Why are Medicare and Medicaid reimbursement rates so low?
A doctor friend of mine recently told me that when he bills a private insurer for a procedure, he normally gets between 40% and 90% of the cost reimbursed. But when he bills medicare he gets 20% of the billed amount, and when he bills medicaid he gets about 10% of the billed amount back.
So my question is: why do Medicare and Medicaid reimburse at such low rates?
That is simply the solution that has come from the Gov't to cut costs. They'll just not pay the provider. I have two Dr's in the immediate family. They at times get as low as 8-10 cents on the dollar. Many Dr's are simply opting out. I expect that to increase. Many people don't understand the difference between having insurance and actual care. This will get worse before it's fixed. In reality this creates even a bigger price distortion. The Dr's often over bill more to private insurers to account for the difference. In many cases they will turn a sinlge procedure into two or three procedures to actually get paid enough to stay in business.
The reality is that if health insurace was not only more privatized, but also used the way we treat other forms of insurance like auto and homeowners, the cost of care would go down dramatically. There is no price negotiation between the consumer and the health provider anymore. The system is a real mess. It's more of an economic problem than anything else, and people are looking for emotional solutions. People assume that if they paid for basic maintainence out of pocket it would be unafordable. That's nonsense. If most could not pay then the Dr's are going to have to lower costs. If not they would go out of business. Right now they can't lower their rates because they're not getting paid as it is and mandated to do many things they would not otherwise choose to do. The current laws have turned the system into a volume business like a fast food chain.
As a result Dr's don't make nearly what many think. The average compensation for a general internist in the US in now about 100k. Compare this to a NYC bus Driver. When you look at their salary after 5 years on the job plus benefits like insurance, pension etc, they make more in total compensation. If that's not a distorted market, than I don't know what is. No disrespect to bus drivers, but they don't need to go through the hellish gauntlet that a Dr's does to be qualified to operate on you liver.
This is a good answer, and in line with what I've read elsewhere. Someone else pointed to Lasik and cosmetic surgery as a model for the whole industry. Insurance won't cover those procedures, and costs have gone down.
Cosmetic surgery has come down in price while advancing in technology and availabilty. Rarely is it covered under insurance. A few exceptions like a breast reduction for someone with a back problem. But the answer is clear but not popular politicly
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