are covered by Medicare or Medicaid. If they say "CMS now pays a flat hourly rate for hospital care" then it's done. The hospitals will either bill by the hour or not get paid by CMS and lose ~60% of their patients. The hospitals don't get to decide how this works. CMS decides what is covered, how much it pays, what codes and forms must be used, what quality standards must be met, etc.

If Medicare did a good job, I don't think we'd be having this discussion. We'd already have some kind of single payer or medicare for all or public option. It would have been a tale of two payers where Medicare was obviously better and everyone except for insurance company employees would be begging for its expansion.

The law doesn't allow for this. CMS can't just do it. They're not allowed to regulate prices. Ditto with state health insurance commissioners. They can't either. At least not without federal approval. Average charges range from over $400k per inpatient visit to under $1k, depending on the hospital. That's the Medicare range. Lord knows what that range is for private insurers. Medicaid is even more complex. There are special higher reimbursement rates for FQHCs, look-alikes, and others vs. standard rates. And they vary all over the place too.

But the whole thing is that the whole existence of the payment intermediary arose due to a lack of price regulatory power. Once people have it in their heads that a payment intermediary is necessary, the best they can imagine is something like Medicare for All, because "better negotiating power" is the only way they can imagine to control prices and cover everyone. Of course, if you want to control prices, you could actually just do it directly.

But whatever. One way or the other, a change is gonna come. At current price growth rates, average family premiums will equal 100% of median family income by 2033. The only question is whether we stubbornly cling to the existing system until we hit a second great depression, or whether we actually do something about it before then. Doing nothing will precipitate a complete retool of the US health sector almost as quickly as doing something at this point. The status quo is no more sustainable than radical change.

California was looking at regulating prices at least for the 60% you're talking about. So far no go. There are lots of entrenched players in the politics game side of this.

[dcarrigg]

Re: Our Next President?

So what are the "good" countries to study in now? (And what language should I make sure my daughter studies?) Germany?


Actually, my boss (a German transplant) was just on a rant about (stem) PhD programs in the U.S. vs Europe. He thinks the U.S. programs are too directed. (Basically, that the U.S. prof typically finds your research topic for you.) He has organizations in both regions and hires PhDs.

I think it's heavily dependent on what she'd want to study, what kind of schools she's looking for, and the sorts of places she can get into.

Germany's a good option. American students heading there have been increasing by 20% y/y. No tuition in many places. Good schools. Usually only have to have about $7k in the bank for the visa. PhD process is tougher than the US, but respected. UK is easier, but somewhat less well regarded. Might want to check out Luxembourg. Norway often has no tuition either, and cheap Norway Air flights from JFK. They have a range of programs in English.

If you want something closer, Canada's not a terrible option. Easy flights. If you're in North Jersey, may not even be that bad of a drive. If you're thinking some sort of liberal arts school or other sort of specialized PUI, the top ones north of the border are running maybe $24k per year USD all-in (room, board, healthcare, tuition, fees, etc). Compare it to comparable US institutions that'll probably run you $70k. Canadian class sizes might tend to be a bit bigger at those things, but they're pretty good, and they generally are directly comparable to US degrees.

Of course, the rest of Europe isn't a bad option either. And there are increasingly good options in Asia too. This page is pretty good. Think up a major you'd want to study and a country you might be interested in and see what the options and costs and visa requirements are. So just type in "biology" and "europe" or something and sort by tuition. It's not perfect, but it's a good jumping off point to hunt down affordable English-language programs. Hell, if you can manage to go to Ireland for $4k per year tuition, get the experience and save a pile of cash, why the hell not?

[DSpencer]

Re: Our Next President?

The law doesn't allow for this. CMS can't just do it. They're not allowed to regulate prices. Ditto with state health insurance commissioners. They can't either. At least not without federal approval. Average charges range from over $400k per inpatient visit to under $1k, depending on the hospital. That's the Medicare range. Lord knows what that range is for private insurers. Medicaid is even more complex. There are special higher reimbursement rates for FQHCs, look-alikes, and others vs. standard rates. And they vary all over the place too.

But the whole thing is that the whole existence of the payment intermediary arose due to a lack of price regulatory power. Once people have it in their heads that a payment intermediary is necessary, the best they can imagine is something like Medicare for All, because "better negotiating power" is the only way they can imagine to control prices and cover everyone. Of course, if you want to control prices, you could actually just do it directly.

But whatever. One way or the other, a change is gonna come. At current price growth rates, average family premiums will equal 100% of median family income by 2033. The only question is whether we stubbornly cling to the existing system until we hit a second great depression, or whether we actually do something about it before then. Doing nothing will precipitate a complete retool of the US health sector almost as quickly as doing something at this point. The status quo is no more sustainable than radical change.

California was looking at regulating prices at least for the 60% you're talking about. So far no go. There are lots of entrenched players in the politics game side of this.

I should have been more precise, but it's just semantics to me. The federal government controls Medicare. The federal government regulates the prices that Medicare pays for healthcare services. The federal government controls how a hospital must bill for their services if they want to get paid by Medicare. Despite all that, the billing for Medicare services is not simple like a utility bill.

Personally, the public option seems more appealing to me all the time. If it's truly a self sufficient program paid for by the people who use it, then it's not "socialized medicine". If it's voluntary then nobody can complain about being forced into some dystopian government program. If it ends up being significantly better, then it will just become a de facto single payer anyway.

[dcarrigg]

Re: Our Next President?

I guess I just want to be clear about one thing:

The federal government does not regulate the prices Medicare pays for healthcare services in any way that's recognizably true price regulation. The federal government does negotiate the prices Medicare pays for healthcare services to an extent.

There's a big difference between public utility rate setting and CMS negotiated Medicare charge rates. The hospital methods are nearly incomprehensible and complicated for the scope of what we can do here. But look at the clinical and lab price setting. How do they do it?

1. Establish an advisory panel made up of industry players to recommend rates.
2. Consult with panel and take panel recommendations under advisement.
3. Collect private payer data from sample reporting labs.
4. Verify data and estimate market rate for private insurance payments.
5. Do a rain dance and say a voodoo chant.
6. Select a price somewhere between the panel recommendations and the private rates for last year (adjusted for prospective price inflation).
7. Negotiate with providers to see if they'll accept that price, which 90% of them do, because look at the previous steps.

This is a fundamentally different process than public utility rate setting. That works more like this:

1. Quasi-judicial board or commission calls a rate hearing.
2. The state defends ratepayers, the utilities request higher amounts.
3. Costs are calculated and questioned. Corporate books are open to regulators.
4. Board or panel makes a ruling and issues a rate tariff based on the case.
5. Rate goes into effect on the date ordered by the commission.

The former case is a convoluted way to attempt to back into market rates. There is no real hard force behind it. The goal isn't to price-set or control rates. The goal is only to mimic imagined market rates. But the fox runs the henhouse. The panel's made up of industry, and every surveyed provider knows if they lower their rates for private insurers, they'll get screwed on their Medicare rates next year. Consequently rates never go down. The latter is an adversarial process that takes real costs, inflation, and depreciation etc. into account, but which at times will drive prices down and control them.

I guess, technically, these are both under the umbrella of "regulation."

But they're two very different things.

[Polish_Silver]

US College for my Girl? NO F-ing way!

Hear, hear! I was talking in an earlier thread about the US potentially becoming a net exporter of students by 2030. And this will be a big part of that.

I will not shell out $200k for my girl to go to US college.
Not worth it.
She'd be better off to put the $200k in dividend stocks and take a two year course in pipe welding.
Come out of it with near 0 debt and excellent career prospects.

What I expect is that she will go to college in Canada or central europe (she is fluent in Polish).


The perspective she will get from 4 years in another country would greatly out weigh any advantage
from going to a "top school" in America.

(And I'm the one who studied at one of these "top schools")

Tuition and Health Care: the public policy & cultural bogies that are ruining this country, even more than FIRE and the Military.
(not that the military cost isn't bad eough)

[vt]

Re: Our Next President?

I've been with Kaiser in the Virginia area for 5 years. It is the most efficient, best service, good doctors I've ever seen.

Wife and I use for Medicare supplemental and cost savings far better than others.

I have my employee covered by Kaiser for about 40% less than other programs.She is not on medicare; only 55. I pay 100% of her
health care.

Kaiser can also cover vision, dental, and hearing for a small amount more.

Kaiser just announced discount meal delivery, medical alert system, and personalized home care.

Kaiser should be the model for health care nationwide.

Doctors are salaried and have full benefits.

[vt]

Re: US College for my Girl? NO F-ing way!

Republicans an Democrats have let FIRE get away with mayhem for decades. They've done the same with healthcare.

Both parties are bought and paid for.

Government at all levels is too large and inefficient. Many corporations are too. Too many business categories are anti competitive and exclude
innovation.

The left has caused education to become bloated and biased. It was biased on the right 50 years ago then started shifting toward reasonably moderate. Now it's gone too far left. There is no questioning, no respect for other opinions, no debate and no opening of minds.

This is why both parties must be replaced and the entire system rebooted to serv all Americans.

[Chris Coles]

Re: US College for my Girl? NO F-ing way!

Republicans an Democrats have let FIRE get away with mayhem for decades. They've done the same with healthcare.

Both parties are bought and paid for.

Government at all levels is too large and inefficient. Many corporations are too. Too many business categories are anti competitive and exclude
innovation.

The left has caused education to become bloated and biased. It was biased on the right 50 years ago then started shifting toward reasonably moderate. Now it's gone too far left. There is no questioning, no respect for other opinions, no debate and no opening of minds.

This is why both parties must be replaced and the entire system rebooted to serv all Americans.

It has come as a surprise to me, as a UK citizen, the full extent of the underlying difficulties faced by those of you on the other side of the proverbial pond. My journey of understanding of why, really started with reading Gold Warriors, America's Secret Recovery of Yamashita's Gold by Sterling and Peggy Seagrave. How a huge sum of money gave essentially unlimited funding to a very small group with no ethical anchor. With that core leadership, deep within the US establishment, acting without proper oversight; particularly without an ethical foundation based upon true freedom; has produced what I believe to be a new form of feudalism.

Here in Europe, we still live in an essentially feudal environment; very small families holding absolute power over their citizens. As I see it, what was forgotten, or again, misunderstood, is that feudalism can only exist if there is an administration that will support it. I might come into possession of a great fortune, but that does not give me access to the levers of power to control a nation. What gives access is bureaucracy; the faceless bureaucrat, someone behind the scene that acts, supposedly, as merely the means to deliver democratic decisions. But they find, over time, that they have complete control. A VERY good example here in the UK is how, when the integrity of the UK civil service comes up in open conversation; the politician will always state they are the very finest; or again, when the politician is briefed against, they will never comment when briefed against. What you end up with, as we here have today is a new form of mafia; an organisation totally dedicated to their own needs; totally secretive, (I once brought this matter up on The Times newspaper web site and heard that soon after, a leading politician decided to sit in on one of the primary civil service meetings in Downing Street, [we discovered some years ago that they have, far and away the best office for such meetings in Downing Street, which is NOT available to the politicians], the result being that the civil servants involved were most put out by his sitting in on their meeting and claimed that his actions were unconstitutional).

Once a nation has an organisation embedded within that has it's own agenda, with their primary discussions deliberately out of the earshot of the democratically elected politicians, then you end up with, as an excellent example.... https://uk.news.yahoo.com/chancellor...093900625.html The decision taken by the UK Ministry of Defense bureaucracy, (who are very obviously under the complete control of the US CIA), was presented to "a friendly" politician, who did not tell anyone else...... enough to make one laugh if it was not so sad a situation.

But these are the UK's problems. As I see it, the underlying problem; the core reason for the ongoing difficulties faced by the US citizen is a failure to create a non politicised system to deliver the rule of law. Especially law based upon ethics. That once you have embedded within the nation a primary leadership group unable to display ethics; you get mission creep. The word gets out that it is OK to ignore ethics and once that sets into motion the entire legal system; the underlying framework for all decisions made under the rule of law; particularly commercial law; becomes debased. An excellent example being when the likes of Microsoft, or, again, Adobe, deliberately set out to climb through the windows of every one of the previous customers to destroy the software that their customers bought under classic free market terms; paid for and thus owned by the customer; so that the customer is forced to buy a new product; or NEVER again have access to their work previously produced by that once free market software.

Now, imagine that everyone that had historically purchased a fine example of porcelain had to "enjoy" the destruction of their purchase, then NONE would exist today. Go and google images ancient porcelain and accept that all would have been destroyed as a "normal" part of the evolution of the product.

What the lack of ethics has done is very effectively destroy your nation's integrity. Your law is today under the influence of a national belief that any attorney may create any legal document without any ethical constraints whatever. If "I" write it down and some fool, (who does not fully understand the implications), signs it; that is LAW; simple and incontrovertible.

The United States has lost it's ethical foundations and will, as a result; fail.

[dcarrigg]

Re: US College for my Girl? NO F-ing way!

Your law is today under the influence of a national belief that any attorney may create any legal document without any ethical constraints whatever. If "I" write it down and some fool, (who does not fully understand the implications), signs it; that is LAW; simple and incontrovertible.

This is an old idea in the United States. And there are those who still hold that the Lochner Era was a good thing, because they believe in this kind of unethical chicanery is a natural right and they call it Freedom of Contract. Of course, all it really ever amounts to is license for the powerful to abuse the weak. And it always gets traction in tandem with increasing inequality. The two are inexorably linked.

[DSpencer]

Re: Our Next President?

I guess I just want to be clear about one thing:

The federal government does not regulate the prices Medicare pays for healthcare services in any way that's recognizably true price regulation. The federal government does negotiate the prices Medicare pays for healthcare services to an extent.

Who has authority to set the prices Medicare pays, other than the federal government?

Can you provide any links to support the idea that hospitals negotiate prices with Medicare?

[dcarrigg]

Re: Our Next President?

Who has authority to set the prices Medicare pays, other than the federal government?

Can you provide any links to support the idea that hospitals negotiate prices with Medicare?

I tried to explain the process in broad strokes with my numbered list before. Medpac (The Medicare Payment Advisory Commission) is the legislative independent advisory commission made of private practitioners which recommends rates. CMS staff consults with Medpac staff and takes rates and rate policy under advisement. CMS then takes the NHED account survey data of provider rates paid to private insurers. The rulemaking process takes both these factors and public comment into account. Eventually a proposed rule comes out. Medpac comments again, something like this. They tinker again. Eventually, final rules are published in the fed register and set. Then providers decide whether or not they will accept Medicare, and negotiate all sorts of details, and get to recommend a number of their own adjustments and accounting methodologies, as broadly outlined in the provider reimbursement manual. Eventually a contract is signed. Even after this, providers have some flex to affect rates.

So maybe you take issue with how I used the term 'negotiate.' It's not a free for all where a hospital CEO sits on one side of the table and a CMS bureaucrat sits on the other and they haggle rates. But neither is it an adversarial process in which a commission rules on rates and the government defends ratepayers against providers. The reality is different than either of those. The federal government doesn't just set rates. Industry has a huge role in the process, including the opening salvo out of medpac that sets the baseline for the process which I suppose I'm calling negotiation and you don't feel justifies the term. That's fine. Just a semantic quibble. Two points are that 1) providers don't have to accept Medicare at all, and, 2) there are a lot of ways they can push for and work to get reimbursed at higher rates. Hospitals also negotiate cost rates on the NIH and HHS and research side, sometimes as negotiated indirect cost rates (icrs), other times as lump sums.

It's very convoluted. I can get deeper in the weeds, but I don't think it will be very helpful. The physician fees are separate from the facility fees, equipment fees, pharma fees, etc. But if you want to see an example of the rule governing the process, here it is. If you want to understand the mechanics of pricing better, you can play with the fee scheduler. You'll have to know something about HCPCS codes. Suffice it to say pick a letter followed by 4 numbers. So P3001 is a pap smear, for instance. So there's the base. But notice the mods by locality and MAC (Medicare Administrative Contractors, which are private intermediary entities), RVU (relative value units), various status and payment policy indicators, professional and technical components, etc. So roughly this is a broad sense of one side of the Part A and B payments. Part C payments are effectively de facto tied to percentages of the A & B amounts for various convoluted reasons, but are still independently negotiated between providers and private insurers that offer the plans. Part D we all know can't really negotiate with drug companies.

But the whole mess amounts to one simple take-away: It's not like thinking of the federal government as a monolithic price-setting entity is helpful here. Even if one were to do so, it's not clear that the federal government in that case would be either interested in setting rates itself, nor interested in controlling costs, nor firmly on the side of consumers against providers. If anything, the process is heavily run by outside industry, in terms of the role of outside advisory rate recommendations, and in terms of the process requiring private sector negotiated insurance payment rates as input, and in terms of the relative flexibility providers have in negotiating with CMS for various determinations and adjustments that affect ultimate reimbursement rates via contracts. I realize I'm being vague here. I'm also honestly getting a bit out over my skis, as I've never participated in the process directly myself. Regardless, here's a flowchart of the provider reimbursement process even after rate rules are promulgated and contracts are signed by providers to accept Medicare that shows you the effects of some of the post-contract determinations and adjustments I'm talking about.

[Chris Coles]

Re: Our Next President?

I tried to explain the process in broad strokes with my numbered list before. Medpac (The Medicare Payment Advisory Commission) is the legislative independent advisory commission made of private practitioners which recommends rates. CMS staff consults with Medpac staff and takes rates and rate policy under advisement. CMS then takes the NHED account survey data of provider rates paid to private insurers. The rulemaking process takes both these factors and public comment into account. Eventually a proposed rule comes out. Medpac comments again, something like this. They tinker again. Eventually, final rules are published in the fed register and set. Then providers decide whether or not they will accept Medicare, and negotiate all sorts of details, and get to recommend a number of their own adjustments and accounting methodologies, as broadly outlined in the provider reimbursement manual. Eventually a contract is signed. Even after this, providers have some flex to affect rates.

So maybe you take issue with how I used the term 'negotiate.' It's not a free for all where a hospital CEO sits on one side of the table and a CMS bureaucrat sits on the other and they haggle rates. But neither is it an adversarial process in which a commission rules on rates and the government defends ratepayers against providers. The reality is different than either of those. The federal government doesn't just set rates. Industry has a huge role in the process, including the opening salvo out of medpac that sets the baseline for the process which I suppose I'm calling negotiation and you don't feel justifies the term. That's fine. Just a semantic quibble. Two points are that 1) providers don't have to accept Medicare at all, and, 2) there are a lot of ways they can push for and work to get reimbursed at higher rates. Hospitals also negotiate cost rates on the NIH and HHS and research side, sometimes as negotiated indirect cost rates (icrs), other times as lump sums.

It's very convoluted. I can get deeper in the weeds, but I don't think it will be very helpful. The physician fees are separate from the facility fees, equipment fees, pharma fees, etc. But if you want to see an example of the rule governing the process, here it is. If you want to understand the mechanics of pricing better, you can play with the fee scheduler. You'll have to know something about HCPCS codes. Suffice it to say pick a letter followed by 4 numbers. So P3001 is a pap smear, for instance. So there's the base. But notice the mods by locality and MAC (Medicare Administrative Contractors, which are private intermediary entities), RVU (relative value units), various status and payment policy indicators, professional and technical components, etc. So roughly this is a broad sense of one side of the Part A and B payments. Part C payments are effectively de facto tied to percentages of the A & B amounts for various convoluted reasons, but are still independently negotiated between providers and private insurers that offer the plans. Part D we all know can't really negotiate with drug companies.

But the whole mess amounts to one simple take-away: It's not like thinking of the federal government as a monolithic price-setting entity is helpful here. Even if one were to do so, it's not clear that the federal government in that case would be either interested in setting rates itself, nor interested in controlling costs, nor firmly on the side of consumers against providers. If anything, the process is heavily run by outside industry, in terms of the role of outside advisory rate recommendations, and in terms of the process requiring private sector negotiated insurance payment rates as input, and in terms of the relative flexibility providers have in negotiating with CMS for various determinations and adjustments that affect ultimate reimbursement rates via contracts. I realize I'm being vague here. I'm also honestly getting a bit out over my skis, as I've never participated in the process directly myself. Regardless, here's a flowchart of the provider reimbursement process even after rate rules are promulgated and contracts are signed by providers to accept Medicare that shows you the effects of some of the post-contract determinations and adjustments I'm talking about.

Thank you! Now relate that very convoluted system to the simple process of a face to face auction; where one bids against the actions of other bidders; or, again, when dealing with a purchase of a product from potential multiple suppliers, where one simply states what one wishes to purchase and gets the equally simple answer of related cost.

As I see it, the entire system above is the responsibility of the point of sale; that such complexity should be invisible behind the determination of the cost of purchase. Pap Smear costs and a single price offered from each provider. Any other way brings in such complexity that the whole idea of a free market is completely lost.

Very thought provoking.