Medicare Payments to Hospitals

The comment is often that Medicare does not reimburse hospitals for cost. The question is, what on earth is the "cost" of medical care. No one really knows. I do not know. Yet, for some reason, I do think Medicare could reimburse for cost, and it would not need to increase its reimbursement rates.

Essentially the matter is that hospitals are inefficient. Some hospitals have very high Medicare caseloads that almost surpass their caseloads of non-Medicare patients, and likely the private insurers are not helping them "make up." Instead, as Glenn Hackbarth, Chairman of the Medicare Payment Advisory Committee (MedPAC) states on pp. 5-8 of his March 17, 2009 testimony before the House Committee on Ways and Means, Subcommittee on Health (mind you his testimony to other Medicare Committees was functionally the same), hospitals are horrifically inefficient, and many hospitals with more Medicare payments seem to perform fine, thank you.

So, it depends on how you define cost (much like how you define cost and benefit in cost-benefit analysis is important). Unfortunately, cost in healthcare is a big black hole.

For the full report in all its glory, visit http://www.medpac.gov/documents/Mar09_EntireReport.pdf, and read § 2A.

Also, as a wonk, I have to link to this wonderful post from the New America Foundation's Blog. Yes, CBO Reports are like Harry Potter. Perhaps they are even better.