cost of government healthcare...
The immediate effect of Medicare and Medicaid was rapid escalation of medical costs. In 1965, the average cost of a one day stay in the hospital was around $45. In 2002, that cost increased over 28-fold to $1,289. Today the cost is closer to $4,000 per day!
Did Medicare and Medicaid have a role in this increase or is it just coincidence that 1965 is the inflection point of the rise? The “gold standard” experiment was the Rand Health Insurance Experiment between 1974 – 1982. They randomly assigned people to different insurances types and observed different levels of utilization.
Amy Finkelstein of the National Bureau of Economic Research explored this question in a different manner. When Medicare was introduced it was national and in different regions seniors had different types of health insurance prior to Medicare. She concludes that the impact was at least 4 times larger than Rand accounted for, 23 percent in the first 5 years.
According to Finkelstein, Medicare can explain 40 percent of the rise in real per capita health spending between 1950 and 1990, for all age groups. Medicare resulted in longer hospital stays and increased cost per day. Medicare also influenced the adoption of newer and more expensive technologies.
In 2011, Medicare spending grew to $554.3 billion. Medicaid spending was $407.7 billion. Private health insurance was $896.3 billion. Out of pocket spending was $307.7 billion.
2011 Per Capita costs of healthcare
|Average Medicare cost||$12,195.|
|Employer provided ins||$4,547.|
Does universal health coverage reduce costs? In 2009, which state had the HIGHEST per capita spending? Massachusetts at $9,278 while the national average was $6,815. To their credit, they did comment that their plan was not to lower health costs, but to achieve universal health care. This is a preview of future health care costs. Massachusetts is the only state with a law mandating that every resident obtain a state-government regulated minimum level of healthcare insurance and provide free health care insurance for residents earning less than 150% of the federal poverty level.
Stanford economists John Cogan and Dan Kessler state that the Massachusetts plan increased private employer-sponsored premiums by about 6%. Another study found that the number of people gaming the “individual mandate” – buying insurance only when they are about to incur major medical costs, then dumping coverage – has quadrupled since 2006.
But, Massachusetts is close to universal coverage. 98.1 percent of residents had insurance in 2010, 401,000 uninsured gained insurance. Here’s how. Medicaid and Children’s Health Insurance Program increased by 164,000. Subsidized plans went up 154,000. Individuals buying their own insurance increased by 83,000. The annual penalty in 2011 for not having insurance was $1,212 (half the cost of the lowest available yearly premium). Yet, even with these draconian penalties, Massachusetts cannot get all the young, healthy people to sign up.