The basic theorem is this: market actors have greater incentives to prevent fraud, because it’s their own money on the line.  Politicians are spending other people’s money, so their incentive to prevent fraud is far less.  Therefore, fraud will always be higher in government programs than in similar market endeavors.

See also: Medicare & Medicaid fraud far exceeds insurance company profits.

via Cato-at-Liberty.

Competition from a “Public Plan”: What to Expect

• 60 Minutes: Medicare fraud is $60 billion a year
  YouTube versions w/o commercials: Part 1, Part 2.
• GAO: Medicaid fraud was $33 billion in 2007 alone [page 32]
• Fortune Magazine: The top 14 insurers earned $8.6 billion last year

These figures per Medicare recipient:

Number of Medicare recipients: 44.8 million … For $60 billion in annual fraud, that’s $1339 in annual fraud per Medicare recipient.

Number of Medicaid recipients: 58.7 million … For $33 billion in annual fraud, that’s $562 in annual fraud per Medicaid recipient.

Number of insured: 300.5 million. Estimate $10 billion in annual profits, that’s $33 in profit per insured person.

Note that not all insurance companies are for-profit, and 57% of those with employer-based plans are self-funded, so it’s not clear who gets the profit.  Still, even if subtracting these two figured decreased the number of insured by profit-making insurers by one-third, the profit per insured person would be just $100 per year.

And remember, profit is good!  In a free-market at least. It’s reward for selling what people want while keeping costs low.  Yet, insurance company profits would be lower if politicians did not shield them from competition.

See also:Government Health Care Awash in Waste and this post on insurance company profits.

If “Medicare for all” gives you that intoxicating “government as nurturing parent” feeling, think again. The Camera reported that “thousands of patients” … “will have to find new doctors” because Boulder Community Internal Medicine is closing — in part because of the “low reimbursement rates of its Medicare patients.”

Expect more of this. The 2008 Medicare Trustees report says Medicare’s financial outlook “continues to raise serious concerns.”  It will be underfunded without “very substantial increases in tax revenues and/or reductions in expenditures.”

“Reduction in expenditures.”  This means government will tell you when you can or cannot receive medical care.  “Medicare for all” will make these problems worse.   As a tax-funded insurer, Medicare would drive out competition from non-government insurers and become a monopolistic insurance provider with little incentive to satisfy patients needs.

Medicare for all means more waste.  A Washington Post headline reads “Medical Fraud a Growing Problem: Medicare Pays Most Claims Without Review.”  Dartmouth researchers concluded that “nearly 20 percent of total Medicare expenditures” provides “no benefit in terms of survival” and that it’s unlikely that the “extra spending improves the quality of life.”

Government shouldn’t be in the insurance business.  Before Medicare retirees were buying insurance in increasing numbers. They would again if politicians phased out Medicare and lifted controls that make medical care and insurance so expensive.

But if you must have government involvement, why not replace Medicare with a voucher for private insurance?  Government doesn’t run its own grocery stores – it issues food stamps.

Other ideas:  Make Medicare eligibility requirements more strict.  Life expectency has increase since its inception.  Raise the qualifying age gradually.  Also, why is everyone eligble?  I’m no fan of means-tested welfare programs, but limited Medicare to poor people is better than offering it to everyone.

Medicare’s top officials said in 2006 that they had reduced the number of fraudulent and improper claims paid by the agency, keeping billions of dollars out of the hands of people trying to game the system.

But according to a confidential draft of a federal inspector general’s report, those claims of success, which earned Medicare wide praise from lawmakers, were misleading.

In calculating the agency’s rate of improper payments, Medicare officials told outside auditors to ignore government policies that would have accurately measured fraud, according to the report. For example, auditors were told not to compare invoices from salespeople against doctors’ records, as required by law, to make sure that medical equipment went to actual patients. …

Equipment sellers have submitted counterfeit documents, forged doctors’ signatures and filed claims on behalf of patients who were dead or had never been seen by the prescribing physician, according to many reports by government oversight agencies.

For more examples of fraud and the connection to the “Medicaid has lower administrative costs” mantra, see here.  Too bad you don’t have the choice to donate your hard-earned income to a better charity.   Government should not be in the insurance business, especially when its revenue derives from forcing taxpayers to donate.  That’s immoral.  Medicare should be phased out.

(Via Michael Cannon at Cato)

“If government employees can keep administrative costs down, and you think that’s such a good thing, then why not let Medicare compete with insurance companies?  If Medicare is so good, why do you need to make it crime for people not to fund it?  Or if you view Medicare as a type of charitable organization, why not let it compete with other non-profits?”

This gets to the heart of the issue.  Of course, you can dispute their claim by asking them if low administrative costs are necessarily a good thing.  I mean, why does the Washingtown Post report that “Medicare Pays Most Claims Without Review” and that …”Law enforcement authorities estimate that health-care fraud costs taxpayers more than $60 billion each year”?

The same article reports that

A critical aspect of the problem is that Medicare, the health program for the elderly and the disabled, automatically pays the vast majority of the bills it receives from companies that possess federally issued supplier numbers.

For more on how people defraud Medicare, check out Michael Cannon‘s posts here and here.