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Authors: Mark R. Levin

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In 1997, Congress and President Bill Clinton expanded Medicare coverage to include Part C, Medicare Advantage (MA), which set up a system allowing the selection of health insurance through private companies, which, in turn, are subsidized by the federal government. (Most participants choose Parts A and B.) In 2003, Congress and President George W. Bush again expanded Medicare coverage to include Part D, prescription drug plans.

Part A automatically covers an individual based on age or disability. Like Social Security, Part A HI is in theory financed primarily through the Federal Insurance Contributions Act (FICA) payroll taxes on employees and employers. Employees pay 1.45 percent of their earnings, which is matched by the employer, and the self-employed pay the full 2.9 percent. This rate used to have the same cap on income as Social Security, but the cap was completely removed in 1990. When the program started, the tax rate was only .35 percent on the first $6,600 of income, the same tax base as Social Security. Johnson claimed that the average worker would pay about $1.50 a month for hospital insurance protection in the program's first year.
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Within six years, however, the rate jumped from .35 percent to 1 percent a year, a 185 percent increase.

By contrast, Part B is voluntary. It is said to be a form of insurance, although it actually does not function that way, but it does require the payment of premiums and copays. In 1966, the premium was set at $3.00 a month. Each year the premium changes, and the premiums are also adjusted according to certain income levels. The Congressional Research Service (CRS) reports: “The standard monthly Part B premium for 2014 is $104.90. Higher-income beneficiaries, currently defined as those with incomes over $85,000 a year, or couples with incomes over $170,000 per year, pay $146.90, $209.80, $272.70, or $335.70 per month, depending on their income levels.”
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Part D, the prescription drug program, is also voluntary and is funded mostly by premiums and general tax revenues. As with Part B, it initially provided for a uniform premium, but now the formula includes higher premiums on higher earners.

The history of Medicare is similar to that of Social Security. It was first touted as an insurance system, but it never was. And it has grown into a centralized, bureaucratic octopus with tentacles reaching in every direction.

One thing is clear: Younger people are taxed today for promises of comprehensive health-care coverage in their senior years, which is simply impossible. Over the longer run, the Medicare design was political in nature and could never work as a rational economic model. Like Social Security, today it is simultaneously expanding and imploding.

Of course, those who have already retired have benefited considerably from the system. The evidence demonstrates that an average worker who retired in 2011 would have paid $60,000 in Medicare-related taxes yet received $170,000 in benefits.
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This system cannot last forever, and it will not, given reality and mathematics. Indeed, in 2014, the trustees overseeing Medicare declared that the HI trust fund will run dry in 2030.
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The trustees also predict that Medicare will take an even larger share of the nation's resources, nearly doubling from 3.5 percent of GDP in 2013 to 6.9 percent in 2088.
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In fact, the present value of the HI trust fund's unfunded obligation through 2075 is $3.6 trillion.
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Consequently, not only will future generations lose the tax “contributions” they have “paid into Medicare trust funds,” for they will no longer exist even in theory, but they will have to bear the impossible burden of Medicare's massive unfunded obligations.

In addition, Medicare has a perverse effect on the delivery of quality health-care services, which will only exacerbate over time. For example, obviously the health-care system cannot function well without the services of doctors and other providers. Doctors are largely paid on a “fee for service” basis. Initially, Medicare reimbursed doctors for “usual, customary and reasonable” fees. Such a vague standard paid by a distant third party was soon blamed for rising costs. Therefore, about twenty-five years ago, the federal government created an incredibly complex standardized payment scheme—the Resource-Based Relative Value Scale (RBRVS). This system sought to assign a numerical value to the multitude of medical services. As described by the American Medical Association (AMA): “In the RBRVS system, payments for services are determined by the resource costs needed to provide them. The cost of providing each service is divided into three components: physician work, practice expense and professional liability insurance. Payments are calculated by multiplying the combined costs of a service by a conversion factor (a monetary amount that is determined by the Centers for Medicare and Medicaid Services). Payments are also adjusted for geographical differences in resource costs.”
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The RBRVS system assigns a relative value to a given procedure. The values are updated periodically by a handful of individuals from the AMA who serve on the Relative Value Update Committee (RUC). They meet in secret each year to discuss and reach their decisions. The federal government adopts nearly all of the RUC's recommendations. The effects of this centralized, byzantine approach and point system are not limited to Medicare because of Medicare's size and influence over the entire health-care system—roughly 80 percent of private insurers use the point system for their own payment structures.
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Therefore, the impracticability of Medicare's centralized management and archaic decision-making practices also significantly impairs the broader private sector.

The absurdity of the federal government's top-down control over health care is perhaps best explained with a simple example. The retail price for a loaf of bread is different in New York than it is in Alabama. There are differences in price for a loaf of bread between towns and cities in the same state—such as Brooklyn, New York, and Utica, New York. The reason is there are untold factors relating to resources, allocation, labor, administration, and so on, which go into the cost of planting, harvesting, transporting, processing, baking, packaging, labeling, and transporting again a loaf of bread, as with any product. There are also countless regulations and taxes at every level of the process, from beginning to end, and they differ from jurisdiction to jurisdiction.

Imagine the disorder and dislocation, including cost increases, supply shortages, and instability, if the federal government were in charge of supervising the production and delivery of a loaf of bread. It has been tried by many totalitarian regimes with terrible consequences. Yet the health-care system, which the federal government increasingly monopolizes, is far more complicated and intricate than the numerous processes involved in putting bread on the family table.

Unsurprisingly, another outcome from government's omnipresence in the health-care system is vast levels of fraud, waste, and abuse. On June 25, 2014, the General Accountability Office (GAO) reported: “We have designated Medicare as a high-risk program since 1990, in part because we found the program's size and complexity make it vulnerable to fraud, waste, and abuse. Although there have been convictions for multimillion-dollar schemes that defrauded the Medicare program, the extent of the problem is unknown. There are no reliable estimates of the extent of fraud in the Medicare program or for the health care industry as a whole. By its very nature, fraud is difficult to detect, as those involved are engaged in intentional deception.”
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Nonetheless, the GAO pointed out that in 2013 “The Centers for Medicare & Medicaid Services . . . estimated that improper payments in the Medicare program were almost $50 billion in fiscal year 2013, about $5 billion higher than in 2012. Improper payments may be a result of fraud, waste, or abuse, but it is important to distinguish that the $50 billion in estimated improper payments reported by CMS in fiscal year 2013 is not an estimate of fraud in Medicare. Reported improper payment estimates include many types of payments that should not have been made or were made in an incorrect amount such as overpayments, underpayments, and payments that were not adequately documented.”
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Sadly, there is more. There exists another layer of complexity that is bewildering to patients and adds heavy administrative costs to health-care providers: medical codes. The AMA developed Current Procedural Technology (CPT) codes in the 1960s, which assign a number for every service a doctor or facility provides as a way to introduce uniformity in medical records. There are thousands of such codes, which are updated each year. Now these codes have spawned more codes. In 1983, CMS incorporated CPT codes into the billing process for Medicare through the development of the Healthcare Common Procedure Coding System (HCPCS).
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HCPCS codes include CPT codes for services as well as codes for supplies, devices, and equipment provided to patients. There is also an outpatient code system for diagnoses and disorders—International Classification of Diseases, 9th revision, Clinical Modification or ICD-9-CM codes. Health-care providers are required to use all these codes on claims for reimbursement from Medicare and private insurers.

As the consolidation of health-care management tightens further, the federal government is about to require a switch from ICD-9, which has 13,000 codes, to ICD-10, which has 68,000 codes.
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In the new system, there are separate codes for injuries sustained while “sewing, ironing, playing a brass instrument, crocheting, doing handicrafts, or knitting” or injuries caused by a bird, duck, macaw, parrot, goose, or turkey.
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Tracking existing injuries will also require more intricate codes: “the one code for suturing an artery will become 195 codes, designating every single artery, among other variables.”
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This unfathomable coding system, which engulfs doctors' offices in suffocating administrative minutiae unrelated to the provision of timely and quality medical services, is also prone to error and outright fraud. In May 2014, the Office of the Inspector General (IG) for the HHS conducted a review of doctors' reimbursement claims for office visits and other evaluations (E/M services) for calendar year 2010. It discovered that “Medicare inappropriately paid $6.7 billion for claims for E/M services in 2010 that were incorrectly coded and/or lacking documentation.”
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These payments accounted for 21 percent of Medicare payments for this type of visit for the year. The IG also discovered that 42 percent of claims for such services in 2010 were incorrectly coded—billing too much or too little—and 19 percent lacked documentation.
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Despite the backdrop of spiraling costs, centralized decision-making, administrative overkill, and widespread waste, fraud, and abuse, in 2010 a Democratic Congress passed, and Obama signed, the most dramatic expansion of federal control over health care since the passage of Medicare and Medicaid nearly fifty years earlier—Obamacare.

For starters, the Heritage Foundation estimates that by 2023, Obamacare will add $1.8 trillion to federal health-care spending.
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It also requires individuals to purchase insurance policies (whether they want to or not) and moves other people onto the Medicaid rolls by loosening eligibility requirements and subsidizing the creation of state insurance exchanges. Furthermore, all individuals not already covered by a private employer plan or public program, such as Medicaid, must purchase their own health insurance policy or pay a penalty to the Internal Revenue Service.
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This is the so-called individual mandate.

Although before the law was passed Obama insisted that an individual who liked his existing health insurance policy would be able to keep it, this was a deliberate falsehood. In truth, the law required that all insurance policies offer “essential health benefits” as determined and dictated by the Obama administration.
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Consequently, many existing private policies have been or will be discontinued, severely limiting available health-care options for consumers.

In fact, Obamacare opened the door to infinite future governmental directives and commands covering all aspects of health-care and medical services. For example, the federal government now determines who insurance companies must cover and what benefits they must offer. It prevents insurance companies from denying coverage to people who are already ill or charging higher premiums for those who have greater risk factors. It also puts caps on the out-of-pocket amounts that insurance companies can charge policyholders. These mandates and many more will obviously make it increasingly difficult for insurance companies to remain financially viable. Obamacare's architects attempted to ameliorate the cost of some of these mandates by forcing younger, healthy individuals to buy insurance they may neither want nor need. Younger people, who, as a group, are healthier and less likely to use health-care services, are subsidizing Obamacare, just as they are subsidizing Medicare and Social Security. Even so, Obamacare is not financially viable. Thus, premiums for private coverage continue to rise appreciably. In 2014, health insurance brokers in the individual and small group markets reported that average annual premiums increased by 11 percent (small group) and 12 percent (individual), with much higher increases in some states: Delaware and California, for example, had 100 percent and 53 percent increases, respectively.
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Obamacare's advocates also insisted that if passed it would help contain costs. But the experience of Medicare shows otherwise. Massachusetts Institute of Technology (MIT) economist Amy Finkelstein studied the early effects of Medicare on health-care costs and determined that by 1970, within only a few years of its initial passage, it caused a 37 percent increase in hospital spending.
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A major selling point of Obamacare was that once individuals without insurance were finally covered—for example, through Medicaid expansion—they would no longer go to emergency rooms (ERs) for care. ERs are required by federal law to provide care to everyone, regardless of whether a person has insurance or the ability to pay. ERs are also a very expensive way to receive medical treatment. The Robert Wood Johnson Foundation found that the average ER visit costs $580 more than a trip to the doctor's office.
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Unfortunately, the early results after Obamacare's passage show a spike in visits to ERs for medical treatment.
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Among the reasons is that although Medicare and Medicaid claim to provide better “access to health insurance,” they cannot guarantee access to a doctor. Not all doctors can afford to keep their practices afloat when Medicare reimburses their services and costs at significantly lower rates. A survey of doctors in 2013 found that only 45.7 percent accepted Medicaid patients.
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This is not a new development. The same survey showed that in the past ten years, the rate has fluctuated between 50 and 55 percent.
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And the situation is getting worse.

BOOK: Plunder and Deceit
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