NCPA - National Center for Policy Analysis


August 8, 2005

Under Medicare's 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, says the Washington Post.

But the system costs federal insurance programs billions of dollars a year and many wonder if Medicare will remain solvent and whether taxpayers and patients are getting their money's worth, says the Post.

A recent study examined Medicare's quality of services. According to researchers:

  • Medicare is highly valued by 42 million elderly and disabled members, but it wastes an enormous amount of money on inefficient medicine; nearly $1 out of every $3 is wasted on unnecessary or inappropriate care.
  • Waste control is difficult because of deficiencies in monitoring and enforcement of quality standards; for every $1,000 paid to hospitals and doctors, just $1 or $2 is invested to oversee and improve patient care.
  • Many enforcement activities were outsourced to private groups that have overlooked or missed cases in which patients were injured or killed.
  • Most high-ranking states rank near the bottom in quality in care; Louisiana ranked 50th in quality, but first in Medicare spending, while New Hampshire was first in quality, but 47th in spending.

Additionally, Medicare's incentive to provide more services is a cause of variations in spending:

  • In 2001, a Medicare patient in Los Angeles cost the government $3,152 more than a comparable patient in Washington, D.C.
  • A patient in Miami cost $3,615 more than one in Baltimore.

This year, Medicare began requiring hospitals to report their performance on a handful of measures, but a majority of its reforms are research demonstrations or pilot programs. Hospitals are simply being rewarded for reporting how they do on specific measures of quality, not for their actual performance, says the Post.

Source: Gilbert M. Gaul, "Bad Practices Net Hospitals More Money," Washington Post, July 24, 2005.

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