Don't Blame Medicare for Rising Medical Bills, Blame Monopolies.

• Author: Walsh, Thom

FOR DECADES, HOSPITALS HAVE INSISTED THAT THEY CHARGE THE PRIVATELY INSURED MORE TO OFFSET LOSSES FROM MEDICARE PATIENTS. A HEALTH CARE REGULATOR BLOWS THE WHISTLE ON THAT MYTH.

Medicare's hospital insurance trust fund is officially projected to be exhausted within five years. To close the gap, President Joe Biden has proposed a tax on families earning more than $400,000, while also calling for large cuts in how much the government reimburses Medicare Advantage plans. Meanwhile, Republicans, from Paul Ryan to Ron DeSantis, have a long history of efforts to defund the program. But what if both sides are missing the point? America does face a big-time health care financing crisis. But Medicare is not the reason.

Yes, Medicare faces a shortfall, but it's modest. The cost of the main hospital insurance trust fund, which currently comes to just 1.6 percent of GDP, is expected to rise by only half a percentage point by 2045 before flattening out and even falling thereafter with the passing of the Baby Boom generation. By contrast, the continuing cost of the tax cuts implemented under George W. Bush and Donald Trump is more than seven times as large as a percent of GDP. Or to take another measure, according to the "intermediate" range projections by the system's actuaries, gradually increasing payroll taxes by less than one percentage point before 2045 would keep the trust fund solvent indefinitely.

But even if Medicare is basically fine, the outlook for private health care plans, which cover the majority of working-age Americans, is not. The biggest reason is that the prices these plans and their members pay to doctors and hospitals are out of control. According to researchers at RAND, the prices paid by private payers for hospital care are nearly two and a half times higher on average than the prices paid by Medicare for the same treatments in the same hospitals. And the gap keeps increasing. According to a 2020 study by the Congressional Budget Office (CBO), the cost per enrollee for hospital and physician services under traditional "fee-for-service" Medicare rose by just 0.2 percent more than the rate of general inflation from 2013 to 2018. By contrast, the per-person costs in private plans rose by nearly double the rate of general inflation.

Because of those high and rising prices, the cost of health care consumed by a typical middle-class family of four with a typical employer-sponsored preferred provider organization (PPO) plan reached $30,260 in 2022, according to the Millman Medical Index. This cost is borne almost entirely by the families themselves because, as any economist will tell you, even when the employers nominally cover the premiums, they do so by paying less in wages and other benefits. It's a burden on middle-class families that is rising far faster than their ability to pay, increasing by nearly $9,000 for the typical family of four between 2010 and 2018 and by another $5,000 in just the past two years. Commercial health insurance doesn't have a trust fund, but if we accounted for it the same way we do for Medicare, it would show a huge, unsustainable long-term deficit.

Why aren't we talking about this? The biggest reason is the power of a myth, promoted by monopolistic hospitals, other health care providers, and private insurers, that continues to pervert the thinking of both Republicans and Democrats when it comes to health care finance. It's time to unpack that myth and show how it obscures what's really driving up health care prices.

According to groups like the American Hospital Association, hospitals and doctors charge so much more to treat patients covered by private insurance because they lose money treating Medicare and Medicaid patients and need to make up the difference. It's a talking point that's been around for decades, and lots of people involved in the practice of medicine, as well...