CMR’s Shallow Grasp of Medical Economics

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Mark Twain

Dear Group,

There is a reason that McMorris Rodgers tries hard to stick to message. When she does not stick to message she reveals startling gaps in basic knowledge and understanding. Nowhere is that more apparent than in a town hall speaking about health care.

I’ve transcribed parts of an audio recording of the Green Bluff town hall McMorris Rodgers held on short notice on May 29th. Doing the transcription has driven home for me a fundamental truth: Cathy McMorris Rodgers, the fourth highest ranking Republican in Congress, is ignorant of the basic economics of health care in this country. She is lost in the weeds. 

In what was an oblique response to a man expressing dismay over the rising cost of health insurance for his wife, McMorris Rodgers offered the following. I’ve transcribed it verbatim:

“One thing about Medicare and Medicaid. The government doesn’t pay the full cost of actually providing Medicare and Medicaid. So…ah…any provider, any doctor, any hospital, any physical therapist…anybody who takes Medicare or Medicaid will lose money every time someone comes in with their Medicare card or a Medicaid card. Medicaid is..I believe, 30, 35% of the actual cost and Medicare is 60, 70% of the actual cost…so the providers…how do the providers actually…how do the hospitals stay in business? How does a doctor stay in business? They’re making….so they charge the private health insurance higher so that they can keep their doors open. So…so that’s where we need to be honest about the actual cost…and I believe that the government needs…I have supported for our rural communities…so we’re losing our hospitals in rural areas right now because 70, 80% of their patients are on Medicare or Medicaid and they’re losing so much money every time somebody comes in with Medicare/Medicaid….They can’t keep their doors open!  So…. We’re not being honest about actual cost of, of a what the…way it currently works.. And that’s where I think Medicare is an important program and I, I believe we’ve got to make sure it is secure but it is on a path…right now it is not on a stable path and we’re signing up twenty thousand people a day.”

This is a very peculiar and confused answer to a question about the rising cost of health insurance. She claims private health insurance is expensive because Medicare and Medicaid don’t pay enough to cover the “cost” of keeping the doors open.  She even extends her mis-conception to a justification for her and her party to tackle the “entitlements” of Medicare and Medicaid, a theme she touches on elsewhere at every opportunity. 

Surely every reader of this email has puzzled over a health care “Explanation of Benefits” (EOB). You have seen a $500 charge for a service that has an “allowable” of $200, and an actual payment to the provider of only $160. When I was in practice the occasional patient would express dismay that I was only being paid a tiny fraction of my charge. I did not disabuse them of their notion by explaining the truth: the charge is a number basically pulled out of thin air. Why? Simple. The charge is set high enough so that if there is an insurance company out there that isn’t paying attention and will pay nearly that much then a nearly (or completely) outrageous charge level will “capture” that amount. If the provider doesn’t charge enough then money will be left on the table. One trouble with that system is, of course, that a patient with no insurance whatsoever sees an astronomical bill. 

The posted charge bears only the loosest relationship to the cost of providing the care. Apparently in McMorris Rodgers’ vaunted, sacred…and imaginary…health care “free market” what a provider charges for a service is the same as the cost. She says providers “lose money” every time they take care of a Medicare or Medicaid patient. Horse manure. If that were true most ophthalmology practices (largely dependent on Medicare age patients) would have gone out of business long ago.

To assess “cost” she would actually require numbers for a given medical facility that detail the fixed costs (rent, utilities, furniture,insurance, etc.), the variable costs (employee salaries and hourly wages, equipment, etc.), and some idea of the profits the providers expect and take home. 

McMorris Rodgers in spite of her youthful apple stand experience and in spite of her “MBA lite” (Executive Masters of Business Administration) missed the basic courses in economics and accounting. If she had been exposed to such course and actually learned the material she would not confuse “charge” and “cost.” She would not be susceptible to self-serving pleas from lobbyists who hope to convince her that Medicare routinely short-changes medical providers. More importantly, she wouldn’t brusquely dismiss (as she did at Green Bluff) a questioner who pointed out medical care might be cheaper if insurance companies didn’t run overhead many times higher than Medicare. 

The scariest thing is that McMorris Rodgers is very concerned and sincere in her presentation, however halting and confused it is. She is not play acting. She really is sincere. She can be sincere because she doesn’t understand that she doesn’t understand.

Keep to the high ground,

Jerry

P.S. I am reminded of Sarah Huckabee Sanders’ convolution about one of Trump’s lies: “It’s not a lie if you believe it.”