Pearls on a String:Further Extending Health (and Retirement) Savings Accounts
Pearls on a String: Further Extending Health (and Retirement) Savings Accounts. HSAs are the string. Retirement saving, Privatizing Medicare, and Shifting Childhood Costs-- are the Pearls. Other Pearls to follow.
I was sitting in the Congressional hearing room when it happened. A proposal from the hospital association was made to Congress in 1983 that instead of paying hospitals for each step of treatment, they should be paid by the diagnosis, and Congress soon agreed to the idea for Medicare. This system was to be limited to helpless inpatients. The idea had some good features: if a patient had to be fed with a spoon, he had little interest in the cost of his treatments. Under these circumstances, market mechanisms would never restrain the cost of hospitalized patients. If they were anaesthetized, it was even more true.
DRG: An Object Lesson for Control Freaks With Little Interest in What They Are Controlling.
So in this way, by arranging the assignment of costs to codes, Medicare and the hospital coding clerks took over the job of pricing. No doctor understood what in the world they were doing. And by steps familiar to accountants, the DRG was enlarged back to a thousand codes and internally arranged to come out paying the hospital a 2% profit margin for inpatients. Since we were running a 3% inflation at the time, the effective push was on-- to move in-patients to the out-patient area. No matter how many tests, no matter how long the patient stayed, the DRG came out to produce a 2% profit margin. The cost the insurance had to pay was lessened, the costs the hospital actually incurred, became the hospital's problem. Meanwhile, interest rates were low, so new outpatient buildings seemed cheap. Pretty soon, hospitals were paying doctors above-market prices to fill the outpatient area. There's more to say, but the idea is clear. Once you find a rationing tool, the accountants are in charge, the doctors are out, and eventually would be really out. And the beauty part of it was, no one understood what was happening, or who did it. Except you will find a lot of empty out-patient buildings when the music stops.