That effect goes both ways: medicare gets patients that are old and have more expensive and chronic diseases, thus their spending per service might be very efficient. Which leans on which is hard to know without some rigorous analysis.
> That effect goes both ways: medicare gets patients that are old and have more expensive and chronic diseases, thus their spending per service might be very efficient.
It doesn't really matter, if they're reimbursing below COGS (which they are). If the expected value of a set of numbers is negative, you can't make it positive by adding a bunch of other numbers which are also negative (even if they might be closer to zero, which in this case they oftentimes are not).
I don't follow your reasoning. Private insurance pays physicians more than medicare, producing the implied subsidy you mention (as they pay less). But once patients get onto medicare, they dont go to private insurance anymore so there is no subsidy: almost all the money is spent by the state at that stage.
This has the incentive that private markets have incentives to do disease treatment and prevention before the patient goes to medicare, potentially offloading care onto the later stages.
I would surely like some formal study and analysis on this, i feel this is very theoretical.
> I don't follow your reasoning. Private insurance pays physicians more than medicare, producing the implied subsidy you mention (as they pay less). But once patients get onto medicare, they dont go to private insurance anymore so there is no subsidy: almost all the money is spent by the state at that stage.
As a provider, let's say 40% of your patients are on Medicare, and 60% are on private insurance. On average, you're losing money on a per-patient basis for 40% of your patient base, since Medicare's reimbursement rates are below COGS. You stay in the black by charging the remaining 60% enough to make up the difference.
Without the privately-insured patient base to subsidize the Medicare patients, the provider would go out of business immediately, because they wouldn't even have enough revenue to cover the direct, marginal costs of supplies for each treatment, let alone anything to pay for staff wages, office space, overhead, etc.
> I would surely like some formal study and analysis on this, i feel this is very theoretical.
This isn't theoretical at all. It's no secret that Medicare's reimbursement rates are below sustainable levels. Medicare itself admits as much. For providers that see a high enough percentage of Medicare patients that they can't effectively distribute the costs among their privately-insured patients (because there aren't enough of them), Medicare actually runs special stipend programs, where they provide you with extra money to stay afloat (separately from the regular reimbursements).
I dont agree with this analysis, but Im more than willing to read up on it.
> Medicare does not reimburse below sustainable levels
> On average, you're losing money on a per-patient basis for 40% of your patient basis..
I disagree with this conception of sustainable: at any point if you have two suppliers with price differenciation yes, one of them 'subsidizes' the other, but that doesnt make it so the latter doesnt bring revenue. If by law airlines could not sell coach anymore, they would all drastically go out of business, even though they dont make money on coach. Medicare does lower reimbursement but it only matters in so far they take the spot of a private insurer.
Furthermore, sustainable implies that there would be no providers at medicares rates but that is not true: there would be less because they pay less, but you would still have providers.
Second, accepting medicare is a hassle for providers but I assure you they dont do it out of charity. They give you infinite demand which means you can fill your non-private insurers slots with medicare and provide lots of revenue.
> Furthermore, sustainable implies that there would be no providers at medicares rates but that is not true: there would be less because they pay less, but you would still have providers.
In most regions, Medicare reimburses rates that are less than COGS. If you have to pay $100 wholesale just for the supplies to perform a procedure, and you're only allowed to charge $93 for the procedure, you're going to go out of business very quickly.
Your assertion that "there would still be providers" is wrong, because unless Medicare dramatically raised its reimbursement rates[0], most providers would go out of business overnight. Even if it were true that there would still be providers, just fewer of them (which is not true), you're at best arguing for something which, in your own words, would exacerbate the current shortage of practicing clinicians, which would drive up prices for self-paying patients even further and dramatically lower the quality of care for the entire country.
> Second, accepting medicare is a hassle for providers but I assure you they dont do it out of charity. They give you infinite demand which means you can fill your non-private insurers slots with medicare and provide lots of revenue.
Medicare doesn't give you "infinite" demand. But furthermore, having more patients doesn't help you if you're literally losing money on a per-patient basis. You can't lose money on margin but "make it up in volume".
This is exactly why Medicare has to provide separate stipend programs to providers who aren't able to overcharge privately-insured patients and make up for their losses on Medicare patients that way.
[0] which is the entire point of the comment that began this whole thread - Medicare would have to dramatically raise its reimbursement rates if it covered all patients
