A recent Op-Ed that the Harvard PR departent is shopping around (I saw it in the Los Angeles Times) tells me Harvard professors are having a real hard time understanding how Medicare works.
Last month it was The Three Amigos of Harvard with their bizarre methodology and conclusions about Wyden-Ryan's Medicare Reform proposal based on a total misunderstanding of both Part C and the rest of the Medicare market. Now it's a Harvard professor who thinks Wyden-Ryan (and Obamacare and Harry Truman and LBJ and I don't know who else) is much too generous to us seniors. His name is Miron and he says:
“The purpose of insurance is to protect against large, unforeseeable expenses. If everyone faces some risk of substantial health costs, but no individual can predict whether or when these will occur, everyone can benefit by pooling these risks via insurance.”
Professor Miron doesn't seem to realize that Medicare law does not allow what he is describing, what most people call catastrophic coverage. Many private Medigap supplemental insurance policies do not even include it (varies state by state as private insurance is covered by state laws). The only proposal I have ever seen to correct this flaw in Medicare law is the December 2011 Wyden-Ryan proposal. MedPAC recommends Congress think about correcting this flaw in the Medicare law every year but Congress never does, apparently even when it corrected the problem for everyone else in PPACA.
Then Miron goes on to write:
“This argument does not apply, however, to small or predictable expenditures. It makes no sense to buy insurance against the "risk" of routine medical care, such as annual checkups… , or against the risk of moderate expenses, such as many medication regimes, minor surgeries or treatments.”
Of course, and the professor does not seem to know this, Medicare does not do this either. Not only does Medicare not cover predictable annual check-ups but it has very high co-pays and deductibles for moderate expenses. Everyone agrees that the combination of no catastrophic coverage and no coverage of predictable events and little coverage of moderate expenses is the worst possible combination of insurance characteristics. But that’s Medicare.
(Maybe Miron means I shouldn't be able to buy with my own money a policy to cover physicals and provide lower co-pays. But elsewhere he claims to be a libertarian. If that's true he must be like a Muslim that drinks or a Catholic that eats meat on Fridays in Lent.)
Miron concludes:
“This "moral hazard" is a major reason behind escalating costs. When consumers are not paying for their care, the incentives for excessive utilization are huge: unnecessary tests, too much surgery rather than watchful waiting, doctor visits with minimal value, brand name versus generic drugs and more.”
Perhaps he is not aware that seniors cover about 60% of their total healthcare costs out of pocket on average (including paying premiums for supplemental insurance). Medicare only pays about 40%. I think we seniors are well aware of moral hazard, Professor.
He says:
“The way to diminish moral hazard is with large deductibles.”
So just to be clear, this Harvard professor thinks Medicare’s $6000 potential in deductibles for admitted hospital stays annually with potentially tens of thousands of dollars in co-pays and co-insurance for observed hospital stays and other medical procedures should be even higher?
Wow? That's a bit out of the mainstream, no?
-- Dennis Byron
