Government health insurance expenditure eaten up by bureaucracy

Many people are still wondering what happened to the billions of pounds spent on the NHS over the last five years. Apart from slightly improved waiting lists and massively increased doctors wages, there is still a lot to do to explain where the money has gone. However history gives us a sort of precedent for this.

It comes from Lyndon B Johnson’s Great Society and the introduction of Medicare/Medicaid in 1965. At the time, health care spending in the US was a mere 5% of GDP. Today it has exploded to a staggering 16.5% of GDP. An economics professor named Amy Finkelstein from MIT has shown what happened after the implementation of the new state health insurance. She concluded that it is not, as conventional wisdom has it, ageing populations and medical progress, but rather the expansion of the insurance industry itself that is the the real driver of healthcare costs. Her views stirred up the thinking about health care spending since first published last year.

Finkelstein discovered the proof by sifting through long-forgotten paper records in MIT's library. There, she found that hospital spending soared after the federal Medicare program began in 1966. Finkelstein had the papers scanned and shipped to a company in Cambodia, where it took 18 months to turn the records into usable data. The story they told was dramatic. In regions such as the South, where most seniors had no insurance, health spending soared after Medicare. But in New England, where many already had coverage, Medicare had much less impact on costs.

What we begin to understand from her findings is why spending huge sums of money does not necessarily improve health services; the cash simply gets swallowed up in this highly complex system. This supports the argument for devolution of health care purchasing power to the consumer, offering a fair chance that it will be spend more wisely than by any third party, be it governments, HMOs or even paternalistic private insurance.

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Socialized waste

Four of the top 10 companies in the $11.4 million business last year of providing power scooters, wheelchairs, prosthetic limbs and other medical equipment to D.C. Medicaid recipients have come under investigation. At least six other "durable medical equipment," or DME, dealers also are being investigated, including one suspected of selling a recipient a walker, then billing the government for a $13,500 deluxe power scooter.

The D.C. Department of Health confirmed the investigations in response to a Freedom of Information Act request by The Washington Times. Agency attorneys withheld several records, saying the documents are "investigatory records compiled for law enforcement," therefore exempt from public disclosure. Officials also would not release the names of the companies under investigation.

The situation raises questions about whether fraud and mismanagement, which have plagued the District's Medicaid transportation program in recent years, also have surfaced in the DME program. The Medical Assistance Administration (MAA), an arm of the health department, oversees the city's more than $1 billion in Medicaid spending, which is funded by federal and local governments to provide health care for the poor.

Nearly 90 DME companies, mostly in the District and Maryland, received a combined $11.4 million in fiscal 2006 to supply the city's poor. The figure is up from $10.1 million in 2005 and $9.8 million in 2004. And while officials say overall costs remain within budget, MAA spending could increase by 40 percent compared to 2004 figures. Already, MAA had paid out more than $12 million in fiscal 2007.

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation. Both Australia and Sweden have large private sector health systems with government reimbursement for privately-provided services so can a purely private system with some level of government reimbursement or insurance for the poor be so hard to do?

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